Ms Oliver said when the new funding was opened up to everyone, they lost out.
She said their application made it to stage two but they were shocked when they were told they were unsuccessful.
"We are just gutted, it's the loss of a vital service to Wairarapa and we are already a vulnerable community. "We share information with people letting them know it's ok to talk about what's going on.
"So many people can't believe it, it's gut-wrenching."
She said they only applied for the amount necessary to cover operational costs and her salary. The rest of the team are volunteers.
"You could apply for $100,000 but we've run on the smell of an oily rag for five and a half years."
Ms Oliver said money should be put into preventative programmes such as LMLM rather than taking an ambulance at the bottom of the cliff approach.
"For every dollar invested in the Like Minds Like Mine campaign nationally, $13 is saved in the area of mental health."
She said in the past year nearly 300 people attended workshops run by the team, some of whom have experienced mental illness themselves.
They covered issues such as hearing voices that are distressing, stigma and discrimination, human rights, and be there, stay involved.
They also ran radio and print campaigns such as the Feeling Down on the Farm programme.
Masterton Mayor Lyn Patterson said she would meet with Ms Oliver to see what could be done.
LMLM Wairarapa was one of 73 applications that sought funding from the new fund.
HPA's manager mental health, Virginia MacEwan, said HPA was pleased with the quality of proposals received and most aligned with the objectives of the fund and the new national plan.
"The 16 projects selected were those that most closely aligned with the refreshed national plan and application criteria."
Mrs Oliver said they were meeting with the HPA to find out why they were not successful.
