Callaghan suspends R&D grant for first time, SFO informed

Callaghan Innovation has suspended a research and development growth grant to Trends Publishing International Ltd, the first time it’s done so, following an audit of its funding claims and referred the matter to the Serious Fraud Office.

Trends got approval for a three-year Growth Grant in March this year and had received $332,966 before the grant was put on hold. Callaghan Innovation says it doesn’t disclose how much the growth grants are for or what the research and development being undertaken is for commercial reasons but there is a cap of $5 million plus GST for each grant annually.

So far Callaghan has handed out growth grants worth an estimated $309 million to 125 companies since they were introduced last year from a total available pot of $393 million.

Sarah Holden, Callaghan’s general manager external relations, said concerns were raised by Callaghan staff about the legitimacy of some of Trend’s claims against the approved funding following regular meetings over the grant. That led to an independent audit by one of the big four accounting firms. While there have been other audits carried out on grants, this one was the first time the agency had suspended one as a result.

She said the company will be given until the New Year to respond to notification of the alleged breaches. Its feedback will be considered and a decision made soon after that on whether to terminate the grant, Holden said.

There is a clawback provision in the contracts that any breaches include the right to end the contract and require funds to be repaid with interest.  Growth grants provide 20 percent public co-funding for qualifying firms’ eligible R&D expenditure. The qualifying criteria includes firms having to have spent at least $300,000 on R&D in each of the last two years and spent at least 1.5 percent of their revenue on R&D in NZ over the last two years.

All growth grants are reviewed at the end of the second year, at which point the contract may be extended for a further two years for a maximum five years.

Trends has been active for more than 20 years and is majority owned by David Johnson, a former EY Entrepreneur of the Year who has also been an international judge in the annual competition. Johnson didn’t respond to calls to the company’s Auckland head office.

The firm’s website says it has 60 publications in the home interest and commercial design area that are published in NZ, Australia, US, south east Asia, the Gulf, China and India. Last year the company launched a digital platform connecting homeowners, professionals and suppliers and in October this year it launched a MyTrends project on digital lead generation.

(BusinessDesk is funded by Callaghan Innovation to write about the commercialisation of innovation.)

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