His organisation had applied for its usual amount of funding for gambling addiction services - between $1 million and $2 million.
Instead, the ministry decided that it would take over as the national provider.
It is understood that the gambling industry has made a number of complaints about the Problem Gambling Foundation's advocacy work.
Some critics said yesterday that a state-funded organisation should not lobby on government policy.
Right-leaning lobby group the Taxpayers' Union welcomed the change, saying that the foundation was using public money for pet political causes.
National MP Tau Henare caused an online debate after he wrote on Twitter: "Why should the Govt pay a group to be critical of it? Pay them to help but don't pay them to bag the hand that feeds."
The foundation's chief executive Graeme Ramsey said that its taxpayer funding came with strict conditions, and not a cent of it was spent on advocacy work.
Campaigns were paid for with private donations.
Under the changes, his organisation's funding would be cut from $4.7 million to around $1 million and its staff was expected to drop from 63 to 11.
The money would be transferred to the Salvation Army, which was believed to be able to employ 12 more frontline staff than the foundation with the same amount of funding.
Some parties questioned whether the Salvation Army was an improvement on the foundation.
Former foundation head John Stansfield said that the key difference between the two organisations was that the foundation had a strong track record on prevention while the Army focused on treatment.
In two decades the foundation had treated 25,000 clients, established an international reputation, and hosted high-level conferences. It had helped communities negotiate with their councils to introduce sinking lid policies, one of the most effective gambling harm tools.
Mr Walker said it was difficult to comment because he had not seen a contract yet, but said his organisation had worked in the gambling addiction sector since the 1990s.
