Victoria's Local Government Inspectorate Office has recommended all councils in the state remove both councillors and community members from the process of awarding money, following allegations made against Yarriambiack Council in the North West.

But at Tuesday's meeting, none of the councillors voted to make that happen in Indigo.

Mayor Jenny O'Connor said there was never a suggestion that Indigo's residents or councillors did anything wrong.

"It was in no way a reflection on Indigo Shire's performance or the performance of the volunteers or councillors that have been involved in committees in the past," she said.

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"It came out of a statewide direction from the inspectorate because there have been issues in some councils around the way committees function.

"It's important to say we really the input of our community members."

Cr Larry Goldsworthy said community members needed to be involved in discussion panels and proposed councillors go against the recommendation to remove them.

He was quickly supported by his colleagues.

Cr Diane Shepheard said she understood the recommendation for council officers to assess the grants, but there was "huge value" in having community involved as well.

The previous panel that decided Indigo's grants has since been disbanded so the issue will come back to councillors next month to discuss a new group that will make the decision on council grants.