New Zealand's oldest RSA has ordered an urgent review after fears its flagship $6.5 million bar and restaurant business faces financial ruin.
The Christchurch RSA's bar and restaurant Trenches is losing thousands every month.
While the local president says the business is under control, its performance is concerning the regional boss, RSA headquarters, and Veterans' Affairs Minister Ron Mark.
An independent auditors' report to the shareholders of Christchurch RSA Holdings Ltd, which runs the bar operation, shows "further significant trading losses" for the year ended June 30, 2018.
The report, seen by the Herald, also shows a negative net asset position of $702,242.
"The Directors have relied on the guarantee of continuing financial support from Christchurch Memorial Returned and Services Association Inc. to prepare financial statements on a going concern basis," the chartered accountant's report says.
It warned that "if some of the assumptions on which the Executive have relied" in their projections for 2019 are not achieved, then it would "cast doubt on the organisations [sic] ability to continue as a going concern and significant restructuring may be required".
Members have become increasingly worried about the finances, with one former insider saying concerns date back to when the multi-million dollar Warren & Mahoney-designed Armagh St building in the central city opened in March 2015 to replace its original earthquake-damaged clubrooms.
At last month's biannual meeting, the hospitality company's executive and directors were instructed by members to carry out a review.
"Enough is enough," said one source worried about the RSA originally formed in December 1915 by wounded veterans of the disastrous Gallipoli campaign.
"I fear it will close. I just can't see it going on the way it is."
Upstairs to Trenches, which is open to the public, there are conference and meeting facilities that are rented out.
"That is what's keeping the place open. It's robbing Peter to pay Paul and it's just not sustainable," a source said.
Christchurch RSA President Pete Dawson admitted the bar operation was having "trading difficulties" and a new working group was "working hard to make certain" that it doesn't close its doors.
They are reviewing running costs and ramping up marketing efforts to try to attract more corporate memberships, Dawson said.
"It has looked at a whole range of options for us but in the meantime we need to continue business as usual," he said.
Dawson is adamant the bar's difficulties are not impacting Christchurch RSA's core welfare services, operated through a separate trust fund.
"The company has some difficulties but the RSA is safe," he said.
"Our whole hope was that Trenches would also produce a revenue stream to assist in that area but that hasn't yet happened.
"There is a general downturn in the hospitality industry in Christchurch and across the country, and it's becoming difficult for everybody to survive."
Last month, a set of three large murals – 4m to 8m long, painted by notable Christchurch artists including Bill Sutton – were sold at auction to a private buyer who wished to remain anonymous for an undisclosed sum. The Herald understands they fetched more than $100,000.
They were too large to put on display, Dawson said, and could potentially have deteriorated. Around 90 per cent of the Christchurch RSA's impressive memorabilia and art collection was in storage at any one time, he said.
The proceeds from the auction now sits with the Museum and Support Trust. It can only be spent with permission of its trustees.
"It was just a capitalisation of an asset," Dawson said.
In 2015, the Christchurch RSA was criticised for spending more than half of the cash raised during its two previous Poppy Day appeals on administration, salaries, wages, and travel.
Canterbury District RSA president Stan Hansen was aware of Christchurch RSA Holdings Ltd's financial situation.
"I've heard rumours and they are concerning," Hansen said.
"We have made offers to help and I have been assured by Pete Dawson that everything is under control."
The Royal New Zealand Returned and Services Association's Wellington-based chief executive Jack Steer became aware of financial concerns at Christchurch RSA after last year's audit report.
The RNZRSA says it has offered financial and management review and advice but given that the Christchurch RSA is owned and run independently, the head office can only help if they are asked.
"Unfortunately, any offers of assistance by the Canterbury District President and the RNZRSA have not been accepted by the CMRSA (Christchurch Memorial Returned and Services Association Inc)," Steer said.
"It is always concerning to us when an RSA is in difficulty. Christchurch was one of the first ever RSAs, it has a large membership and an important history within the RSA movement."
An internal report carried out for the RSA earlier this year concluded that its 180 clubs across the country would not survive unless they found a way to become relevant to younger people.
"To survive at all the organisation needs to demonstrate relevance to the community and to recognise and meet the needs of those whom its existence is designed to support," said report writer Christopher Hodson, QC.
Veterans' Affairs Minister Ron Mark was "saddened" by the Christchurch RSA's problems, which he was aware of.
He said it "appears to be a continuation of what's been happening" at other RSAs across New Zealand.
"While many RSAs, like Marton and Rangiora have adapted, modernised and thrived, others have gone down paths which have led them to financial difficulty and in some cases closure. The people that ultimately suffer when RSAs get into trouble are our 41,000 veterans," said Mark, himself a former soldier and member of the Christchurch RSA in the 1990s.
"I hope it's not too late for the Christchurch Central RSA. I urge them to take whatever guidance and help is on offer from the National RSA, and to find a way to get through and continue to support our veterans."