The shareout was announced at Holyrood by Finance Secretary John Swinney as part of the budget for 2011-12.
Scotland's 32 local authorities have been told they face an average 2.6% cut to their budgets if they sign up to the conditions - such as maintaining police numbers and the council tax freeze.
But he said: "If they choose not to accept it, funding will fall not by an average of 2.6% but by an average of 6.4%."
This penalty would differ between councils, with the highest given as 9.2%. Authorities have until December 21 to indicate whether they accept
Mr Swinney said councils will share 11.548 billion for revenue and capital if they agree to his conditions.
Within the total, 10.9 billion goes to support revenue, including a further 70 million for the proposed council tax freeze. Another 20 million will go towards "honouring the commitment" of the previous Labour-Liberal Democrat spending decisions on school buildings.
The capital funding element amounts to 7 billion next year, including certain protections, such as flood defences in Moray.