Error 0x80070005 trying to push files via Group Policy

Issue

Trying to copy a file from a network share to client machines using Group Policy (Computer Configuration > Preferences > Windows Settings > Files)

Operation fails with error 0x80070005 Access is denied.

Client computer records a warning event in Application Logs:
Event ID: 4098
Source: Group Policy files
Leven: Warning
Description:
The computer ‘filename.txt’ preference item in the ‘<GP name and ID>’ Group Policy object did not apply because it failed with error code ‘0x80070005 Access is denied.’ This error was suppressed.

Cause

The issue was caused by insufficient permissions to access the source file on the network location. Although “Computer” part of Group Policy runs as a SYSTEM account, this applies to the target client computer, not the server where shared files are stored.

Resolution

Give Authenticated Users “Read-Only” access to the network share where source files are saved. Also change NTFS permissions if necessary.

Windows Server 2008
Windows 7 Pro