Specialised residential villages in Otaki and Roxburgh, which provide treatment for children who've endured trauma, will have to close at the end of June.
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Stand Children's Services provide unique treatment for children ages between five to 12 years who need support to recover from trauma.
The service hasn't received a funding increase since 2009 and has been using its own reserves to bridge the gap.
Those reserves have now dried up and it is facing a $3million shortfall.
If the proposal to close goes ahead, 63 jobs will be lost across both regions and 380 children a year will miss out on the Children's Village trauma treatment programme.
Stand Chief Executive Fiona Inkpen said there's currently a waiting list for the service and the the closure will effect other agencies.
"People don't fully realise the trauma treatment programme is a mental health service and we do work very closely with child and adolescence mental health services right throughout the country, they often refer to our services.
"I think the impact in relation to increased stress and pressure on their services will definitely happen," she said.
The villages are also used three times a year to give grandparents who look after their grandchildren a week long break, she said.
"The kids love it because it's just like having a holiday, make new friends, have adventures and do fantastic things, but for grandparents its a week of respite to let them catch their breath," she said.
It would be really sad to see it go, she said.
Ms Inkpen said she has spoken to Minister for Children Tracy Martin who said, despite being clear about the value of the service, she was in a situation where she couldn't find the money.
However, Stand Children's Services will continue to support children and families in the area through other services it provides.