Vulnerable people in parts of Melbourne and Perth are set to be left without financial counselling help after Christmas after three services failed to secure funding.

The social services minister, Paul Fletcher, intervened in November to offer 12 months of transitional money to 16 organisations providing financial counselling services which had been defunded during the grants process.

But three services, in Perth and south-eastern Melbourne, have since learned they are unable to access that money.

The funding shortfall – about $360,000 in total – means the services are likely to close, meaning clients yet to have their cases resolved would be left in the lurch while newly funded providers are set up.

The executive director of Victoria’s Financial and Consumer Rights Council, Sandy Ross, said the services provided by the Salvation Army and Lifeline in south-east Melbourne, and Lifeline in Perth, were at risk.

“[The department] told us that they’re looking into it but we’ve got less than two weeks before Christmas just about and the positions [will be] gone,” Ross said.

“They have to close their books, they can’t assist people any more. Where do the referrals go? We can’t even say.”

Ross accused the department of relying on a technicality to deny transitional funding to the three affected services, a decision that will affect dozens of needy clients.

“The department has basically said, ‘Tell it to the hand. We’ve got a definition and you don’t fit it, tough luck,’” he said.

“In my book, that is bureaucratic bungling. Putting an arbitrary and technical set of rules ahead of the key principles – helping people – which need to be the focus.”

Clients who would be affected included a 72-year-old breast cancer sufferer who faces losing her home over $30,000 in debts owed to a finance company, the council said.

In November the government reversed a decision to withdraw $300,000 in funding to the charity Foodbank, a decision that emerged as part of the same grants process.

The department is understood to have only offered transitional funding to services whose parent organisation had applied for funding in the most recent grants process and had been knocked back.

In the case of Lifeline’s Perth service, its financial counselling services have been absorbed into its state-based organisation, Lifeline WA.

The department has argued that because Lifelife Australia did not apply, Lifeline WA’s Perth service is not eligible for funding.

A department spokeswoman said there had been “no cuts to financial counselling funding in south-east Melbourne”.

“Full funding has been maintained for the next 4.5 years,” the spokeswoman said.

The spokeswoman said the Salvation Army had received a $100,000 boost to its overall funding.

But Ross said the Salvos had been defunded in the south-east Melbourne region and were not able to provide services outside the areas in which they had won grants.

“So in that region that position is gone,” he said.

The spokeswoman said a new organisation – Good Shepherd Microfinance – would be providing financial programs to people on low incomes in south-east Melbourne from the start of next year.

Other services – Narre Warren’s Casey North Community Information and Support Service , and South East Community Links in Dandenong – would also remain, the spokeswoman said.

The shadow minster for families, Jenny McAllister, said the grants rollout had been a “disaster of the government’s own making”.