"We are doing all right, but praying really hard for the rest," national director Kim Workman said.
The fellowship, which runs programmes in prisons to help rehabilitate offenders, said in the letter to individuals and organisations it needed to raise $200,000, or it would be forced to cut staff and cancel some of its partially-funded programmes.
This would include the Sycamore Tree programme, where victims meet offenders and explain the effects of crime.
The first group of offenders at the Otago Corrections Facility graduated in March.
It was the first time Mr Workman had written such a letter in his eight years as national director, he said.
"We think people have assumed incorrectly we are fully funded by the Government, so the amount of donations has declined.
"People didn't realise we relied primarily on donations."
Other groups, such as the Prisoner Aid and Rehabilitation Service, were fully funded, so it was difficult to get more Government funding and the philanthropist's dollar was spread thin, he said.
Head of prisoner rehabilitation with the Department of Corrections, Phil McCarthy, told Radio New Zealand the group's work was successful.
"That first experience of sitting down with a victim and experiencing the impact of their offending is often a turning point for offenders.
"We think that it is very effective, and indicative of that is that prisons are asking Prison Fellowship to provide more programmes than the department is contracting them for."
Mr Workman said about $42,000 had been raised since the letters were sent out.
"We have had a very sympathetic reaction to the letter."
The fellowship hoped to be in a position to continue delivering the programmes in five weeks' time, but if it was not, it would have to start dropping them.
Conferences between victims and offenders as part of the Sycamore Tree programme would be one of the first to go.
United Future deputy leader Judy Turner has asked the Government to consider the group's current shortfall and acknowledge the benefits of its restorative justice programmes.
"It is crucial that we lower the rate of recidivism in New Zealand. The only way to do so is to give those coming out of prison the skills to contribute to the community," she said.
