The prospect of losing funding from state and local Liberal governments has cowed the Mardi Gras board into silence about the conduct of a former employee who misused almost $14,000 of charity funds on personal expenses.

Liberal candidate for Sydney lord mayor Christine Forster confirmed her campaign manager Mitchell Price resigned on Thursday, two days after Fairfax Media revealed the young Liberal used a corporate credit card to purchase $13,800 of personal expenses while employed by the Sydney Gay and Lesbian Mardi Gras.

But according to leaked communications obtained by Fairfax Media, the executive board of Mardi Gras has been engaged in tense discussions about whether to dispute Mr Price's claim that his conduct was the result of an innocent "error".

When Fairfax Media provided written questions to Mr Price on Monday, he said he had "mistakenly" linked the company's corporate credit card to accounts on his computer while employed by the charity from November 2013 to April 2015. As a result, he spent almost $14,000 on personal hire-car travel and social media and Facebook advertising.