Victoria's ombudsman is being legally forced to investigate potential links between the actions of former Liberal director and convicted embezzler, Damien Mantach, and 40 past and present state coalition MPs.
Deborah Glass' office confirmed on Thursday she'd received a referral from Spring Street and the law states she must make inquiries.
"The referral requires Ms Glass to investigate matters concerning invoices current and former Liberal and Nationals MPs certified for payment by the Department of Parliamentary Services," it said in a statement.
"Where any matter is referred to the ombudsman by a house of parliament or a committee of parliament, the ombudsman is required to 'forthwith investigate that matter and report thereon', according to the Ombudsman Act.
She will report to parliament "in due course" and make inquiries about the status of other investigations including by Victoria Police.
The fraud squad is investigating the 2014, $388,000 rorts-for-votes scheme by Labor. The government has also referred to police accusations 18 Liberals and Nationals used electorate office staff for campaigning during normal business hours.
Mantach stole more than $1.5 million from the Liberal Party between 2010 and 2015 using fake and inflated invoices.
His scam included a mailing business inflating invoices to Victorian Liberal MPs and the party eventually repaid nearly $200,000.
The Labor government flagged they would refer the opposition for investigation on Tuesday, sparking an increasingly hostile week in parliament.
After Labor announced its counterattack to its own scandal, the opposition declared it would move a no-confidence motion against the government.
By Thursday tensions reached boiling point with opposition MP David Southwick suspended from parliament for four days after calling Premier Daniel Andrews a "crook"
"I don't apologise for calling the premier a crook," the Caulfield MP told parliament after speaker Colin Brooks told him to apologise for disorderly conduct.
His comment prompted his ejection.
Mr Southwick will be absent from the chamber for a fortnight when parliament resumes without pay and will miss the opposition's no-confidence vote.
In March Ms Glass released her report into Labor's use of parliamentary budgets to pay for campaign staff during the 2014 election campaign.
She found the MPs who took part were not deliberately deceptive but also called the scheme an "artifice".
The party has repaid $388,000 to parliament over the scandal.
Police recently arrested and interviewed 17 Labor staffers across Victoria, NSW and the Northern Territory as part of a fraud squad investigation but no charges have been laid.
Parliament's powerful privileges committee is also holding an inquiry into the Labor scheme.
