The head of the embattled RSL NSW hopes the charity can make a clean break from the cronyism and leadership failures that haunt it, after an investigation uncovered governance failures at the highest levels of the organisation.
The Australian Charities and Not-for-profits Commission - after a two-year investigation, this week ordered RSL NSW and its aged-care arm RSL LifeCare to undertake several measures to rectify their shortcomings, or face being deregistered.
The regulator identified the misuse of charity funds by former NSW RSL president Don Rowe; the failure to properly investigate or report the misuse of funds; and misleading statements regarding Mr Rowe's resignation.
It also found RSL LifeCare's directors had approved and received their own pay while the charity's funds were used to pay for directors and staff to attend functions linked to the Liberal Party.
RSL NSW president James Brown says the charity had been working with the ACNC and several others for a year to identify the problems with a new state council and management team.
"The conclusion of the ACNC's two-year investigation into RSL NSW provides an opportunity for our charity to make a clean break from the cronyism and leadership failures of recent years," Mr Brown told AAP in a statement on Wednesday.
There is still work to be done with the focus now on following RSL NSW's charitable purpose, in accordance with the law, he said.
ACNC assistant commissioner David Locke said the charities had acknowledged their failings and needed to demonstrate improved governance to remain registered.
"Governance failures occurred at the highest levels," he said.
The charities must provide quarterly compliance reports to the regulator for 12 months and then provide annual reports for two years after that.
RSL NSW has committed to implementing 15 measures including a new accounting system, making councillors' expenditure public on the RSL NSW website and getting councillors to complete a course with the Australian Institute of Company Directors.
RSL LifeCare has committed to four measures relating to board remuneration and risk management.
The ACNC provided evidence during last year's public inquiry, led by former NSW Supreme Court judge Patricia Bergin SC, into RSL NSW.
The inquiry's report, released in February, made 29 recommendations including that Mr Rowe be referred to police and 13 others be referred to ASIC and ACNC.
It found Mr Rowe used his RSL credit card between 2009 and 2014 to pay for his mortgage, family phone bills, flights and meals.
He also paid for his daughter to stay at an RSL-owned hotel in Sydney's CBD, and allowed his son to stay there rent-free for seven years.
The inquiry found he spent $465,000 of the charity's money.