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The decision was made behind closed doors by the SDHB last week.
Invercargill's Southland Youth One Stop Shop, or Number 10, which has operated for 18 months, has been funded by community organisations, which requested the clinic seek DHB support.
Board chairman Paul Menzies said while the board recognised the clinic's value, its dire financial position meant it could not provide the $200,000 requested.
Mrs Johnstone said the clinic would now seek continued support from its community funders, including the Invercargill Licensing Trust and the Community Trust of Southland. If unsuccessful, the clinic would probably close at the end of next month.
The clinic provided a much needed service for young people between 10 and 24, many of whom were vulnerable, unemployed, or had young children, she said.
There was a high proportion of Maori and Pacific Island youth among the 2200 on the clinic's books.
Mrs Johnstone said Invercargill's GP shortage made it difficult for some young people to get help.