An Official Information Act request had also revealed MPI did not have funding for its own regional animal welfare emergency management co-ordination function, despite it being mandated.
"We have had veiled threats from officials and even a Minister that if we continue to draw attention to such deficiencies, our chances of getting funding will be affected," Glassey told the committee.
"Yet, this Government repeatedly says it's prepared to be held to account."
He said he had been told today that despite being assured that MPI would cover the costs of responding to the fire, it was now undecided as it whether it would pay its "piddly" expense claim.
Asked by MPs what had been conveyed, Glassey said "basically, if we don't play the game we won't get funding".
O'Connor confirmed to reporters he and Glassey had spoken but he made no such threat.
"Steve will always extrapolate things out. I said it's really important to be positive when we're trying to negotiate a better deal with him. I think Steve going around criticising MPI staff at every single opportunity when everyone is doing their best is not a very productive way forward."
O'Connor said Glassey would misunderstand anything regardless of what was said.
He said Nelson was an emergency situation, Glassey had gone behind the cordon.
"He had created some chaos and some challenges for the police and for MPI. It wasn't a very productive situation."
MPI's director of animal health and welfare Chris Rodwell said Animal Evac NZ was one of several agencies invited to help with the response to the fires, along with
the SPCA, the Helping You Help Animals charity and Massey University's veterinary emergency response team.
"Animal Evac does not receive funding from MPI, so there are no plans to cut funding. We look to find funding to support services in every response we are involved in, including this one," Rodwell said in a statement.
Supporting agencies were advised that travel and accommodation costs would be picked up by the Nelson Tasman Civil Defence Emergency Management group.
"It is up to them to seek reimbursement and we can facilitate this. In addition, charities
involved are also able to apply to the mayoral fund," Rodwell said.