Tale of betrayed community outreach service highlights the effects of financial crime

Tale of betrayed community outreach service highlights the effects of financial crime | Insurance Business New Zealand

Insurance News

Tale of betrayed community outreach service highlights the effects of financial crime

Registered trust says their premiums have tripled since the incident

Insurance News

By
Kenneth Araullo

The outcome of a financial crime in Northland has put a spotlight on the longstanding effects of financial crime, especially on insurance.

Jigsaw North Manaaki Whanau, a registered trust operating in Whangārei, endured a significant financial embezzlement by its former administrator, Kathryn Morale Holmes. Holmes, who was responsible for managing accounts and payroll, and securing funding, was found guilty of diverting more than $200,000 meant for the Inland Revenue Department (IRD) into her personal account over a four-year period from 2018 to 2022.

As the sole financial administrator, Holmes managed to conceal her actions by being present before the 20th of each month to cover up any financial discrepancies. She also intercepted and altered documents from auditors before they reached management, effectively masking the embezzlement.

The employees, who are part of an organisation that provides social services, had a close relationship with Holmes and supported her through personal challenges. The revelation of Holmes’ actions brought significant stress and disillusionment to the team, with some staff members personally affected in areas such as their KiwiSaver contributions and student loan payments.

David Hain, the chair of Jigsaw North’s board, spoke of the board’s responsibility and the trauma experienced in uncovering and addressing the criminal behaviour.

“The trauma [was] from realising what seemed to have happened and having to meet to deliver disciplinary actions, ongoing meetings with accountants and various funders who included government ministries, various trusts, our auditors and insurance agents,” Hain said.

Holmes was sentenced to 30 months in prison after her actions, totalling $224,758, were brought to light. Jones noted the lack of genuine remorse from Holmes and the unlikelihood of reparation, given Holmes’ bankruptcy. The trust, fortunately, had crime insurance, but the premiums have since tripled following the incident.

The embezzlement had a direct impact on Jigsaw North’s operations, including delaying plans to relocate to a larger facility, a goal it is still striving to achieve despite a significant financial shortfall caused by the fraud.

Resilience amid the challenges

Despite the challenges, Jones highlighted the resilience of the organisation. The incident prompted Jigsaw North to strengthen its internal controls, including implementing more robust administrative processes and educating themselves about fraudulent crime. The trust has continued to grow, securing new contracts and expanding its staff.

The Department of Internal Affairs, in response to the incident, emphasised the responsibilities of charities and their officers under the Charities Act 2005. Officers are required to act in the best interests of their charity and govern effectively.

“There are a number of excellent resources available to support groups in exercising good governance. These include Community Law’s Community Toolkit, the CommunityNet Aotearoa resource hub, Community Governance Aotearoa, and the Institute of Directors New Zealand,” the department said.

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