The NSW corruption watchdog will be unable to make corrupt conduct findings against a group of Liberal MPs ensnared in its inquiry into illicit political donations, in the latest blow to the embattled agency.

But the Independent Commission Against Corruption still has the power to make a raft of other findings, including recommending the Director of Public Prosecutions consider criminal charges against the MPs if there is sufficient evidence to do so.

Former NSW police minister Mike Gallacher has resigned. Credit:Jessica Hromas

The political donations inquiry, codenamed Operation Spicer, caused a storm of controversy last year and resulted in 10 state Liberal MPs, including former police minister Mike Gallacher, joining the crossbench or quitting politics over allegations they had solicited or received illegal donations from property developers. Mr Gallacher and others have furiously denied the claims.

Recent changes to the ICAC's powers – ushered through state Parliament in the wake of a damaging High Court ruling – gave it the power to investigate alleged breaches of NSW election funding laws but stopped short of allowing it to label it "corrupt conduct".