Up to $1 billion could be moved from specific projects for Maori, to a bulk fund aimed at broad goals such as improving education and health.
Maori Party co-leader Tariana Turia is driving the radical proposal across her two portfolios as Associate Minister of Health and Social Development.
She said it would help cut "huge" compliance costs faced by agencies and the Government dealing with numerous small contracts tied to specific goals such as youth work, social workers in schools and alternative education.
"We will get a better spend because people will be able to access a pool of money to deal with a range of issues," she said.
"It's a great opportunity to build trust in the sector because the sad thing about it is that the bureaucracy doesn't trust the non-government sector and that's why we end up with particularly prescribed contracts with people being over-audited.
''I'd like to see that change."
She has asked Massey University professor Mason Durie to produce initial ideas on how to do it "within the next two to three weeks" and was hoping it would begin at some level by the end of June.
She was also looking into ways to ensure the way the money was spent could be monitored.
Prof Durie said the scheme would almost certainly start on a trial basis in a few localities to find out "under what circumstances would this work and under what circumstances it wouldn't work".
Those agencies said they often ended up working with the same families under the various contracts.
Receiving a bulk sum of money to achieve broader social outcomes such as lifting their families' health status, educational and work achievements would allow them to take a "holistic" approach to each family's needs.
Mrs Turia said the Maori workshop group at February's Job Summit in Manukau suggested the ultimate goal could be to devolve "maybe 2% of the total budget".
With Government spending running at $62 billion a year, that would represent about $1.2 billion a year.
Mrs Turia said she would like to extend it beyond the health and social development portfolios to include housing, education and justice services - and not just for Maori.
"I only have responsibility for Maori health and family violence and areas that connect back in there," she said.
"While my focus may well be on getting Maori organisations up and running, it's an opportunity in fact for the community and voluntary sector - the not-for-profit sector, the Pacific community, the migrant communities and, of course, others if they choose to."
Her superior, Social Development Minister Paula Bennett, said she was working with Mrs Turia on the idea.
"As far as I'm concerned, anything that leads to improved outcomes is worth considering," she said.
West Auckland's Waipareira Trust chief executive John Tamihere has been pushing for integrated funding for 20 years.
He said his trust currently worked with whole families informally across 54 specific contracts.
