Uniting Care has pulled out of the project with Cabonne Council General Manager, Bradley Byrnes, saying they had told council the project "no longer applies to their business model".

The $1.2 million of operating expenditure for the project was removed and placed into the Council reserves during the period of October 1 and December 31," he said.

This movement was described as one of the "major issues" of the quarter by Mr Byrnes when giving clarification on the budget to councillors.

"We've also taken out $1.2 million regarding the Canowindra Retirement Village Project because Uniting Care has pulled out of the project," he said.

"We've put that into reserve as well to proceed in a different way."

This explanation brought questioning from Councillors Marlene Nash and Jenny Weaver, with Cr Nash asking if the project was going to proceed.

"Unfortunately about a week ago we heard off Uniting, we've yet to have a formal notification, that it (the retirement village) no longer applies to their business model shall we say," Mr Byrnes replied.

"We've met with the committee in Canowindra last week, they understand the situation.

"Myself and the Mayor had a meeting a few months back as we were a bit worried about it, however, the project will still progress," he said.

The retirement village has been on the drawing board since 2008 and Uniting Care had been slated to lease and operate the 14-unit village in Mill Street since 2018.

Cr Weaver questioned if the council had explored further options or any interest shown in the project.

Mr Byrnes said Council may look at re-asking expressions of interest in the project but also possible changes.

"Uniting has indicated they feel there will be other parties that will want to be part of something like that," he said.

"But since it has only been about 10 days we haven't gone out to that expression of interest phase.

"We'll try and do that as quickly as we can, but we want to work with the committee because there may be some changes in the way we can look at it now that we own the land and have the (budget) reserve with that project.

"I'll talk to you at a workshop around that," he said.

Mr Byrnes said "Even if the project was still going ahead that money wouldn't have been spent this year, it's been in the budget for 10 years".

"Appropriately it should be in a reserve that's actually labelled Canowindra Retirement Village, so it's certainly not disappearing and I've made sure it has been tagged that it is for the Canowindra Retirement Village project.

"We're not quite back to square one, we've just got to try again," he said.