THE Bendigo and District Aboriginal Co-operative received one-tenth of the funding it applied for under the federal government's Indigenous Advancement Strategy.
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BDAC had applied for $5 million from the program, but received $500,000 for an enterprise program and a men's social and emotional wellbeing program.
The co-operative had not received funding under the scheme for its Bringing Them Home worker and other services aimed at young Indigenous people in the Bendigo community.
The Bringing Them Home worker had 19 clients, and a further seven on a waiting list, and does work around the impacts of the Stolen Generation.
BDAC chief executive officer Raylene Harradine raised the funding issue during a visit to Bendigo from the federal Labor Party's Indigenous Affairs spokesperson Shayne Neumann on Tuesday.
Ms Harradine said their applications were refused on grounds that they were not necessarily "high need".
She said the process was overly rigorous and they did not always have the resources to make repeated funding applications.
"We were advised as well that the money that was held back, if we identified there was a high need for a particular area, then we could go down that line and do that whole process again," she said.
"That's just another layer to what they expect we need to do and from the organisation's point of view, we have staff that are funded to do client direct services.
"We don't have the luxury to have people come in and do this. The goal posts are moving all the time. I feel for the really small ones and how they've gone with their applications."
The Indigenous Advancement Strategy was instituted by federal Indigenous Affairs Minister Nigel Scullion to streamline funding.
The federal government has $1.14 billion of unallocated money for Indigenous organisations ahead of this year's budget, Mr Neumann said.
He hoped the funding would not just flow back into Treasury coffers.
A spokesperson for Nigel Scullion said the government had to make some "tough decisions" as the funding was "overwhelmingly oversubscribed".
"There was an overwhelming response to the Funding Round with 2,472 applications for 4,948 projects – so it’s inevitable not everyone will be happy with the outcome of the funding round," the spokesperson said.
"However, all applications were assessed on their merits and we have taken the time to get this process right.
"Every effort has been made to ensure frontline services are maintained. Where possible, we have been mindful to support Indigenous organisations and Indigenous employment."