The former attorney general Michael Lavarch will lead a review into New South Wales Labor after the suspension of the general secretary Kaila Murnain over claims the party accepted $100,000 in banned developer donations from Huang Xiangmo.

The New South Wales Labor leader, Jodi McKay, and the federal leader, Anthony Albanese, announced the appointment on Sunday, promising to create structures to prevent a repeat of what McKay called “shocking and appalling” allegations at the anti-corruption watchdog.

Lavarch – who served as attorney general in the Keating government from 1993 to 1996 – will review the position of general secretary, improving the oversight of the party’s administrative committee, and processes for managing risk, which McKay said “seemed to be lax and deficient right now”.

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Icac heard allegations that Huang came to the party’s Sussex Street headquarters with $100,000 in an Aldi shopping bag, handing it to the former NSW Labor boss Jamie Clements. Murnain was suspended after Icac heard she had known since 2016 that Labor had likely taken unlawful donations.

McKay told reporters in Sydney it had “become obvious there’s far too much power invested in the general secretary”, committing that nobody would be appointed to replace Murnain before the review is complete.

Albanese explained an intervention was “needed to make sure that that can never happen again” through changes both to the party’s rules and to its culture.

He said that “the culture by which the general secretary makes a directive and people fall into line needs to change”.

Albanese also suggested the 48-person administrative committee may be too large, because “sometimes if you want to make a body undemocratic, make it bigger, because then there is less accountability there”.

Albanese said that Labor must ensure that people “can have confidence in the integrity of the New South Wales administration of the party … And clearly party officers have let the party membership down.”

McKay claimed the culture of “whatever it takes” – made famous by the former secretary Graham Richardson – no longer exists in NSW Labor but changes must be made to “reflect” that at head office, which should instead pursue a path of “accountability, transparency and honesty”.

Lavarch said the gap between expectations and “some of the behaviours that we’ve seen in the head office … has brought such despair amongst the broader party …So this is about fixing that and fixing it forever.”

After the first stage of examining the party’s governance, Lavarch said that he will investigate “broader party activities, in terms of its compliance with political donation laws and general election laws which go to the running of campaigns and beyond the head office”.