The New South Wales Government has refused to refer the Bland Shire's second application for flood aid to the Federal Government.
The council re-lodged its $23m damage bill seven weeks ago after major flooding in March, particularly around the village of Ungarie.
A spokesman for New South Wales Emergency Services Minister Mick Gallacher told ABC Riverina News late yesterday, the application did not meet the relevant criteria, so would not be passed onto the Commonwealth for Category C consideration.
But Bland Shire Mayor Neil Pokoney says, there is still some hope for Ungarie residents.
"I was contacted this afternoon by the Attorney General's office of Nicola Roxon," he said.
"I have been told although it's not usual practice to apply funding without a Category C declaration, the Attorney General is seeking further advice to determine whether special circumstances can be applied specifically for the township of Ungarie.
"It would be applied to the township of Ungarie.
"What Nicola Roxon is trying to do, is find out whether a declaration or more funding can be applied to a specific location.
"So look, we are forever hopeful.
"There is a slight ray of hope.
"We can now only wait and see what the federal government might be able to provide, seeing we've been abandoned by the state government."
The Bland Shire Council has sought an explanation from the New South Wales government as to why the second application for federal flood aid has been rejected.
Councillor Pokoney says the local community will be devastated and there is little council can do now.
"We don't know what the standards are, and this has been one of the frustrations all along," he said.
"You can't contest, you can't complain, because you don't know what the rules are.
"I did request a full explanation, so that we're able to tell our community what grounds they used to knock us back."
The Bland Shire Mayor says senior federal government bureaucrats believe the process for accessing flood aid is a farce.
Councillor Pokoney says the Attorney General's department appears to understand the shire's plight.
"One of the things that was clear in quite lengthy conversations I had with Nicola Roxon's office was they accept this Category C process is an absolute farce and they're looking at reviewing it completely, so that in the future other communities don't find themselves in the position we find ourselves," he said.
© ABC 2012
13:39 EST With 28mm already recorded in the rain gauge this month, Alice Springs is having its wettest May since 2004.