A third of the current funded budgeting services across the country face closure. File photo. Photo: 123RF
Budgeting services whose government funding has been chopped are warning other free financial mentors are too busy to pick up their clients because of the recession.
A third of the current funded budgeting services across the country face closure, after missing out on the latest round of funding through the Ministry of Social Development (MSD).
Among them is Auckland Central Budgeting, which received $269,000 from MSD for the current financial year and will be running on reserves from July.
General manager and senior financial mentor Teresa White was concerned there would be little capacity for others to pick up clients they can no longer serve due to funding constraints.
"We are very concerned about what is looking like a very real lack of provision in the central Auckland area, and are concerned that there will be nowhere for people to go for support," White said.
"If we cannot secure funding, we will have to consider closing our doors. But we know that most other financial mentoring services are also at capacity.
"They will struggle to take on any extra clients, if our service is unable to continue to operate due to lack of funds."
White said she understood the locations of budgeting services receiving funding were more limited, which would make it more difficult for people already struggling to access support.
MSD said funding for budgeting services has dropped from just over $22 million last year to $19.5m from July, due to the expiry of a time-limited cash boost during the pandemic.
It is also changing the funding model from covering sessions to employees - around 180 financial mentors will be funded nationally.
That meant MSD would no longer fund 44 of the current 132 budgeting services.
In a statement, MSD spokesperson Karin Dalgleish said some of the 88 budgeting services offered new contracts were being funded to pick up extra clients.
"We are working with regional clusters of providers on the transition to new contracts. The transition will look different for different providers, depending on their situation," Dalgleish said.
"For example, many existing providers will continue to operate under new contracts with some being funded for increased capacity to pick up extra clients."
She said the list of budgeting services awarded contracts will be updated as these are confirmed, so that services without funding can refer clients if needed.
"This is the first re-contracting of our Building Financial Capability core services since 2016 and the scale of this procurement means it is a complex transition, and we are working to make the change as smooth as possible."
Dalgleish said some providers might stop offering free budgeting services and clients may "need to use other providers in the region, or contact Moneytalks".
MSD would update its list of providers as contracts were signed, she said.
Mangere Budgeting Service would continue to receive funding, and chief executive Lara Dolan said they needed to employ two more financial mentors to cope with existing demand.
"Our demand has increased by 17 percent compared to last financial year and we will be able to take some new clients."
But she was worried about how many people would come knocking if other services in the area folded.
"A little bit concerned but I've done my planning and I think I will be able to cope with some demand but because I don't know how many services [there will be] in our area, the demand as such is unknown at this stage."
Dunedin resident Shannon, who wishes to be known by his first name, had the weight of credit card debt on his shoulders when he approached Dunedin Budget Advisory Service, which will no longer receive government funding.
He has little wriggle room in his weekly budget after paying bills and his rent recently went up.
"After groceries I probably have, because rent's just gone up for me, a spare $30 to $40 at the end of the week after everything else is paid, doing 40 hours a week."
The credit card he signed up for seemed like cheap money, until he started paying interest and realised he could not pay off the $4000 dollar debt.
"You're getting money and you're like sweet this is great and then it comes to doing the repayments and it's like this is way too much I can't afford this and I got real stressed."
Shannon said with a budget advisor's help, he stuck to a plan and paid off the debt.
"The amount of gratitude I have is overwhelming."
He was disappointed to learn Dunedin Budget Advisory Service was not getting government funding from July, after last year receiving $230,000 from MSD.
"I was actually real devastated. They way they helped me, how come they're not getting any support."