A mailing business inflated invoices to Victorian Liberal MPs to milk almost $200,000 in taxpayers' money from the party.
Disgraced former state director Damien Mantach told MPs to use the printing business, which then followed his advice to over-charge MPs.
The Liberals will have to pay $196,037 back to the state and federal parliament as the printing included taxpayer-funded work.
"Our MPs have been appalled by what they have learnt, having at all times acted in good faith," state president Michael Kroger said in a letter to members on Tuesday.
"No member of parliament was aware of Mr Mantach's direction to the mail house and they are disgusted with what has happened."
Mr Mantach last week admitted to stealing $1.5 million from the party over four years.
Mr Kroger said the party had written to the relevant federal and state departments to say the $196,037 would be paid back.
"The party is currently taking legal advice about whether this reimbursement should actually be made by a third party but in the meantime the party feels a moral obligation to settle the amounts in question," he said.
Top Liberals are facing questions over how Mr Mantach got the Victorian job in 2011 after he had to repay $47,981 to the Tasmanian branch when he left his state director job there in 2008.
Tasmanian Premier Will Hodgman - who was then opposition leader - said he and Senator Eric Abetz were told in 2008 Mr Mantach had to pay back the money when he left the state.
"I was spoken to and briefed ... and appropriately so, as was Senator Abetz as the Leader in the Federal Parliament," Mr Hodgman told parliament.
"We were briefed by the senior members of the state executive as to Mr Mantach incurring a liability, that liability being repaid and Mr Mantach's employment concluding."
Senator Abetz said the matter was for the Tasmanian division and his office wouldn't comment on Mr Hodgman's statement.
The Liberal party recouped $450,000 selling Mr Mantach's share portfolio, but has chosen not to sell his family home.
Victoria Police are investigating Mr Mantach's thefts, and Mr Kroger said the amount due back to parliament could change once investigations are complete.
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