The Bermuda War Veterans Association (BWVA) has been told it cannot keep money raised from the annual poppy appeal amid allegations it has been too selective over which veterans it has helped, and "seriously misled" donors over fund distribution.

The Royal British Legion — a global charity based in London that owns the poppy emblem — is unhappy that the BWVA has declined to help veterans who served on the home front rather than overseas. According to letters obtained by The Royal Gazette, it has told the BWVA it must in future obtain poppies from the Legion and pass funds from the appeal back to the Legion. The BWVA has strenuously denied any wrongdoing. H. Francis Stephens, honorary secretary and trustee of the Association, said: "We are terribly angry because they are allegations without any foundation whatsoever."

Jack Lightbourn, trustee of the BWVA said: "The whole thing, as far as we're concerned, is a lot of rubbish — an awful lot of untruths." He said his organisation had taken "a very active stand," and been in touch with Governor Sir John Vereker.

In a letter to the Association dated yesterday, the Legion's regional organiser David Green said it has identified "a very narrow view and limited support given to the ex-service community in Bermuda."

It told the Association that in future, funds collected in Bermuda during the poppy appeal will be kept on the Island and managed by the Legion "for the benefit of a larger qualifying group of beneficiaries than undertaken by your organisation".

It continued: "The Legion does not place a pre-requisite of where a person served, and many of those who have served since the Second World War will qualify for assistance, if found in need, from the funds raised."

In the letters to the BWVA, the Legion said it has appointed Carol Everson — a caseworker trained at its London headquarters — as the Island's poppy appeal organiser. The Legion informed the BWVA that money coming to it from Bermuda's poppy appeal will be used for "welfare work for the whole of the qualifying community in accordance with the Legion's welfare policies".

As caseworker, Ms Everson will be able to call on funds from the Legion's $150 million per annum worldwide funding pot and other associated charities to help those in need.

In one letter Mr. Green claimed: "The War Veteran's Association has been using the Legion's fundraising emblem (the poppy) for a number of years. The Legion believed that this fundraising was being used for welfare support as set out within The Royal Charter. The War Veteran's Association has not used the funds raised for the benefit of the serving, ex-service and dependents in the community in need; but has applied very restrictive criteria to those who they assist. In addition they have accumulated funds for which they have no specific use.

"This restrictive use and the lack of accountability are in direct conflict with the Legion's Royal Charter, welfare and fundraising policies. Therefore the Legion had to withdraw its direct support for the War Veterans Association. The War Veterans Association cannot use the Legion's fundraising emblem, the poppy, without supporting the Legion's aims and objectives.

"The Poppy Appeal is known worldwide and the purpose is fully understood to be a fundraising campaign in support of the Legion's welfare work. Those who have been contributing to the War Veterans Association's Poppy Appeal have been seriously misled. The funds have not been used in accordance with the Legion's policies as set out within Article 3 of the Royal Charter."

Mr. Stephens said in response to the allegations that the BWVA, founded in 1919, exists to help all veterans who served oversees and their dependents, not those who served on the home front. He said those who have applied for assistance have been considered by a committee "regardless of what regiment they served under" and expenses such as hospital bills and funerals paid. "It is erroneous to state that we have no plan for the dispersal of the funds," he said. Of the allegation that the BWVA has used funds raised from the poppy appeal restrictively and in conflict with the Legion's rules, he said: "Our books are audited every year and we operate as a charity. You cannot do anything in Bermuda under the Charitable Act without audited accounts."

Of the claim his organisation has "misled" donors, he said: "That is a gross mis-statement. We have never been told what Article 3 of the Royal Charter is but we disperse our funds as we see fit for funeral expenses and operations regardless of which regiment they served in."

He defended the stance that those who served on the home front are excluded, saying these veterans "were not exposed to the trauma" that those who served abroad were. Mr. Stephens said the current situation remains unresolved, but his organisation will not be taking poppies from the Legion.

Meanwhile, Mr. Lightborne said: "We have no intention of dealing with Ms Everson," telling The Royal Gazette. "We have been selling poppies for 84 years and, out of the blue, comes this thing. We've never seen any instructions about what we should do with the sale of the poppies."

He was reluctant to go into further details, saying Governor Sir John Vereker has had discussions with the Legion but the matter is unresolved.

Ms Everson confirmed she is aware of the letters sent by the RBL to the Association. Yesterday, she stated her aim to address the needs of every former serviceman and their families in future — wherever they served.

"Many Bermudian soldiers had no choice in where they served," she said. "A certain number of veterans only used to benefit — the War Veterans Association's own particular membership. They have not allowed those who served on the Island of Bermuda to join their membership because they don't recognise their service. The Royal British Legion by contrast recognises the needs of every veteran and every former serviceman and their families.

"I welcome the War Veterans Association to join with the Legion in selling poppies this year. They are absolutely not banned from selling them. However, the funds have always legally belonged to the Royal British Legion not the War Veterans Association as a private society restrictive in its membership."

Ms Everson said she can assist with a wide range of issues including applications for welfare grants from the British Government such as Ministry of Defence disability grants. Veterans who are homeless or need emergency assistance with debts will be able to call upon her advice, and she also provides home and hospital visits. She added that the Legion will be offering poppies next month in schools and businesses throughout the Island.

Minister for Public Safety David Burch said Government was not involved in any action regarding the BWVA's fundraising.

In a statement, Government House said: "This is a matter which needs to be resolved between the Bermuda War Veterans Association and the Royal British Legion. Government House is prepared to use its good offices to help find such a resolution, and to that end is seeking clarification from the Royal British Legion on a number of points."

The Royal British Legion's London HQ did not respond to a request for comment.