The Final Report from the Expert Panel on Constitutional Recognition of Local Government is out. It recommends that a referendum on financial recognition of local government is held this year, specifically to amend Section 96 to
…the Parliament may grant financial assistance to any State or to any local government body formed by State or Territory legislation on such terms and conditions as the Parliament thinks fit.
The recommendation is justified partly in terms of the threat to the Roads to Recovery program posed by a potential High Court challenge.
You can find the report on this website.
The recommended amendment to the Constitution would not completely circumvent a state’s interference in the allocation of Federal money to local governments as the local government body could simply be dissolved by State or Territory legislation.