Sports Minister Filipe Bole said the funding was contingent on mass resignations of the FRU board after Commerce Commission officials raided the union office last week following an investigation into a fundraising lottery.
The Commerce Commission said the FRU had sold lottery tickets for below the authorised price, had used funds for purposes other than the original purposes of holding the lottery and had not included some of the sold tickets in the lottery.
"I have informed the IRB and now I'm informing the public that the Fijian Government will give $3 million to assist the Flying Fijians team to prepare for the IRB World Cup but under a new FRU administration," Bole said. "Accordingly, it is now up to districts, who appoint the administration team, to ensure that our... team gets adequate resources to prepare for the World Cup competition in which we expect and want them to do well.
"Of course those at the centre of this debacle and mismanagement can resign themselves to quickly put in place a new administration to ensure our boys have enough time prepare," Bole added.
The Commerce Commission said that about $350,000 worth of tickets had been sold and there was a discrepancy of about $156,000 in the Union's lottery account.
The Commission also said that some of the money from the lottery had been used by officials for travel and tickets to rugby sevens tournaments in Britain and Hong Kong.
The FRU denies any wrongdoing, however, and said in a statement its legal advice was that it was not against the law to discount tickets.
"The most disturbing aspect of this whole saga is the Commission's unending appetite for publicity," Fiji Rugby Union chief executive officer Keni Dakuidreketi said.
"It has a legal responsibility to investigate any alleged offence in a fair and reasonable way, particularly when it is on notice that it may not even have legal powers to do so.
"It should not be conducting a trial by media. FRU suggests the Commission do the sensible thing and have an open discussion with FRU - and its lawyers - about what it is doing."
Fiji opens its World Cup campaign against Namibia in Rotorua on September 10. (Yahoo Sports)