Yule said he could not fathom a reason why the application was declined.
The hospice's current building near Hastings racecourse is too small and a new one is set to be built on Fernie land on the Hawke's Bay Expressway between Napier and Hastings.
The Cranford Hospice Trust recently applied for funding, but it was declined last week.
In a letter provided to Hawke's Bay Today, Sean Wynne, Deputy Chief Executive Officer – Housing Infrastructure, laid out the reasons for declining the foundation's application.
Wynne said the government was looking to support projects that could be under way within 12 months, were of a minimum scale with material employment benefits and which provided national or regional public benefit.
"The value of the submitted projects was much greater than available funding for this programme of work, and so not all projects were able to be included for support."
Yule said the foundation's application being declined made him furious, considering the other projects which did receive funding.
"When I compare our hospice to the $11.7 million Green School in New Plymouth, which was approved, I am left wondering why our project was declined," he said.
He said the application met every criteria for receiving funding.
"So this is the choice that this government has made. No to our Hospice, and yes to a Green School and I'm pretty darn annoyed about it.
"It makes no logical sense to me, and the people of Hawke's Bay yet again have missed out."
A spokesman for the Ministers who oversaw the Infrastructure Reference Group [IRG] process sad experts scrutinised 1924 submissions before a shortlist of 802 projects was presented to Ministers.
The Ministers and Cabinet then considered those projects and agreed to fund, in principle, around 150 of them.
"We know that there will be a number of applicants who will be disappointed that their projects weren't included.
"We understand how important some of these projects are to their communities, but not all of them could be funded and Ministers had to make some difficult decisions," he said.
"We will continue to work to find further ways to support economic and social infrastructure projects around the country."
