EXCLUSIVE

More than $4 million in public funding is being withheld from the NSW Liberals by authorities until the party can prove hundreds of thousands of dollars in donations it received before the 2011 election that swept it into power were not illegal.

The donations were made by the controversial Free Enterprise Foundation, which the Independent Commission Against Corruption heard had "washed" illegal contributions from property developers before donating them to the NSW Liberals.

More than $690,000 in donations remains unverified.