The Department of Internal Affairs (DIA) is sitting on almost $12 million raised a year ago by the public for Cyclone Gabrielle-affected townships, because the money was specifically designed for medium to long-term projects.

However, the time it has taken for the money to be invested has led Wairoa mayor Craig Little to call the actions of the DIA "a disgrace" and demand it release the money as urgently as possible.

The $11.7 million, to be exact, was raised by Lotto in a special draw allocated to the Cyclone Gabrielle Appeal Trust.

Wairoa was one of the worst-affected towns in the cyclone that hit last January and Little toldtThe Mike Hosking Breakfast that the money is desperately needed by a town that is still struck with homelessness and poverty after the disaster.

"You've got people living in third world country [conditions] really," he said this morning.

"They can't get back to their homes and they've lost everything."

The $11.7 million would "completely finish the job" required for the town to recover from the cyclone, Little said.

"But then again, six million would be great, one million would be great for us as well.”

A DIA spokesperson told Newstalk ZB Plus the Lotto draw money was specifically for medium- and long-term recovery projects within cyclone-hit communities.

"These are projects that take time for communities to scope, like fixing the facilities where people come together including community halls or marae," the spokesperson said.

"Because this is about medium- to long-term projects, it is critical the community has a chance to fully engage and participate in the process."

The DIA also said it had learned from the Christchurch earthquakes that the needs of communities will often take time to be apparent, and having funding available for those needs was necessary.

"Communities apply for the funding or put bids into the process, and it takes time for people to pull these applications/bids together."

Little, however, isn't convinced by the DIA's reasoning for holding onto the funds. He encouraged officials to visit the approximately 100 people without a home and understand where they've come from.

"Just pull the Gib and linings off and that's where the houses were sitting now, they're ready to be rebuilt," he said about the homeless' properties.

"These people making the decision need to go for a walk around these homes and talk to these people and listen to their stories - it's just horrible."

Every mayor and local leader in Hawke’s Bay want to get on with finishing the recovery, Little said, and increased pressure on councils to perform hasn't helped their case.

He said the Wairoa District Council wasn't well funded but was desperate to get a move on.

"You forget also that a lot of people went into this arrangement buying Lotto tickets and donating thinking it would be well and truly done by now," he said.

"We have our own account in Wairoa and we raised our $2m, we've probably spent most of it - the other $500,000 has got to go back into actually starting to rebuild these homes and we just want to train builders and everybody up.

"We've got all the solutions, but we haven't got the funding."

The DIA has provided community advisers to work alongside other funders, including councils, since the cyclone. The agency has also distributed almost $10m in additional Lotto funds, some of this alongside council funding.

The spokesperson said that on behalf of the Cyclone Gabrielle Appeal Trustees, the department’s community advisers have been working alongside community groups, hapū and iwi to hear their needs.

"The trustees are meeting this month to make a decision on funding time frames and this will be communicated publicly," they said.

"Any and all interest earned on the money from the special Lotto draw will be distributed by the trustees into communities."

The trustees plan to meet this month and make further decisions on funding timeframes.