More than two months after floods devastated communities in northern NSW, thousands of people are still waiting for government grants to be approved.
More applications for small business grants worth up to $50,000 have been ruled ineligible than have been funded.
Flood Recovery Minister Steph Cooke says about 1600 applications for a small business grant have been paid, out of about 10,000 applications.
More than half of those, about 5500, have been ruled ineligible.
Ineligible applications were coming largely from sole traders and Ms Cooke says the state government has worked with the Commonwealth to simplify the process and reduce the paperwork required.
About 3000 applications from sole traders will now be reassessed.
The government was trying to provide flood support as quickly as possible, she said.
"We have an obligation to make sure that we've got checks and balances in place when we're assessing people's applications because we know fraud is a huge issue," she told 2GB on Tuesday.
Opposition emergency services spokesman Jihad Dib says nobody wants to see fraud happening but that's a matter for the police and other government agencies to deal with.
"Deal with the fraud but don't use that as an excuse to stop people who are genuinely eligible and genuinely need the money from getting it."
He said the grants rollout had been nothing short of a shambles.
"All the promises that were made by the government (saying) there is nothing we're not going to do to support these communities, the fact of the matter is the government has well and truly dropped the ball."
Bureaucratic delays, including being asked to provide additional paperwork that they lost during the floods, were awaiting those who applied for support, Mr Dib said.
Less than 20 per cent of grants being approved weeks after applications opened was evidence that bureaucracy was a major problem and obstacles needed removing, he said.
Lismore MP Janelle Saffin said people were being traumatised by repeated requests for additional documents when they applied for grants.
"We know there's money available, we know there's grants available but they're just not rolling out quick enough," Ms Saffin said.
"We've barely got an economy to speak of, let alone people knowing where they're going to be housed."
Ms Saffin said she and her staff were doing case management for many Lismore locals trying to get grants.
"We do it well I have to say, but that job should be somewhere else," she said.
There are multiple grants for flood victims and some of them cancel each other out, which can add to the confusion for applicants.
Some of them also had onerous conditions that were not suited to the area, Ms Saffin said.
"(Farmers) have to derive 50 per cent of their income on farm ... every local farmer I know is a family farm, and one of the partners works off farm, otherwise they can't farm."
Inflexible grant packages were a blunt instrument that let people who needed help fall through the cracks, Mr Dib said.
The NSW government has moved to reduce bureaucracy by adjusting some requirements.
Customer Service Minister Victor Dominello said sole trader applicants would now be initially approved based on statutory declarations, rather than requiring additional documentation.
