The discussion paper, by accounting firm Ernst and Young(EY), says RSL Victoria has reached a "tipping point".

It proposes a "bottom-up restructure" of the state office and its network of 277 sub-branches, with the help of money from the state government.

RSL revenues have taken a big hit due to the forced closure of pokies venues during COVID-19, while charitable donations have also dropped off.

The paper, commissioned by RSL head office, says the RSL Victoria state branch cannot carry out its functions effectively at the moment, because it can't access enough of the money its sub-branches generate.

But RSL Victoria CEO Jamie Twidale says reports the organisation is headed for insolvency are wrong, while conceding the pandemic has not been good for the veterans' organisation.

"The second wave definitely had a big impact," he said.

"2021 will be a tough year."

The organisation made provision for $2 million in doubtful loans to its sub-branches in 2019.

Meanwhile, the president of one of Victoria's biggest RSL sub-branches has described the situation as a "liquidity crisis".

A qualified accountant, Lucas Moon is the president of the Hawthorn sub-branch, and says the RSL head office was millions of dollars in the red even before the COVID-19 crisis.

He's accused Mr Twidale of lacking transparency, and failing to deal with the RSL's problems during his first year in the job.

"The RSL is a $400 million company with a billion dollars worth of assets and we've got a highly paid CEO carrying on like a pork chop," Mr Moon said.

Mr Moon put his hand up to become the treasurer of RSL Victoria at its AGM on the weekend, but he says his bid was disallowed on a questionable technicality.

RSL sub-branches have lost almost a year's worth of hospitality revenue since clubs were forced to close in March, while RSL revenue from charitable donations dropped by about a third in 2020.

But Mr Moon says while many other branches are running at a loss, his Hawthorn branch has raised $50,000 for bushfire charities during 2020, as well as $50,000 for veterans' welfare.

RSL state branches across Australia have been troubled by governance issues in recent years.

In 2018 the national charity regulator found RSL Victoria had several governance problems, including around financial management.

Former NSW RSL state president Don Rowe spent nearly half a million dollars on his corporate credit card.

And the national charity regulator found the Queensland state branch had significant governance failures.

Australian Associated Press