Julie Morton, a supporter of Dunedin South MP David Benson-Pope, resigned on Wednesday as secretary-treasurer of the South Dunedin branch.
Branch vice-president Keith McFadyen said Ms Morton's resignation was a result of difficulties in the branch from the dumping of Mr Benson-Pope as the party's Dunedin South candidate, and internal disruptions from "certain branch members".
Dunedin public relations consultant Clare Curran was selected in place of Mr Benson-Pope.
Later, the South Dunedin branch executive was replaced with supporters of Mr Benson-Pope.
Mr McFadyen said several issues from the previous executive committee had been investigated by Labour Party general secretary Mike Smith.
"It is as a result of these findings that Julie, and perhaps others, have decided they are unable to continue.
Julie has given her valuable time and effort to resolve issues of concern but, like other branch members, does not accept the findings within this investigation."
The issues of concern raised by the current office-holders were in relation to the previous executive's operations, including the transparency with correspondence, financial reporting and other concerns with respect to constitutional decision-making and destruction of electronic data.
Before Mr Smith meets members in Dunedin on July 14, he would only say (from Wellington) that matters were "straightforward".
The Otago Daily Times has learned that in March this year, Mr Benson-Pope wrote to the incoming branch chairman Richard Page.
His letter questioned a $10,000 donation which was included in the 2006 financial accounts.
Records show the donation was made to the Montecillo Veterans Home and Hospital.
Labour Party stalwart Dame Dorothy Fraser was chairwoman of the Montecillo Trust but was not at the meeting at which the grant was approved.
At the April meeting, Mr Benson-Pope asked for a report clarifying who made the decision and when it was reported to, or discussed with, the branch.
Then-chairman Lindsay Rackley wrote to Mr Benson-Pope and said the donation was made by the branch property committee.
Those present were Mr Rackley, Beryl Maultby, Neil Harvey and Margaret Barrow.
"A record of this was found in the minutes of the meeting of the property committee dated March 13, 2006.
However, the auditor had noted in his report on the 2006 accounts, some 11 months later, that there was no authorisation in any minutes made available to him.
"The hard drive of the branch computer was formatted prior to the recent handover, so the actual date of the creation of that document was impossible to assess," Mr Rackley said.
Other information obtained by the ODT showed the donation gave the branch the naming rights of the room at Montecillo which would acknowledge that three local MPs - Fred Jones, Phil Connolly and Bill Fraser - had been Labour ministers of defence.
A recent presentation to branch members showed about $250,000 had been donated by the branch to the Labour Party's head office since 1995.
The branch owns property in Dunedin South and has been an active fund-raiser for the party.
Part of the problem stems from the branch being an incorporated society and acting outside the party's head office structure.
It is understood a plan to redraw the constitution also caused conflict.
When contacted, Mr Benson-Pope said he would not discuss party matters in public.
Ms Curran referred the ODT to Mr Smith.
