"Oranga Tamariki have also offered to identify employment opportunities for staff to consider."
She said Stand hadn't had a funding increase since 2009 and had been meeting operating shortfalls from its own reserves.
Financial pressures increased last year following salary increases for the organisation's staff.
"Pay rises were a priority for us to retain our specialist staff who support some of the country's most vulnerable children and families but who've been among the lowest paid in the sector.
"Our people deserve recognition for their work and we needed to recruit and keep quality staff who make a a real difference to these children's lives."
The organisation had been able to top-up Government funding for many years with prudent financial management and the sale of unused land.
But its reserves had now been used up and "we have made the difficult decision to consult with staff and the PSA about closing two of our villages".
"Our hope is this will be a temporary measure and we will be working with Oranga Tamariki and the Ministry of Education to rebuild services in both areas."
She said for the 2017/18 financial year, Stand and Oranga Tamariki split the increased operating costs 50/50, however Stand would need $3 million extra, an increase of 18 per cent, to cover the pay rises, compensate for nine years of inflation, and added costs such as Kiwisaver, to keep the villages open.
Dr Inkpen said the government had told Stand the funding required could not be secured at this time because of restrictions on the government budget.
The organisation would continue to operate its intensive family wraparound services in the central and southern regions, but would stop providing the residential trauma focused treatment programme at the end of June.
"I want to reassure our children and families that Stand is not going anywhere.
"The villages are one aspect of the services we provide and while it would be very sad to close these two, our priority remains supporting children and families to be safe, healthy and functioning well."
Stand had been seeking to relocate its Otaki village, commonly referred as the Otaki Children's Health Camp, to a property in a residential street in Paraparaumu.
A house had been bought in Milne Drive but was now being rented out.
"We do believe in the trauma treatment programme for children, that operates out of the villages, so we intend to work to try and restore that service for children in both regions."
Stand's villages provide a unique treatment service for children aged 5 to 12 who need support to recover from trauma.
