"A lot get advance payments because they're in rent arrears, or power arrears and have had their power disconnected or are about to have their power disconnected," Ms Lyden said.
"They also get advanced payments for optometry, dental care, and to buy whiteware and school supplies. We try to emphasise to people that they're still a debt they need to pay back. They're a much better debt than debt with a loan shark because they're interest-free but they're still a debt."
Advance payments, known as "recoverable assistance", helped people pay for something they needed urgently when they have no other way of paying for it.
Most beneficiaries who owed money to the ministry also had other debt, she said.
"Rent and power arrears are common. People also have hire purchase and some get debts buying from truck shops. We encourage people to put 'do not knock' signs on their doors to keep sellers away but they don't always or the sellers knock anyway."
Ms Lyden cautioned against building up any more debt at Christmas.
"January and February is always a busy time for us because people overspend at Christmas. There's also lots of costs involved in going back to school; stationery, uniforms and now a lot are expected to have Chromebooks [budget laptops] which are about $500."
Nationally, $627,780,079 was owed by beneficiaries at the end of the financial year.
Almost 60 per cent of 18 to 64-year-olds on a main benefit were in debt, with an average individual debt of $2532.86.
Ministry of Social Development spokesman Carl Crafar said the ministry worked hard to "protect the integrity of the system to ensure it remains fair to all New Zealanders".
Clients could owe money to the ministry because of overpayment, "recoverable assistance" or as a result of being prosecuted for fraud. Most overpayments occurred because clients failed to inform Work and Income of a change in their circumstances, such as accommodation costs, Mr Crafar said.
