TWO years after being flooded, a community is struggling to come to grips with the catastrophe that left it high and dry.

Charlton's long-suffering flood victims are enduring an uphill battle to rebuild their homes amid an ongoing insurance brawl, and major infrastructure remains in disrepair as the town's impoverished council continues to count the costs of the natural disaster.

Dozens of homes, roads and bridges still bear the damage the floods wrought as they inundated the north-central Victorian town on January 14, 2011, the Herald Sun reports.

Buloke Shire mayor Reid Mather said the embattled town was still licking its wounds.

"I still call Charlton a very resilient community but, by gee, they've been tested," he said.

"You don't have to look very hard to see the scars."

Residents feared they got a dud deal after the Financial Ombudsman ruled their swamped homes would be compensated only for a few centimetres from the ground up.

Several have abandoned their damaged homes, with dozens of unrepaired properties languishing amid a backlog of building work.

Community frustration has also mounted at the delay in a massive $34 million worth of road repairs.

Work on the critical local hospital is also yet to begin - with contracts for the $23 million state-funded facility yet to be finalised.

Cr Mather said he was frustrated at the slow progress of local work.

"Roads are absolutely vital for our economy - in a large farming sector we need quality roads to get our products out," he said.

"The people of Charlton are entitled to access to basic health, education, arts and cultural services."

Resident John Coughlin, whose house is built on stumps, said he was mystified by the Ombudsman's decision to allow him compensation for 10cm of stormwater damage from his shed floor, and 10cm from his house floor, but nothing in between.

"How can you come to the conclusion that the clear water was there and there, and not in the middle? There's 450mm difference in those two lots of 10cm," Mr Coughlin said.

He said he was grateful for an outcome, but feared his family would get little benefit from the Ombudsman's resolution.

"We've already spent $97,000 inside - that's not including the contents. We still need a bed, we're sleeping on a cardboard box with a mattress on it," he said.

"Not to mention the heartache, sleepless nights and stress levels that went with it all."

He said the house's brick exterior - which wobbles under his weight - still had to be pulled down and rebuilt, at a cost of a further $100,000.

The dispute about whether homes were initially affected by stormwater or riverine flooding was at the centre of the drawn-out stand-off with insurers.

Financial Ombudsman John Price said by finding stormwater run-off had damaged many homes before they were inundated by river waters, he was able to resolve at least 41 claims.

He said the 10cm ruling could cover flooring, furniture, electrical wiring and walls, among other things.

Maurice Blackburn lawyer Michael Bates said households now would have to negotiate the value of their entitlements with insurers. New insurance spats were still emerging in Charlton, he said.

Since the 2011 floods, insurers have paid more than $250 million in claims across northwest Victoria and the border region.

The Victorian Government pumped almost $4 million in disaster relief into the shire - the most money for any flooded-affected area - as well as several million dollars more in infrastructure aid.

The town also had an influx of charitable donations.

Despite the relief, Buloke Shire chief executive Warwick Heine said the floods had contributed to leaving the council in a $4 million deficit six months after the disaster.

But Cr Mather said the council made no apologies for putting flood victims before its own budget.

"We had people that were in need," he said.

Community worker Peter Noble, credited by many for lifting Charlton back to its feet, said the staunch residents wouldn't be defeated.

"Time does heal. You cut your hand, you get it stitched up, it starts to heal and after two years you see the scar but there's little damage," Mr Noble said.

Plans for a levee are now being costed, heaping several million dollars more on to the flood recovery bill.

Stephanie Ryan, a spokeswoman for Agriculture and Food Security Minister Peter Walsh, said a flood management plan was being developed for the area.

Insurance Council of Australia spokesman Campbell Fuller said any decision by the Financial Ombudsman related only to individual circumstances, and did not create a precedent for others.

Read more at the Herald Sun.