The funding, announced this week, is $1 million more than last financial year and in the case of Shellharbour City Council, which received $4.08 million in total, more than was expected.

"Council was extremely happy with the allocation we received. The allocation was over what council had originally budgeted for," a Shellharbour spokesman said.

"The funding provides a fairly substantial proportion of our yearly works budget."

This year's funding would be allocated to projects including the Rural Fire Service control centre, Terry St regional repair program and major repairs to Shellharbour City Stadium, he said.

Wollongong City Council was allocated $13.8 million, which makes up 7.5 per cent of its total revenue.

Kiama Municipal Council was allocated $1.2 million.

Federal Local Government Minister Anthony Albanese said nearly three-quarters of the $597 million handed to NSW councils was distributed to rural and regional areas.

"The grant allocation is determined independently and is untied so that councils can spend them in accordance with local priorities," he said.

"We also understand how important the grants are for rural and regional councils, where these funds can comprise more than half of council revenue."

Wollongong City Council says it doesn't track exactly where the federal funds go, as they are pooled with other general revenue.