NSW Treasurer Matt Kean said the current framework for allocating funds had not worked and there were multiple examples of flood-affected communities going without support.
It comes after a day of finger-pointing over who caused the delay of an additional flood package, which on Thursday saw the Tweed Shire, Ballina, Byron and Kyogle areas added to those able to access extra funding.
"The current framework for getting disaster relief money out the door obviously hasn't worked in this instance," the treasurer said on Thursday.
"There are a number of areas where it's been very successful, but we know some communities ... have been left out of the existing framework."
Mr Kean said the state needed a tailored response designed for the communities' needs.
The cost of the floods disaster is expected to far exceed the $5 billion the NSW government spent on the 2019-20 bushfire crisis, the treasurer said.
Mr Kean said about $1 billion had already been allocated in flood funding, with applications for further support already open.
The federal government announced on Thursday it would extend two additional disaster recovery payments to residents in the Tweed, Byron, Kyogle and Ballina council areas.
Minister for Emergency Management Bridget McKenzie said the government was "implementing this extra support as quickly as possible" as the full scale of the disaster was realised.
On Thursday, multiple outlets reported the package, worth up to $1 billion and jointly funded by the state and federal governments, was held up by Prime Minister Scott Morrison's tour of Western Australia.
Mr Morrison denied those claims, saying he received the state's proposal on Tuesday night, and met with the attorney-general and national security committee of cabinet to work through the details.
"That is the normal process and as I indicated to the premier we'll be turning that around as quickly as possible," Mr Morrison said.
NSW Liberal MLC Catherine Cusack had earlier said she would quit the party over what she believed was a decision to allocate federal disaster payments along party lines.
Funds were initially given to Nationals-held council areas Lismore, the Clarence Valley and Richmond Valley, and not to Byron, Ballina and the Tweed Shires, which are Labor seats.
Geoff Provest, the Nationals member for Tweed, said he had lost faith in the prime minister's ability to lead.
A further $9 million in funding for northern NSW and Queensland was also announced on Thursday.
"The immediate financial and material losses associated with the floods has significantly impacted many people's ability to access food and clothing, and to pay bills and manage debt," Minister for Families and Social Services Anne Ruston said.
Federal opposition spokesman for housing Jason Clare accused the prime minister of withholding disaster funds to maximise the political benefit of an announcement.
"Today we find out that help is being held up because Scott Morrison hasn't signed the paperwork," he said.
"We know Scott Morrison doesn't hold a hose, the least he could do is hold a pen."
NSW Opposition Leader Chris Minns urged the state and federal governments to stop playing politics with disaster funding.
"I've been up in the Northern Rivers twice over the last few weeks," Mr Minns said.Â
"Those communities are hurting, they need urgent financial support.
"You can't leave someone standing on a street corner while you're pointing fingers at each other trying to work out who's done what."
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