Following one of the worst natural disasters to hit the region, the government unlocked one-off, tax-free funding grants of $1000 for adults and $400 for children affected by floods.

But The Area News has received reports of dozens of residents that were never impacted by any flooding - one even residing in Banna Avenue - rorting the system's eligibility criteria and claiming the money for themselves.

The money is available from the Department of Human Services and as of May 4, almost 19,300 claims for the Australian Government Disaster Recovery Payment had been granted across declared areas in Southern NSW, including the Griffith Local Government Area.

Member for Murrumbidgee Adrian Piccoli said the category C natural disaster declaration funding, which the grants fall under and is declared on council area not individual circumstances, was "utterly stupid".

"The system opens itself up to being rorted," Mr Piccoli said.

"I think there's a lot of frustration amongst people that people who ought to be entitled to assistance aren't, and others who weren't significantly damaged were and it's driving people crazy."

Mr Piccoli said NSW Premier Barry O'Farrell had acknowledged that the whole system needed to be re-designed.

"A good example is out on Myall Park Road - one side of the road is Carrathool and doesn't get any funding but the other side is Griffith and they do receive funding," Mr Piccoli said.

"I've heard stories of people over in Wagga who had to spend the night over at mum and dad's because they were evacuated and even though their home didn't sustain any damage they're able to claim. They're not doing anything wrong because the system allows them to but people who really do need the money are missing out."

The eligibility criteria for people in declared natural disaster zones states that to claim, they must have experienced one or more of the following: have been seriously injured, are the immediate family member of an Australian killed as a direct result of the disaster, their home was destroyed or sustained major damage, they were stranded in their home, or unable to gain access to their home, for a period of at least 24 hours, their home was without electricity, water, gas, sewage services or another essential service for a continuous period of 48 hours, or they were the principal carer of a dependent child who experienced any of the above.

Department of Human Services General Manager Hank Jongen said there were cases where someone who did not seem to be eligible at first glance met an aspect of the criteria but there was broader legislation behind the general eligibility guidelines that they took into account when assessing a claim.

"We base claim eligibility on the information that residents initially provide to us, together with information from other authorities about the extent of flooding, for example, police, councils, local energy providers etc," Mr Jongen said.

"The department regularly reviews claims to ensure people remain eligible for the payments, particularly if updated information is provided."