Social Development Minister Paula Bennett concedes there are problems with the stricter rules for getting hardship assistance grants.
She attended a meeting on Friday in Mangere with more than 20 budgeting services that want her to increase their funding.
The services say demand has grown by 70% in the past three months after a change by Work and Income that requires people applying for hardship grants for a third time to get budgeting help.
Following the meeting, Ms Bennett said she realises that changes are needed.
Ms Bennett says some Work and Income staff are misinterpreting the policy and insisting that people go to a budgeting service when they could be getting advice in other ways.
"What I think that has been interpreted in the frontlines sometimes is they have to send them to a budgeting service before they can help them - that's not right.
"They could go online and fill out a budgeting form; they could do it with a case manager themselves in those first circumstances.
"I think we need to fix that and make sure that the policy intent is actually happening on the frontline."
Mangere Budgeting Services chief executive Daryl Evans says he is confident something may now be done to improve the situation.
The minister says the number of hardship grants has increased dramatically, from about 51,000 in March 2008 to 91,000 in March this year.
