The Lebanese Muslim Association had taxpayer funding withheld after investing $1million in a company directed by its president, it can be revealed.
In 2016, the New South Wales government granted the LMA $750,000 under a programme called COMPACT to prevent extremism by educating young Muslims.
The first part of the grant - $374,000 - was awarded that year but the second half due in 2017 was not handed over after the LMA failed to meet compliance and financial reporting requirements.
The LMA in 2016 invested $1million in Maryum Investments whose director and majority shareholder is LMA president Samier Dandan, The Daily Telegraph reported.
But the charity did not declare Mr Dandan's interest in Maryum in its annual financial report.