The Local Government Association of NSW has found that councils will need to reassess and modify their 2012-13 budgets.

Councils will need to give their budgets a second look after the federal government substantially overestimated the amount of funds councils would receive in Financial Assistance Grants (FAGs) for 2011-12.

The NSW Grants commission advised councils on the federal government’s FAG adjustments.

Shires Association of NSW president, Ray Donald said the federal government’s FAG estimates were so over-inflated that many councils will not have the funds need to carry out local services and vital capital works projects.

Mr Donald said it is a “disgrace” that this over-inflation will affect councils and their projects planned in their budgets.

As many NSW councils will no longer have the necessary funds to see their 2012-13 projects, several NSW councils have considered postponing or cancelling projects that were to be FAG funded.

He said councils throughout NSW and Australia plan their budgets incorporating projections for Financial Assistance Grants provided by the federal government.

This “gross miscalculation” will be “disastrous” for the communities impacted,” Mr Donald said.

Local Government Association of NSW vice president (country), Allan Smith said the government’s “over-zealous” projection of the 2011-12 FAGs will have councils re-evaluating whether they can deliver promised services and infrastructure.

“While it’s normal for grant adjustments to be made, the 2012-13 ‘negative’ adjustment is abnormally larger than previous years and will have a detrimental effect now and in the future on councils and their communities,” Mr Smith said.