The body that represents rank-and-file police officers has been damaged by political game- playing, according to a damning report, and is facing questions over an estimated £95 million held in reserves and assets.
A review of the Police Federation by charity the RSA found there was "widespread dismay" over the behaviour of some members in the wake of the Plebgate affair.
Chairman Steve Williams said the review showed the damage that had been done by the row, and apologised to former Chief Whip Andrew Mitchell for the conduct of Pc Keith Wallis, who pretended to have seen a confrontation between the politician and officers in Downing Street.
The report also found that the organisation is sharply divided into local factions, with just three branches that hold separate accounts giving details to the review, and 13 out of the total 43 refusing to respond at all.
The Federation's latest published accounts show that centrally held reserves are at £29.5 million and those held by branch boards stand at around £35 million, but there is also another estimated £30 million in separate accounts, details of which have not been given to the national heads of the organisation.
The RSA said that subscription rates should be cut by 25% in 2015, subsidised by central reserves, in a bid to hand back some of the money to members.
Chairman of the Police Federation Steve Williams said: "The independent review details the damage that has been done to the Police Federation and the police service by the impact from the media-termed Plebgate affair. Any incident that undermines public confidence is regrettable.
"When police get it wrong it is only right and proper that we take responsibility for our actions.
"Following the conviction of PC Keith Wallis it is only appropriate that I apologise to Mr Mitchell for the officer's actions. Clearly there are ongoing legal and disciplinary issues and in the interest of all parties, including Mr Mitchell himself, I do not feel that I can comment further at this time.
"I would also like to take this opportunity to apologise to our members and the wider public for the damage this unfortunate incident has had in undermining confidence in the police service."
Some members of the Federation, which represents officers from the rank of constable to inspector, went head to head with former chief whip Mr Mitchell after he was involved in a foul- mouthed confrontation with officers in Downing Street in September 2012.
The following month Inspector Ken MacKaill, Detective Sergeant Stuart Hinton and Sergeant Chris Jones were accused of giving misleading accounts of what Mr Mitchell had said about the incident at a meeting in his Sutton Coldfield constituency.
Mr Williams said: "The review shows how disjointed the organisation is. One part of the Federation took the view that in the interest of their members they should embark on a particular course of action, which we have now seen the consequences of.
"Today is a new day where we start to build the Federation of the future. Like any grown-up organisation it is important that we learn from our mistakes and take action to ensure that they cannot happen again. Only then will we become the trusted voice of frontline officers."
He has been told that the Federation will be forced to change if it does not do so voluntarily.
"I've had the intimation that if we don't reform as an organisation then there is every likelihood that reform will be imposed upon us."
The report recommended that a new National Board should be set up with a chairman elected by all members, rank committees abolished, and subscriptions sent directly to the central Federation.
It said that the issues with accounts should be dealt with urgently.
"These are very urgent matters. In our view, the Federation's reputation is at risk from its current lack of openness. This is particularly so in relation to some of its branches' unpublished accounts, which create suspicion (expressed to us during our evidence gathering) that they have something to hide, even when it is all above board."
It criticised the organisation for focusing too much on personal attacks instead of arguing over issues surrounding Government cutbacks.
The report said: "It has also too often fallen back on its traditional tendency to attack and try to undermine those who are proposing the changes, rather than take on the issues."
Political back-biting risks bringing the reputation of the Federation and the police into disrepute, the RSA said.
"The Federation should be a powerful voice for standards in British policing but at present it is badly placed to be that voice. Throughout our inquiry we have heard allegations that some Federation representatives who have personally targeted successive Home Secretaries, Andrew Mitchell, Tom Winsor and others, bringing the Federation into disrepute and risking the police reputation for impartiality and integrity.
"We have also been given evidence of bad behaviour within, including poor treatment of staff at, HQ and the targeting of representatives in social media, at conference and elsewhere simply because they hold a different view. If the Federation wants to be respected and listened to in the future, this has to stop.
"The actions of the Federation representatives in their dealings with the former Chief Whip Andrew Mitchell...highlight the extent to which some representatives feel they can pursue local action and campaigns regardless of the impact on the wider Federation and the views of their colleagues."
The RSA found that 68% of the membership feel fairly or very dissatisfied that the national leadership is adequately safeguarding their interests, and 91% want to see change.
Chairman of the review panel Sir David Normington said: "We have no doubt that front line police officers need an effective voice to represent their interests. But we are equally clear from the evidence we heard that the Federation is not fulfilling that function well enough at the moment and needs major reform.
"There is an urgent need for it to regain the trust of its members, to be much more open and accountable and to adopt the kind of stands of behaviour and conduct which the public expects of police officers.
"If it is to regain its influence, it must put behind it the internal distrust and divisions which are such a feature of its present operations."
The RSA recommended that guidance on expenses should be drawn up, annual accounts made public and a national standard set for behaviour. It also said a database of members should be drawn up, as one does not currently exist.
Mr Mitchell said: "I am grateful to Steve Williams, the chairman of the Police Federation, for his apology. I would welcome the opportunity to meet with him for a constructive discussion in the very near future.
"I think the conclusions of the Normington Report that the Police Federation requires root and branch reform are right."