The alleged embezzlement of $1.5m of funds from the Victorian Liberal Party has seen the political party repay nearly $200,000 of taxpayer money for fear it may have been misused.

The Victoria Police fraud and extortion squad are currently investigating former state director Damian Mantach after the party discovered funds had disappeared.

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Fearing some of the missing funds may be taxpayer dollars, the Victoria Liberals repayed about $197,000 to the state and federal parliaments as a precaution — even though it might not owe the money.

Current president Michael Kroger said the party had a “moral obligation” to do so, saying his party was “disgusted” by the alleged fraud.

“Our MPs have been appalled by what they have learnt having at all times acted in good faith,” Mr Kroger said in a letter to the party.

“I apologise to our Victorian state and federal Members of Parliament on behalf of the Administrative Committee for allowing them to be drawn into this matter in circumstances where they had no knowledge or involvement whatsoever.”

– with ABC