Charitable trusts linked to an Auckland family are being investigated, after concerns were raised about where money from pokie machines has gone.

The Department of Internal Affairs wants to know what's happened to hundreds of thousands of dollars given to South Trust, which organises community events Diwali and Bollywood.

And it's taken the unusual step of writing to gaming trusts, advising them to be extremely cautious about funding South Trust whilst the investigation is underway.

The letter says they need to minimise the risk of any future grant money being misused.

South Trust chairwoman Kal Kumar told the Weekend Herald the letter has destroyed the charity, without giving it a chance to put its case.