As conversations continue across the community about council budgets and a potential rise in rates, many residents are asking how councils actually fund their services — and why some areas seem well-resourced while others go without. One key piece of the puzzle is grant funding. Here’s a closer look at how grants work for local councils in Australia — where the money comes from, how it’s used, and why it doesn’t always offer the flexibility people might expect.
Where the Money Comes From
Grants to local councils are most commonly provided by:
- Federal Government: Through programs like the Financial Assistance Grants (FAGs), the Commonwealth allocates general-purpose and road funding to every council across the country. These are among the few grants that offer some flexibility in spending.
- State Governments: Offer a wide range of tied grants — meaning funds must be used for a defined purpose. These cover areas like community safety, infrastructure upgrades, environmental management, and more.
In addition, councils may also apply for one-off grants from special programs or partner with private or not-for-profit sectors to secure targeted funding.
Not All Money Is Equal: Tied vs Untied Grants
One of the most important distinctions in council finances is whether a grant is tied or untied.
- Untied Grants: These are relatively rare and can be spent at the council’s discretion. The most notable example is the general-purpose component of the Financial Assistance Grants, which councils can use for any priority they choose.
- Tied Grants: The majority of grants are tied. This means they can only be used for a specific project or outcome, as outlined in the funding agreement. For example:
- A roads grant may only be used to seal or repair specific local roads.
- A grant for youth services might be limited to delivering a specific program for a defined age group.
Councils cannot redirect tied grant funds to other areas — even if they are facing urgent needs elsewhere. For instance, a council receiving a grant to build a bike path cannot use that money to fix a leaking roof at the local library.
This restriction is why residents might see investment in one area while others appear to go without — the funding is simply not transferrable.
Highly Specific Opportunities
Most grant programs available to local councils are designed with narrow, policy-driven objectives. These are not catch-all funds; instead, they’re crafted to deliver projects in particular areas that reflect state or federal government priorities. As a result, councils must carefully match their project ideas to these specific criteria — or risk missing out entirely.
For example:
- Environmental Grants might only fund initiatives that restore native vegetation within a certain distance from waterways, or projects that increase canopy cover by a set percentage in urban heat zones. Planting trees in other parts of the council area — even if beneficial — wouldn’t qualify.
- Energy and Sustainability Grants often focus on very defined targets, such as installing solar panels on public buildings that meet minimum usage thresholds, or retrofitting lighting in facilities used more than a specified number of hours per week. If a building is used less frequently, it may be ineligible, even if it’s in need of upgrades.
- Arts and Culture Grants might only support:
- Projects that are temporary or site-specific (e.g., public art on building facades).
- Collaborations between artists and underrepresented community groups.
- Events that align with heritage months or national celebrations, like NAIDOC Week or Reconciliation Week.
- Digital Transformation or Innovation Grants might only support councils implementing certain technologies, such as smart water metering or AI-powered traffic monitoring. General IT upgrades or website improvements would fall outside the grant’s scope.
This high level of specificity means that councils can’t simply apply for grants with broad project ideas — they must tailor applications to the grant’s framework or develop new projects that align with available funding.
In some cases, councils may need to invest time and resources into preparing applications for grants they are unlikely to receive due to intense competition or rigid criteria. This can strain the limited administrative capacity of smaller councils.
Moreover, even when a grant is awarded, councils often have to co-fund a percentage of the project cost — meaning they must contribute their own funds to unlock the grant. This can limit participation in otherwise appealing programs if council budgets are already stretched.
Why It Matters
Grants can account for a significant portion of council revenue. But because most of this money is locked to particular uses, it doesn’t necessarily give councils flexibility to fund the full range of community needs.
That’s why councils often advocate for more untied or flexible funding arrangements — to respond better to local conditions, especially during emergencies or economic downturns.
Learn More
Councils typically publish grant income and expenditure in their annual budgets and strategic plans, which are publicly available. These documents offer insight into how grant funding is shaping the local area — and what limits councils face in using those funds.
Understanding how councils receive and manage grant funding can help residents better interpret local spending decisions — and why sometimes, even with funding in hand, some problems take longer to solve.
