Political donations appear to have been hidden inside a secret slush fund controlled by a coterie of Winston Peters' trusted advisers.

Deputy Prime Minister Winston Peters claims the New Zealand First Foundation was modelled on the National Party Foundation but records revealed in a Stuff investigation suggest otherwise.

During the urgent sitting of Parliament held to pass a law banning foreign donations of more than $50 to political parties, Peters faced accusations about the NZ First Foundation.

"It's based on the National Foundation," he said.

But while the initial brief for the NZ First Foundation did name-check the National Party's foundation, in practice it has operated completely differently.

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ROBERT KITCHIN/STUFF Winston Peters says the NZ First Foundation is "based on the National Foundation."

The National Party's Foundation was established as a capital-protected fund which uses the interest on donations to support the political party.

A memo from the meeting where the NZ First Foundation was set up suggests this was also the idea for the NZ First Foundation - but bank documents show it has been drawn down on several times.

National Party spokesman Mark Nicholson said the National Party Foundation is treated by the Electoral Commission as the same entity in terms of donations.

"All donations to the National Foundation are treated as donations to the political party and recorded," he said.

Nicholson said a system to aggregate donations is in place and all donations are declared by the party secretary in their annual returns.

JOSEPH JOHNSON/STUFF The National Party say they declare their donations.

Electoral returns from New Zealand First do not match up with donation amounts into the foundation bank accounts.

In 2017, NZ First declared 13 donations of more than $5000 to $15,000 but bank records show at least 26 donations within the same range were deposited into foundation accounts.

In 2018, NZ First declared just five donations between $5000 and $15,000 but bank records for the foundation showed 10 across three months of records.

Donors contacted by Stuff said they believed the money was going to assist the NZ First political party and were unaware of the foundation.

MEMO SHOWS ESTABLISHMENT

NZ First board minutes show the idea to establish the foundation was voted on during a March 2017 meeting.

Peters is recorded as present during the meeting.

A memorandum to the New Zealand First board from South Island vice president John Thorn in May 2017 outlined the purpose of the newly established foundation.

Thorn's memo included an appendix saying the purpose of the foundation was to remove the "ad hoc" nature of political donations, provide a "capital-protected fund," and a "tiered level of benefits" for donors.

"It [the foundation] will operate as a capital-protected fund. This means contributions will never be removed from the fund," Thorn wrote.

"The Foundation will be a key part of the activities of the NZ First Party but will not be involved in policy development, organisation, structure or day-to-day operation of the party."

However, bank records show the capital was spent on party-related expenses including: campaign headquarters, legal advice, internet, signage, advertising, website, storage, political advice, staff and reimbursed MPs for travel expenses.

About $93,000 was spent on wages for a company called Thorn Services, headed by Thorn. No comment was given by Thorn.

Records show the fund ballooned to $277,141 by October 2017 as donations flooded in during the election year. In the same year, it spent at least $112,217 of its capital on party-related expenses by the end of the year.

By March 2018, the fund dropped to $92,000 and in July 2018 this lowered further to $38,000. From there, it received money and spent money as donations came in, contrary to its goal of a capital-protected fund.

The Electoral Commission announced a probe into the foundation after Stuff last month revealed the donations and expenses connected to the foundation.

New Zealand First Board members declined to comment.

Peters would not answer questions on Tuesday about his knowledge of a board meeting voting on the formation of the foundation.

"Mate, we're going to the Electoral Commission and talking to them about it," he said.

"We're not wasting our time with people like you, who don't understand the law."

Peters said NZ First's discussions with the Electoral Commission were "going great."