Camila Batmanghelidjh has stepped down from her role as chief executive of Kids Company after a joint investigation by BBC Newsnight and Buzzfeed.

Batmanghelidjh, who founded the charity in 1996, stepped down after Newsnight revealed that the Cabinet Office was withholding £3m worth of funding unless Batmanghelidjh stepped down as her role of chief executive.

Kids Company had an income of £23m in the most recent financial year and provides services to disadvantaged children in London and Bristol.

Around 20 per cent of its income comes from statutory sources, with the charity saying it receives its income from 77,000 different sources a year. It has also received significant donations from celebrities including JK Rowling and the band Coldplay.

BBC Newsnight claims government officials told the charity it would not receive the funding unless Batmanghelidjh was replaced as chief executive, although it did not suggest that she had to leave the organisation entirely.

The investigation said that the government is so concerned about the way the charity has been run it will only continue to fund it if Batmanghelidjh no longer runs the organisation.

Speaking to BBC Radio 4's Today programme this morning, Batmanghelidjh said the government was trying to force her to step down because she had criticised current policies threatening the wellbeing of children. She said questions of financial mismanagement were a “red herring”.

She also said that she had always intended to step down from the chief executive position in her 20th year in 2016, with the intention to remain at the charity in a clinical role.

‘Drain on donations’

Journalist Miles Goslett, who wrote an article called “The trouble with Kids Company” in February for the Spectator that attacked the charity for being a “drain on donations”, told Newsnight that the charity “has exaggerated the number of clients that have been using its services”, and that it has had to change its website to reference that fact.

Politics editor Chris Cook said the Cabinet Office “has decided it will withhold £3m of money which Kids Company was expected to get until she moves aside”.

He said that specific government concerns centre round questions of public sector propriety, and whether the charity can account for every pound spent. He said the Cabinet Office is questioning if there is someone in place with a strong enough financial skillset to lead the charity.

He clarified that the government is not pulling funding, and that ministers believe the charity does a very important job, but they do think it could “do better away from her leadership”.

‘Red herring’

But Batmanghelidjh said government claims were a “red herring”, and a way to distract people away from a message that the government is uncomfortable with.

She said audits in the last 19 years have all been clear, and reports from the London School of Economics have shown high levels of staff satisfaction and accountability at the charity.

Batmanghelidjh said on Radio 4’s Today programme: “These arguments are being put out to avoid the real discussion which is there are large numbers of children that are unprotected in this country and who are not receiving appropriate help.”

She said: “If we were so dysfunctional and were not reporting and accounting for things, why have several governments given us money? This argument has emerged recently because government is not facing its responsibilities robustly.”

She added: “I have repeatedly challenged various governments on the fact that they are not protecting children robustly. And it so happens, and I have to believe and hope that it is not from David Cameron’s office, and it so happens that the type of briefing that they are now delivering is one in which they are attempting to discredit me so that my message is weakened.”

Statement from the chair

In a statement on its website, Kids Company said that Batmanghelidjh “will not be leaving the organisation and will assume an advocacy and clinical role after the appointment of a new chief executive”.

Alan Yentob, chair of the charity and the creative director of the BBC, said: “Camila Batmanghelidjh and the staff of Kids Company have created a highly effective model of care and support for the most vulnerable children in society which 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.”

A Cabinet Office spokesman said: “Making sure that every child has the best start in life is our top priority, so we will continue to work with Kids Company to ensure its important work is sustainable.”

In March of this year it was revealed that three directors of Kids Company, including the interim finance director, had resigned over doubts about the charity’s future, following an announcement by the charity that it would have to fold if it did not receive government funding.

Batmanghelidjh told the Today programme that “it is true that three of our senior staff left and they left because there was uncertainty over funding and they didn’t know if they were going to be paid or not”.

Last month Labour MP Harriet Harman wrote to Chancellor of the Exchequer George Osborne to request that government officials meet with Kids Company to discuss long-term funding arrangements for the charity.

Since then the charity has been forced to move out of its head office and is currently without a permanent base.