An administrator would take decision-making away from the mayor and councillors, if one is appointed by Local Government Minister Shelley Hancock.
On Thursday, Ms Hancock said she was "very concerned about the situation at Dubbo Regional Council".
She said told the Daily Liberal she had requested advice from the Office of Local Government to determine if council met the criteria under the Local Government Act to be suspended.
"The NSW government will continue to watch the actions of councillors closely, including at the next extraordinary and ordinary council meetings, and if necessary will take action to ensure the council is serving the best interests of the local community," Ms Hancock said.
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She warned councillors to "get on with the job" and put politics aside.
According to the Local Government Act, "the administrator has all the functions of council (including all the functions of a councillor and the mayor) until immediately before the first meeting of the council held after the fresh election".
It means the administrator votes on every issue before council - as the councillors currently do - but rather than needed a majority for the agenda to be passed, it's solely determined by the administrator.
They also undertake any of the administrative, civic and ceremonial functions the councillors or mayor would have normally performed.
If council is dissolved, the councillors and mayor will not be paid for the rest of the council term. They're also not entitled to exercise the functions of civic office.
Essentially, the councillors become like any other member of the public.
The Local Government Act states the administrator is paid a salary from council's funds, as determined by the minister.
In the 2016/17 financial year, when Dubbo was amalgamating with Wellington council, the administrator's salary was $222,317.
The administrator remained in place for about 16 months until the local government elections were held in September 2017.
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