The dredging of the entrance was previously the responsibility of the now axed Lake Illawarra Authority (LIA).

Shellharbour council's initial application was made subject to the LIA providing matching funds.

Earlier this year the NSW government decided to abolish the LIA and replace it with an estuary management committee, returning management of the lake to Wollongong and Shellharbour councils, but the committee is yet to be formed.

While the board of the LIA disbanded on July 22, the LIA still exists under the umbrella of the Department of Trade and Investment, however no further projects can be funded by the authority, including the dredging project.

This meant Shellharbour council would be required to fully fund a project initially estimated at $400,000, with fears the project would cost more.

Councillors voted 5-1 to reject the funding offer with Cr Kellie Marsh arguing the public had an expectation the entrance would be dredged.

On Tuesday night Shellharbour council officers informed councillors the dredging was not required at this point in time as the shoaling had not affected navigation.

In addition, when the grant application was made, the sand was to be used to renourish Warilla Beach, but since then a stability assessment report found the dredged material was best relocated to the northern side of the entrance channel to help reduce scouring.

"This needs to be managed and pursued by the Wollongong City Council given the associated benefit is in that local government area," the report stated.

Shellharbour Mayor Marianne Saliba said everyone had a view on the entrance dredging, but at the end of the day the lake was tidal and the sand came and went like all lakes up and down the coast.

"Our officers say it doesn't need dredging at this stage," Cr Saliba said.

"Bearing in mind it was only six months ago it was dumped on us we would be responsible ... in the past we would have been responsible for a quarter of the cost."

Cr Saliba said that had the LIA still been responsible, the dredging "probably" would have gone ahead.

"Nobody is more passionate about the lake than myself and the experts will tell you the lake is in the best condition it has been for many years," she said.

"Staff will continue to monitor the entrance and we will find the money when we need to dredge it."

State inaction blocks funds for two lake projects: MP

Shellharbour MP Anna Watson says Wollongong and Shellharbour councils have been forced to reject or delay accepting funding for Lake Illawarra because the NSW government ‘‘simply can’t get its act together’’.

An estimated $400,000 worth of dredging works are on hold after Shellharbour City Council decided to reject funding, while the future of a $750,000 boardwalk at Joes Bay at Primbee is uncertain after Wollongong councillors voted to write to the state government requesting it be postponed.

In the meantime no new funding applications are being made, with the axed Lake Illawarra Authority in caretaker mode until a new estuary management committee is established.

“There was absolutely nothing wrong with the previous Lake Illawarra Authority, yet the NSW government decided to scrap it and instead establish a new estuary management committee,’’ Ms Watson said.

“Nearly eight months since the Lake Illawarra report was provided to the NSW government it is still in no position to announce the establishment of the new committee or its governance arrangements.

“If the NSW government can’t get this committee into place, I call on the minister [Andrew Stoner] to re-establish the Lake Illawarra Authority.’’

Yesterday, Mr Stoner told Parliament ‘‘operational and governance arrangements will be a matter for the councils to establish’’.

Shellharbour council’s corporate policy director Lee Furness said a report on the proposed estuary management committee was due to be presented to the council on December 10.