Kids Company chief executive Camila Batmanghelidjh is to step down amid reports the government has threatened to withhold funding unless the founder is replaced.

A spokesperson for the charity said Batmanghelidjh will stay in her current role until a new person is appointed.

The BBC and Buzzfeed have reported that a joint investigation revealed officials are withholding £3m from Kids Company, and that there are high level concerns within government about financial management at the charity.

Kids Company supports vulnerable children across London, Bristol and Liverpool. The charity’s most recent accounts filed with the Charity Commission show income of £23.1m in the year to December 2013, 23 per cent of which sourced from central and local government.

In a statement, Kids Company said it has been under “unprecedented financial strain” having received fewer philanthropic and public donations while serving “an increasing number of high-risk vulnerable children, young people and families, who are not being supported by the statutory system”.

Batmanghelidjh will remain with the charity in an “advocacy and clinical” role after a new chief executive is appointed.

Batmanghelidjh told Radio 4’s Today programme that the charity has been audited for the past 19 years and has always been clear.

She said she has always planned to step down from the charity she founded in its 20th year, 2016. However, she also told the programme that the government was briefing against her in an attempt to discredit her after Kids Company’s criticisms of the level of protection the state is offering vulnerable children.

"Kids Company is taking care of far too many mentally ill children and children who are not being protected robustly and our discussions with government have been that a charity cannot handle this load,” Batmanghelidjh told the programme. "There have been sometimes uncomfortable discussions which has made the government, understandably, potentially uncomfortable with the message."

Further, the Guardian quoted Batmanghelidjh saying that she is “being silenced”.

“Some ugly games are being played. The facts are that the vulnerable children of this country remain largely unprotected,” she told the paper. “There’s no point in shooting the messenger if the message is uncomfortable.”

The charity said it is working alongside a city-based group of philanthropists, supported by the new government, to create a “more sustainable organisation and funding structure that will be better able to tolerate unpredictable income streams in the future”.

Chair Alan Yentob said Batmanghelidjh and the staff of Kids Company have created a highly effective model of care and support that “should be recognised and valued as a national asset”.

“The board and I, with the backing of a philanthropic group have ensured that this is protected and that Kids Company will continue to offer safety, protection and loving care to some of society’s most vulnerable children,” Yentob said.

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