The State Department of Veterans’ Affairs, by the State Service Commissioner, with the approval of the State Board of Veterans’ Affairs, may contract with any organization of veterans which has regularly, for a period of five years next preceding the date of such contract, maintained an established committee or agency rendering similar services to veterans as the services referred to in Section 31-5-4 to perform such service for veterans and to process any claims or matters of veterans who apply to the State Department of Veterans’ Affairs for assistance when the veterans have executed a power of attorney to the veterans’ organization. The department, through the contract, shall compensate the veterans’ organizations on the basis of service rendered, which compensation shall be paid from sums appropriated to the State Department of Veterans’ Affairs. No such contract shall be made unless the State Board of Veterans’ Affairs determines that, owing to the confidential relationships involved and the necessity of operating through agencies which the veterans involved will feel to be sympathetic towards their problems, the services cannot satisfactorily be rendered otherwise than through the agency of such veterans’ organization and that the best interests of the veterans involved will be served if such contract is made.