The NSW branch of the RSL has not been tracking how public donations such as to its iconic November Poppy Day appeal have been spent and extensively breached its legal requirements for financial disclosures as a charity, a public inquiry heard on Tuesday.
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In an explosive opening statement to the first day of a state government inquiry into the veteran's charity, counsel assisting, Anthony Cheshire, SC, argued the RSL's accounting systems had extensive irregularities and that the organisation did not act on concerns about large claims for work expenses from its long-serving former president.
"The donating public needs to have confidence that any organisation ??? manages its finances properly and applies donations ??? to their charitable purposes," Mr Cheshire said. "There are real questions as to whether this was the case".
The NSW branch of the RSL was thrown into turmoil after Fairfax Media exposed financial irregularities in the organisation last year. The government's inquiry followed exposes such as the withdrawal of more than $200,000 in cash on corporate credit cards by former state president Don Rowe and the payment of $2.5 million in "consulting fees" to directors of its nursing home charity.
Mr Rowe, the former president of the NSW RSL, stood aside after a decade of service in late 2014, something the RSL publicly maintained was due to ill-health.
But the inquiry heard the day before his resignation concerns were raised about the fact that his recent credit card statements showed "large sums" were being paid for mobile phone accounts other than his own.
"Did Mr Rowe resign voluntarily due to ill health, or was it because he was given an ultimatum ??? to resign or have an audit of his expenses?" Mr Cheshire asked. "At no time during Mr Rowe's 11-year tenure as state president ??? was any expense ??? questioned with him at least not until the day of his resignation in November 2014".
Mr Rowe was ultimately asked to repay $4000 in expenses after an accountant hired by the RSL briefed its state council that their system for accounting for expenses "had failed Mr Rowe as much as he had failed the system".
The inquiry also heard of possible breaches of the Charitable Fundraising Act in the RSL's accounting for and disclosure of its charitable appeals, including not accounting their profits and losses, or lodging mandatory reports with the NSW Minister.
"It appeared not to be possible to identify or ascertain how the proceeds of any particular [charitable] appeal were expended," Mr Cheshire said, referring to a forensic audit undertaken by Ernst and Young as part of the inquiry.
Auditors found that the proceeds for fundraising were not kept in separate accounts, as required by law.
Accounting problems and conflict-of-interest issues extended to RSL Lifecare, the organisation's nursing home operation.
About 10 RSL LifeCare directors, including top NSW bureaucrat Jim Longley, shared in about $2.3 million in "consulting fees", with amounts going to each director reaching up to $35,000 and $55,000 per annum.
RSL LifeCare directors voted on resolutions relating to their own fees, raising questions about whether directors breached conflict of interest provisions of the Act, the inquiry heard.
State law forbids directors of charities receiving any form of remuneration without the express permission of the Fair Trading Minister. A preliminary audit by forensic firm KordaMentha earlier found no evidence such permission had been given.
RSL LifeCare maintains the payments were legitimate reimbursements for work performed in addition to directors' duties.
But Mr Cheshire said questions remained about the nature of those duties and that some directors, when raising invoices consulting work requested they not be paid via an ABN because the work was done "as a private recreational pursuit or hobby" or by someone "not carrying on an enterprise in Australia".
RSL LifeCare, which receives donations from RSL sub-branches and women's auxiliaries, generated a net profit of $42 million last year.
The entire NSW RSL state council stood aside following media reports about irregularities and the organisation, under a new president, James Brown, suspended its fundraising operations in August.
The inquiry, being led by former Supreme Court Judge Patricia Bergin, continues on Thursday.
