Mr Longley was one of 10 directors who over a decade shared in $2.5 million of "consulting fees" for standing on the board of RSL LifeCare a major charity nursing home provider that receives donations from the public which was founded in volunteer labour.

The former state Liberal MP announced he would resign as both CEO of the $2.7-billion Department of Ageing, Disability and Home Care and RSL LifeCare on Tuesday.

"I have decided to take the opportunity to pursue a two year post-graduate degree in the United States with my wife early in the new year," Mr Longley said in a letter to members of the charity

State law prohibits directors of charities receiving any remuneration unless they have express written permission from a minister. The state government declined to confirm it had given such permission because it said the matter was referred to NSW Fair Trading for investigation.

The state government appointed former NSW Supreme Court Judge Patricia Bergin in May to lead an inquiry into the payments matter but also the broader NSW RSL, where reports of cover-ups and fraud have preceded the resignation of its entire NSW council.

Ms Bergin was reportedly expected to report back within six months of her May appointment.

Mr Longley styled his exit from the bureaucracy, which will take place in November, as following the completion of his work in transferring state responsibility for disability services to the federal government.

Fairfax had also earlier revealed that Mr Longley had until 2015 been one of the directors of a Christmas Island resort operator that has been lobbying the federal government for a casino licence and other companies which had been making donations to state branches of the Liberal party.

The Department of Family and Community Services, of which Mr Longley has also served as deputy secretary as part of his role as CEO of its disability arm, was responsible for managing programs for people affected by problem gambling.

The department did not at the time say if those business interests conflicted with his duties when questioned at the time.

But on Tuesday the Department Secretary, Michael Coutts Trotter was effusive about Mr Longley's work: "Jim has led our ADHC team during a period of unprecedented change".

Mr Longley had earlier told Fairfax there was no problem with public servants having private business interests: "Licensed casinos are legally operating businesses in Australia."

Mr Longley was the NSW Liberal MP for Pittwater for a decade until 1996 and was previously community services minister.

A review into the payments by forensic auditor KordaMentha found that 10 councillors including Mr Longley received shares of about $2.5 million in consulting fees from RSL LifeCare over nearly a decade.

KordaMentha also said it found no evidence permission had been granted for the payments.

RSL LifeCare said directors were paid for work that went beyond their roles on the board and that payments were allowed under its constitution.