The Federal Opposition has escalated its attack over Wollongong City Council's $2.15 million funding grant, claiming it sends the wrong message to other councils across the country.

Opposition Deputy Leader Julie Bishop sharpened the Opposition's assault on the Rudd government's $300 million stimulus package using Wollongong as an example to illustrate that money was distributed unfairly.

In two media interviews Ms Bishop suggested Wollongong's corruption scandal should have been taken into account when funding allocations were made.

"Wollongong City Council received the single largest allocation," she said. "I mean, what sort of message does that send to local governments about how to conduct their councils and about how to undertake appropriate reforms?"

Yesterday morning she said: "One of the biggest winners was the Wollongong City Council that received the single largest allocation in NSW, yet we all know the Wollongong City Council was sacked following a corruption scandal and you have to ask, well what kind of message is that sending to local councils about reform?"

The comments come a day after federal Opposition spokesman for local government, Scott Morrison described Wollongong City Council as "arguably the most spectacularly failed council" and said the $2.15 million grant was a "reward for incompetence".

Ms Bishop's comments drew a swift rebuke from Member for Cunningham Sharon Bird.

"Julie Bishop and Scott Morrison are deliberately targeting the people of Wollongong for punishment," she said. "This city and its people are trying to rebuild after the ICAC investigation, we don't need continual unwarranted attacks by the Liberal Party."

Ms Bishop did not answer the Mercury's questions yesterday and Opposition Leader Malcolm Turnbull did not return the Mercury's calls.

Yesterday, Mr Morrison said in a letter that he did not begrudge Wollongong the $2.15 million grant, and said his comments were not intended as an attack on the region. "If taxpayers' money is being handed out, then you should expect those who are spending it on your behalf to be at the top of their game," he said.