WELLINGTON (Reuters) - The New Zealand government department in charge of next year's America's Cup has ended a long-running dispute with holders Team New Zealand (TNZ) following an investigation into financial impropriety.
TNZ were cleared of financial wrongdoing in August following an audit of the public funding from the Ministry of Business, Innovation and Employment (MBIE) to the body organising the regatta on behalf of TNZ -- America's Cup Events (ACE).
MBIE said a mediation hearing on Tuesday had settled the outstanding issues over the expenditure of some NZ$3 million ($2.12 million) in public funding around the development of the class rule -- the boat design -- for the Cup.
TNZ had previously said the costs involved in developing the rules and design of the superfast AC75 foiling monohulls were part of the costs involved in running the event.
"MBIE is satisfied that event investment in relation to the Crown's contribution has been or will be properly incurred by ACE," the department said in a statement.
"MBIE, TNZ and ACE have now agreed that there was a reasonable and legitimate basis for TNZ and ACE to consider that the class rule costs were within the scope of event costs in the Host Venue Agreement.
"MBIE accepts that expenditure incurred to date under the HVA has been incurred in good faith."
The New Zealand government and Auckland Council have contributed about NZ$250 million to host the event, including infrastructure spending.
MBIE agreed to give about NZ$40 million in funding to ACE.
The four teams, TNZ and three challengers from Italy, Britain and the United States, had their first competitive races in the yachts last week.
Thousands of people flocked to Auckland's waterfront and onto Waitemata Harbour to watch the racing, with officials having to delay the start of races on Saturday as they attempted to move spectator boats after a late change to the course.
The challenger series runs from Jan. 15-Feb. 22 with the winner facing TNZ for the Cup in March.
($1 = 1.4164 New Zealand dollars)
(Reporting by Greg Stutchbury; Editing by Peter Rutherford)