Koputai Kids After School Programme is an approved Out of School Care (Oscar) Foundation programme which has been receiving partial funding from the Ministry of Social Development.
But programme co-ordinator Jessamy George said major changes to the way the programme would be funded meant its funding would go from $26,000 a year to about $12,125.
''This will break us and we are devastated,'' she said.
The non-profit group ran after-school and holiday child care for children aged 5-14, Miss George said.
Each day, about 15 children attended after-school care and 20 attended holiday care, she said.
''Last year, in April, we moved into a new building which we had spent three years fundraising for.
''It was a massive achievement, only to find out several months later that the Ministry of Social Development was proposing radical changes to the funding scheme.
''We were only given one round of consultation and none of our pleas were responded to.
''The changes have been made.''
Miss George said the group had applied for funding under the new scheme but had grave concerns about its future.
''With the round of funding we have just applied for, we have also applied for transitional funding, which will mean, if we get it, we will receive 85% of our previous year's funding, so we have the next year to figure out what we can do to keep the doors open.
''We already need to fundraise around $6000 to $10,000 per year to keep us operational.''
Miss George planned to meet other Oscar-funded programmes in Otago to discuss the issues.
''I know there are other centres in our situation. I want to create a united front and work together to solve the issue.''
Social Development Minister Paula Bennett announced changes to the funding system for Oscar programmes in April, after consultation with, and advice from, the sector.
She said the ministry's aim was to improve funding so it was fair and equitable, and targeted priority communities for more services.
The present deficit-based funding system had created a ''perverse incentive'' as providers got more funding when operating at a loss, which could encourage inefficient practise, she said.
''It just didn't make sense to continue that.
''Having a spread of good Oscar services means sole parents with new work expectations through welfare reforms have greater child-care options.''
To help providers adapt to the new system, Mrs Bennett said transitional funding would provide support over the next three years.
A Ministry of Social Development spokesman said Koputai's transitional funding for year one would be $22,000, followed by $15,600 in year two before moving to its ongoing annual funding rate of $12,125 from year three onwards.
''This includes top-up funding of $3000 per year. This brings their funding into line with similar services with similar levels of children enrolled.''
He said the level of annual funding was based on enrolment information provided by Koputai.
Funding levels are reviewed annually, so if a programme enrolled more children, its funding could change to reflect that.
At present, the Government provided $16.9 million in Oscar funding to 699 providers across New Zealand, he said.
