The chlorine system at Springwood pool will not be changed to ozone, despite the proposal being voted the most popular project for a state government grant.
Council, which backed Jan Campbell's plan, has now walked away.
Ms Campbell is angry.
"There is much to question about council's handling of the process," she said.
"Council agreed to sponsor my grant application for a significant upgrade to a major asset. I am incredulous that it appears council agreed to be sponsor without first doing some research about appropriate systems and costs.
"If this is true, this raises a red flag about council's competence."
She said as sponsor, council was required to complete part of the application including details of the project and cost/quotes.
"Surely, when council completed its part of the application form it turned its mind to the cost of the project or the type of system that might be used. As an individual I could not arrange a quote for work on council property."
Ms Campbell also queried the project shortfall, which has escalated from $150,000 to $250,000 and now $450,000.
"These are large sums of money. Considering the massive size of the shortfall, surely council would have had some idea of this before sponsoring the My Community Project application," Ms Campbell said.
Council said health regulations meant it had to use either chlorine or bromine in public pools. To remove chlorine from Springwood pool would require a more complex ozone and bromine system upgrade, which was not the project intended by Ms Campbell nor the project council supported.
The council report acknowledged there was a "gap and risk in how council manages grant funding" and recommended a review to ensure similar applications "have been developed with appropriate consultation, project specifications, approvals and funding agreements".
A spokeswoman for the state government said it was reviewing next steps for the allocation of the funds.
Ms Campbell, who put in a big effort to win the grant, was disappointed that the community's wishes could just be dismissed by council.