A review has found no evidence of fraud or misappropriation by a Christchurch RSA which used poppy trust funds to prop up its club.
However, the Royal New Zealand RSA's audit of the Papanui Returned Services Assocation's poppy trust did find "significant governance mistakes, failures, and breaches of duty by successive Papanui RSA Executives and Charitable Trust trustees," the RNZRSA said in a statement.
Failures the audit identified included "a lack of separation between the association and its trust, inadequate management of conflicts of interest, insufficient documentation and oversight, and the use of trust funds to support the association's operations".
The review found Papanui RSA's welfare trust retained enough money to meet all approved support applications, and no evidence that any veterans who had applied for support and met criteria had been denied support, RNZRSA said.
It also found an outstanding loan owed to the trust by Papanui RSA was repaid after the RSA sold its property.
RNZRSA board chair Rhys Jones told RNZ most RSAs had a separate trust for money that's collected from poppy sales around Anzac Day.
"The money is put into a special trust that's designed to just purely be used for the welfare support of ex-service people in need."
Papanui RSA operated as a hospitality club, including a bar, and went through hard times, Jones said.
"They borrowed some money from the poppy trust to do some work on the building. When the club decided that they weren't going to continue having a club, they sold the building.
"They were considering dissolving, so someone volunteered to become the president of the club to resolve it, and he uncovered the fact that this loan had gone on but needed to be repaid."
That new president "put his hand up and said 'hey, something's happened here'" and RNZRSA sent in a forensic auditor to "see what the concern was", Jones said.
The review provided an important opportunity to strengthen the management of poppy funds across the RSA network, which should be held in a separate trust to the RSA accounts, he said.
The issue with Papanui RSA was that "the executives on the RSA were also the trustees of the trust, and so they were acting in a manner that it was just another bank account, rather than it being separated".
Jones said there needed to be a clear separation of responsibility.
"The review identified serious shortcomings that must be addressed, but it also found these arose from a lack of knowledge, experience and understanding, not from deliberate wrongdoing."
The wider lessons from the review would be used to strengthen the management of poppy funds nationally, he said.
"Local associations and their trusts are largely governed by volunteers who give their time because they care deeply about their communities. The RNZRSA is committed to giving those volunteers clearer guidance and practical support so they can carry out their responsibilities confidently and protect the public's trust in the RNZRSA and the poppy appeal."
The review recommended the RNZRSA:
- do a stocktake of poppy funds managed across the RSA network and the safeguards protecting them;
- update and expand its Poppy Trust guidance;
- strengthen induction, training, and ongoing support for RSA executives and trustees;
- reinforce the legal and operational separation required between RSAs and their trusts;
- improve the identification and management of conflicts of interest;
- explore options for professional investment management and greater collaboration between local trusts and the national poppy trust.