Licensing trusts need more scrutiny, accountability and help as some struggle to survive, Controller and Auditor-general Lyn Provost says in a special report to to Parliament.
The report identifies some licensing trusts are not meeting governance obligations or are struggling financially, including those in Clutha and Oamaru.
But some of the others - particularly those who have a monopoly on the supply and sale of liquor - are extremely successful.
Invercargill and Mataura Licensing Trusts are among those - Invercargill returning an average of close to $10 million a year in profits from liquor sales and gaming machines to its community over the past five years.
But others like the Oamaru Licensing Trust are struggling - its long-term viability is questioned the report.
However, the Oamaru trust says it has made changes to management and debt structuring which will return it to profitability.
The Clutha trust was also cited in the report over governance issues because two of its elected members had breached conflict of interest rules which prevent them from having business with the trust totalling more than an individual $25,000 unless granted exemptions.
Exemptions had been granted, saving them from having to stand down.
While licensing trusts had a responsibility to enhance the wellbeing of their communities, Ms Provost said they were one of the least-known parts of the public sector.
''However ... they have some of the highest risks. A high proportion of their transactions are in cash, and they trade in small but attractive items. These factors increase the risk of fraud and theft by customers and staff,'' she said.
Trusts were one of the least scrutinised parts of the public sector.
In most instances, the elected trustees performed with integrity and to the best of their abilities, but there was no comprehensive oversight of licensing trusts generally, other than by the trustees on behalf of their communities.
''From our audit work, I have become aware that more licensing trusts are struggling with profitability and financial viability. Some have wound up during 2012/13, and others are considering winding up,'' Ms Provost said.
While some trusts were well managed and quite successful, many licensing trusts were small, not well resourced, and struggling to comply with their accountability obligations.
Those struggling had not had much support from the larger successful trusts.
There was also a lack of management and administration capabilities in some trusts which meant they were not meeting their accountability requirements to their communities.
Four licensing trusts and one charitable trust were between one and four years in arrears with audited accounts.
The issues had been drawn to the attention of the New Zealand Licensing Trusts' Association which had subsequently set up a working party of trust chief executives to look at ways to lift the performance of trusts.
Licensing Trusts
• Established to sell and supply liquor.
• Invercargill the first in 1944.
• Alternative to private sale of liquor after prohibition.
• Returns profits to the community.
• Elected trustees.
• 28 trusts at end of 1970s.
• Now 19.
• Four have monopoly on liquor sales and supply.
• 15 in open competition.
