A legal battle with former chief executive Alex Swney has led Heart of the City to pull funding from cash-strapped projects.
Swney was sacked last year when his name suppression lapsed, and in the Auckland District Court last month, the 57-year-old pleaded guilty to knowingly evading taxes of more than $1.8 million.
Heart of the City - a city centre business association registered by Swney in 1994 - has income-tax exempt status on the basis that it was created to develop or increase amenities for the Auckland public.
It announced in December that it was launching civil proceedings against Swney.
Now that legal battle has had potentially serious consequences for festivals and organisations formerly in line for funding.
It has suspended event sponsorships to seven organisations for the rest of the financial year.
Has your business been affected? Email us here.
Manager Tania Loveridge said the decision had been made after the board undertook a full review of finances and budgets, and because of the additional costs incurred through its investigation and legal action.
The Documentary Edge Festival, set to take place in May and June, found out shortly before the announcement of the civil litigation that it would miss out on $15,000 previously promised.
Executive director Dan Shanan, trying to put together a 10th-anniversary package to dazzle audiences, described it as "a huge blow".
"It's not a good position to be in when trying to celebrate a milestone year."
After a phone call from Heart of the City's events and sponsorship manager telling him the legal battle had sapped too much cash, Mr Shanan received a wordier email, formalising the position.
"The organisation is incurring considerable extra costs in the process of satisfying council and stakeholders that our management and processes are robust and transparent," it said.
But Mr Shanan did not focus his frustration on Heart of the City. "It's quite astonishing [how] the actions of one person at the top can have a tremendous effect on many others."
The documentary festival suffered another blow shortly after the news, when it missed out on $20,000 of contestable Auckland Council funding.
Another of the seven events to miss out is the Big Egg Hunt, a fundraiser for the Starship hospital.
Starship Foundation chief executive Brad Clark said: "Although Heart of the City is not contributing financially to the 2015 campaign, it is keen to promote and support the Big Egg Hunt in non-financial ways."
He did not specify what these would be.
The foundation did not provide details of how much funding it received from Heart of the City for last year's inaugural egg hunt.
Another popular event to miss out was the Auckland Lantern Festival, which usually received $6000.
Ms Loveridge said the business association intended to "revisit sponsorship" for city events for the next financial year.
The total amount of the funding shortfall for the seven events would not be disclosed by the organisation, nor would it specify which particular projects would miss out on cash.
"We are unable to provide more detailed financial information, given that all matters relating to [Heart of the City's] finances are subject to the Serious Fraud Office [inquiry] and civil proceedings," Ms Loveridge said.
Reached for comment, Swney said he was unable to discuss the matter.
He will be sentenced at the end of April and is expected to be jailed.
- additional reporting: Patrice Dougan