The Northern Territory government has splashed some funding on its regional centres, while a former minister accuses party members of racist remarks.

The Country Liberals Government will provide local governments in the Territory with an extra $5 million in annual funding.

The additional funds will be used to set up new local authorities, needed now that the Giles Government has abolished several shire councils.

The local authorities will operate under powers devolved to them by larger regional council areas.

Local Government Minister Dave Tollner said it was “money they can spend without needing approval by a regional council”.

“The Country Liberals Government is keen to enable local government to essentially manage itself,” he said.

Local government in the Territory will be given greater self-management with a new agreement proposed by the Local Government Association of the Northern Territory (LGANT).

“We want to strengthen the role played by LGANT by allowing it to assume a number of functions carried out by the Department of Local Government,” Tollner said.

“While the Department will still take the lead in policy development and high-level compliance matters, this proposal allows local government to set its own agenda and have more control over issues that affect its ability to deliver value for ratepayers.”

Meanwhile, former Country Liberal member Eli Melky has told Palmer United Party leader Alison Anderson that he heard racial slurs made against her and her fellow Territory representatives in April.

He says he heard the comments in a management meeting, which he contributed to by phone.

Mr Melky says he did not know who made the remarks, but said it was a male voice.

Northern Territory Senator Nigel Scullion says the allegations are a complete fabrication.

“He's misled Alison, he's misled the Territory, and what he has to do now is front up,” Senator Scullion told the ABC.

“He has to sign a statutory declaration or come forward, withdraw and apologise.”

Mr Melky is standing by his assertion, and will make a statutory declaration about what he heard this week.