Top Umkhonto weSizwe Military Veterans' Association (MKMVA) officials turned investment holdings into their own personal piggy bank, according to a report on Friday.
A forensic report alleged that the funds were used to pay for jewellery, spa treatments and school drama lessons, with large sums withdrawn before Christmas, the Mail&Guardian reported.
The draft investigation report by SizweNtsalubaGobodo named MKMVA treasurer Dumisani Khoza, former chairman Deacon Mathe, current treasurer Johannes "Sparks" Motseki and current chairman Kebby Maphatsoe as those allegedly responsible.
They allegedly took R5.4 million, almost half of the money coming into two accounts that the auditors scrutinised.
A group of former soldiers from exile known as the "commissariat" have laid criminal charges against Khoza, Mathe, Maphatsoe and Motseki.
They also laid charges against deputy public service minister and MKMVA secretary Ayanda Dlodlo, who received a R40,000 payout from the association in December 2008.
In response to the allegations Maphatsoe said they had taken a "group decision" not to answer questions about the forensic report or the court action.
"Ask them [the commissariat] how many meetings we had with them to resolve the matter," he was quoted as saying.
"Disciplined cadres do not go to the courts and to the media."
Deputy President Kgalema Motlanthe and the speaker of Parliament Max Sisulu were respondents in an urgent court application to freeze all investment accounts and trusts held by MKMVA.