Evelyn Thordarson, of the Kataujaq Society, said the day care's annual budget is $309,000, and the non-profit society only receives $68,977 in funding from the Department of Education.
"Of that, more than $34,000 is contingent on whether the kids come to day care," said Thordarson.
"If the kids are sick, on vacation, whatever, we don't get the money for that spot.
"Our staff are among the lowest paid in the territory and we just don't receive enough funding to meet our obligations and secure our staff for the long term."
Thordarson said a number of Kivalliq day cares receive Human Resources Development funding from Kivalliq Partners in Development, but the Kataujaq Day Care doesn't meet the criteria.
"In order to receive Kivalliq Partners funding, all the day care board members have to be Inuit.
"Almost all the kids at the day care are Inuit, as are the majority of our staff.
"We also have an elder on staff and an aboriginal assistant manager training program in place, but it's still not enough. As far as we're concerned, that criteria is a form of racism."
Ralph Bellstedt is Human Resource and Development's regional manager of strategic partnerships for Nunavut, the NWT and Alberta. Bellstedt said federal funds flow through an Aboriginal Human Resources Development Agreement (AHRDA) holder.
He said the funding agreements are in place primarily for training and employment development.
"Day care is an important component of that so parents, who are either employed or undergoing training, have the comfort of knowing their kids are being properly looked after," said Bellstedt.
"To my knowledge, unless that's a local rule Kivalliq Partners have put in, there's no requirement that the board be 100 per cent Inuit.
"So, why does it have to be a totally Inuit board to achieve that?
"If this is, in fact, the case, it's certainly not anything that's in our guidelines.
"I certainly would be interested in understanding the reasoning behind it."
Ron Dewar, director for Kivalliq Partners in Development, declined to comment until he had a chance to review the policies.
Bellstedt said his department also administers monies through the Labour Market Fund which helps working aboriginal parents and those in training.
However, he said the control of those dollars rests with the AHRDA holder.
"The AHRDA holder in the Kivalliq region would make the assessment.
"The fund does allows for support for working parents, as well as those undergoing training, but the decision making rests within the community.
The AHRDA holder may feel since working parents have that income coming in, they don't warrant the same consideration as those taking training."
Thordarson said Inuit parents in Iqaluit, regardless of income, receive a substantial subsidy through the Qikiqtani Inuit Association for children they have in day care, which Inuit parents in Rankin don't.
She said the Kataujaq Day Care was in danger of closing this year and had children pulled out when fees were increased by $5 per week.
"We're not saying parents shouldn't have to pay to have their kids in day care.
"But Inuit parents in Rankin should be able to access the same subsidy program as those in Iqaluit, whether we have a few white people on our board or not."