Budgeting services face closure due to fewer contracts

The Ministry of Social Development says a change in its funding model means fewer budgeting organisations will get funding.
The Ministry of Social Development says a change in its funding model means fewer budgeting organisations will get funding. Photo credit: Newshub.

By Lauren Crimp for RNZ

Some budgeting advice organisations are facing closure after missing out on the latest round of government funding, raising fears for some of the country's most vulnerable people.

Building Financial Services funding has dropped from $22.3 million last year to $19.5 million from 1 July, due to the expiry of a time-limited cash boost during the pandemic, the Ministry of Social Development (MSD) confirmed.

It says a change in funding model means fewer organisations will be awarded contracts. The ministry currently funds 132 groups, but it could not yet confirm how much that figure would drop.

Christine Liggins, chief executive of debt solutions service DebtFix, said she had heard of about 20 that were facing closure after not securing a contract.

Dunedin Budget Advisory Service - which last year received $230,000 from MSD - is not getting a cent next year, and manager Andrew Henderson was dumbfounded.

"I feel personally devastated. I feel for our staff, I feel for our clients," Henderson said.

"We've had many clients that we work with on an ongoing basis for whatever reason, and the fact that we're not going to be able to offer our services to those people is devastating."

The organisation was told its proposal did not reach the "required score", which Henderson found surprising, given the service had a "great relationship" with the ministry, and there was an increasing number of people doing it tough financially.

"More and more working families are coming to our service for help, which is unusual.

"We're even getting into the likes of professionals - so teachers, dentists, painters, plumbers, all sorts, and people really are starting to struggle.

"The fact that we're no longer to be able to support them is a real worry."

It would try and merge with another to stay afloat, but that was not a sure thing, said Henderson.

'It's a real worry'

At Family Finance Services in Upper Hutt, manager Heather Lange said it was lucky to get a "good allocation" - but it had dropped to the level it was receiving about five years ago.

On Monday her email inbox was flooded with "emotive" emails from other organisations that did not get a contract, or were getting considerably less money.

"It's just like watching a train derail," she said.

"It's a real worry, when I know how many clients turn to us."

FinCap, which supports free financial mentoring services, said if anything, funding should be boosted, given rising demand.

"We think there will be less services overall for communities to access, and yet we have, as we all know, increased constraints for families with cost of living and we're seeing those presentations coming through financial mentoring services," said chief executive Ruth Smithers.

Between 2022 and 2023, about 50,000 people accessed such services - but that jumped to 69,000 between 2023 and 2024, she said.

"We'd just really encourage the government to maintain and regularly consider the need to increase current funding, so not to reduce the funding."

Funding model provides 'greater flexibility' - ministry

The government decided to fund a certain number of staff from 1 July, replacing the existing model of funding a number of client sessions.

The new model gives providers greater flexibility to tailor services to their client's needs, rather than being tied to a specific number of sessions, MSD's Safe Strong Families and Communities General Manager Mark Henderson said.

Funding staff was also how the ministry paid for a range of other services, he said.

A document shared with RNZ - outlining the ministry's proposal to change the model - included provider feedback, which showed most were in favour of it and agreed it was more flexible.

But they raised concerns about what it would mean for funding, and told the ministry funding a total of 180 staff would reduce budgeting advisors' coverage across the country.