"I saw someone making a comment that we were white hot with anger - that's just the start of it." Former Liberal Party state director Damien Mantach. Mr Guy said an audit of the party's accounts after the 2014 election revealed irregularities, with money missing from from both state and federal election war chests. "You're talking a very significant portion of the money raised by the party in fundraising which appears to have been embezzled," he said. "People did a lot of work to get that.

"We all feel completely gutted and furious." Mr Guy said only one person was being investigated and this was Mr Mantach. Liberal MPs met on Thursday morning, while the state administrative committee is also meeting to prepare a brief of evidence for Victoria Police. Mr Mantach has been contacted by Fairfax Media for comment. Victorian Liberal Party treasurer Andrew Abercrombie left party headquarters but did not stop to talk to reporters. He shielded his face from cameras with his briefcase as he walked away.

Addressing reporters outside the Victorian Liberal head office, Mr Kroger said he believed Mr Mantach had admitted to wrongdoing in the alleged embezzlement. He said the party believed Mr Mantach had acted alone. "We're not aware that anyone else at head office had any involvement at all," he said. The missing funds were only contained within the Victorian division, Mr Kroger said. Mr Kroger did not believe the missing funds adversely affected last year's unsuccessful state election campaign or that it would affect the upcoming federal election.

He said he believed some of the money would be recoverable through assets purchased with the funds. "We feel profoundly betrayed and terrible disappointed with what's happened," he said. The revelations create yet another headache for Prime Minister Tony Abbott and the federal Liberal Party, which was already facing an uphill battle to retain key seats in Victoria. It is understood the scam - uncovered following concern about campaign overspending - included writing invoices for non-existent companies, with money channelled back to family interests. Earlier on Thursday, Mr Kroger said the Liberal Party had clearly failed to monitor spending.

"It should have been picked up before and it wasn't unfortunately," he told 774 ABC Melbourne. "It doesn't involve anyone else at the party head office or any official," he said. "One would have preferred the matter be picked up earlier but it wasn't so we'll be taking the matter to the police."

Police have confirmed they will investigate the allegation that $1.5 million was stolen from Liberal Party coffers. A police spokeswoman said the investigation will be conducted by Victoria Police's fraud and extortion squad. She said the squad are "aware of an external investigation" into the alleged disappearance of funds from a Victorian government party. Fairfax Media confirmed an external investigation was initially conducted by forensic accounting firm PPB Advisory. "The matter has been reported to police and will be investigated by the fraud and extortion squad," she said.

"It would not be appropriate to comment any further at this time." With Tammy Mills, Tom Cowie, Benjamin Preiss and AAP