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As Kiwi skipper Nathan Cayless hoisted the trophy in the air after last year's glorious 34-20 World Cup final victory over the Kangaroos, few would have imagined the sorry state into which New Zealand league had fallen.

League is a "broken" sport after $2.2 million was lost in 2006-07 through mismanagement and financial immaturity or incompetence.

Player numbers had dropped from a high of 40,000 to 16,000, districts outside Auckland were struggling, national competitions were in disarray and the game had lost the confidence of stakeholders from clubs through to sponsors, says a report from the government sporting agency Sparc.

After a six-month review by a committee headed by Sir John Anderson, who had previously dissected New Zealand Cricket, the New Zealand Rugby League Board has accepted it must resign and be restructured at Sparc's expense for the good of the sport.

From 2001-06 the NZRL, under the direction of Gerald Ryan and then Selwyn Person, lost $133,000, which was a write-off of loans to districts that remained unpaid.

In 2007 the deficit was $1.708 million.

The losses sustained under the chairmanship of Sel Bennett, who resigned after he erred in endorsing Nathan Fien's qualifications for the Kiwis in what became known as "Grannygate", and then Andrew Chalmers - who took over in November 2006 and resigned in December 2007 - have wiped out all gains made from the Super League deal secured by former chairman Ryan and David Lange in 1998.

The Sparc report identified "bullying" within the NZRL and retribution taken against those who asked awkward questions about the finances.

But no further investigation will go on into the mismanagement of the past and no scapegoats will be hung out, as Sparc and the sport hold hands and move towards what both hope will be a brighter and better-organised future.

The board voted unanimously to accept all of the recommendations in Sir John's report, which involves it resigning en masse. The existing nine members can put themselves forward for three elected positions on the new seven-person board, while four new members will be named by a Sparc-appointed committee. The new chair will be appointed by that committee for a two-year period, after which the board will vote for its chairman.

A new constitution will remove the power of the board to put provinces "in review", which has been used in the past to deny them a vote.

The 15 districts which have themselves stymied development while pursuing self-interest have been shunted into seven new "zones" each with one equal vote - the South Island, Lower Central (Wellington, Gisborne and Hawkes Bay), Mid-Central (Taranaki, Wanganui and Manawatu), Upper Central (Bay of Plenty and Waikato), Counties-Manukau (including Otahuhu), Auckland and Northern (the North Shore and Northland).

Associates including women, Maori and universities will no longer have voting rights.

The NZRL is broke, but once the current board resigns at a special general meeting to follow the March AGM, Sparc will hand over $450,000 to pay for the restructure.

"Sparc would then consider entering into a multi-year investment," said chief executive Peter Miskimmin.

He said Sparc now had to provide league with funding to match that of similar-sized sports.

"Sparc looks forward to increasing our investment should all the recommendations be voted in."

NZRL chairman Ray Haffenden had aided the review greatly, Sir John said, and such transparency had to be continued. Sir John had found no criminality in the financial dealings.

But the Sparc report mentions a culture of "clipping the ticket" at most levels from the top down and found that parties involved with the NZRL and their associates were involved in transactions regarding property or supply of goods with potential for significant personal gain.

Gaming and other trusts and sponsors had withdrawn funding. The 2007 All Golds tour was described by one trust's submission to the review as an "extravaganza" and the $1.2 million loss as unacceptable.

In 2007 the NZRL wrote off $1.045 million in loans to subsidiary Rugby League New Zealand, money which was put into pubs with gaming machines. All save "Eddy's Bar" in Wainuiomata have now been sold and that bar is on the market, owing $400,000 to the NZRL as break-even.

All this will be laid to rest, Sparc and the NZRL have agreed. "It is a sport that has become broken but it is a vibrant sport with huge potential," Sir John said.

Haffenden said: "This is a time for major surgery and we will do everything to ensure that happens for the betterment of rugby league."

The issues in the past distracted from planning and progress and it was time to put those to rest and move on, said Sparc's review manager, Sue Suckling. Surveys put league in the top-three sports for interest so there was the opportunity to grow player numbers and produce sustained excellence at Kiwis level.

What was required was better governance, better standards of management, better structures from national competitions down and better pathways for players, coaches and referees.

Haffenden said he had enthusiastic responses from clubs when explaining Sparc's proposals. .

Last night the Auckland Rugby League chairman Cameron McGregor was selling the break-up of Auckland to his board and club members.