Association fees are compulsory at my site, but at the modest sum of 50 pence per annum no-one seems to mind. Also each year at the AGM every plot holder can see a set of audited accounts. This transparency means that every penny of income and expenditure is accounted for.
Most councils have an allotments officer and while they are usually very busy people they can be approached for information and help on council policy. No need to rely entirely on your chairman. Find out directly. Your chairman may be spinning you a yarn.