Kids Company is expected to announce the closure of its services at the end of today and the Cabinet Office is reported to be seeking to recover a £3m restructuring grant it awarded the charity last month.

"Charity Kids Company, which received £3m from ministers a week ago, has told the government it will close its services on Wednesday evening," a BBC article published yesterday said.

Separately the Spectator magazine has published leaked emails from trustees and senior management to staff, which show the charity was unable to pay employees on time, and used the government grant to fund its payroll.

The charity has so far refused to confirm or deny the BBC reports, but told Newsnight that speculation was “dangerous and irresponsible”.

A charity spokeswoman said a statement would be made at 7pm this evening.

Kids Company provides services to children in south London, mainly in Southwark and Lambeth, as well as in Bristol.

Southwark Council has issued a statement confirming it is "preparing for the closure of Kids Company".

Cabinet Office grant

Last month Kids Company received a £3m restructuring grant from the Cabinet Office. One of the conditions attached to the grant was that Camila Batmanghelidjh, the charity's founder, be replaced as chief executive.

The grant was given against the advice of the Cabinet Office’s lead civil servant, Richard Heaton, who wrote to ministers seeking “ministerial direction” before making the grant.

Oliver Letwin, Chancellor of the Duchy of Lancaster and the most senior politician in the Cabinet Office, personally overruled Heaton. Letwin has been a long-term supporter of the charity, signing himself up as an official backer of its See the Child. Change the System campaign.

According to the BBC the Cabinet Office is “making plans to recover the grant because the Cabinet Office believes that the conditions attached to the use of the money were not met”.

The BBC claims to have seen an email chain which indicates the grant was used to pay staff. It reported that this is “a day-to-day cost for which officials say it was not intended”.

This morning Kids Company posted a statement on Facebook, which said: "The media frenzy that has developed around Kids Company is sad. Many of our children and young people have described feeling violated by it.

"Regrettably, some journalists have been paying our most disturbed young people for stories. This included an approach to a drug addicted mum. The negative publicity that is generated as a result of rumours and irresponsible journalism will impact our fundraising and cause irreparable damage."

In a post on its Facebook page - later removed - the charity said: "The Cabinet Office in giving us a £3m grant most recently were fully aware that the money would be used to pay the payroll, whilst we waited for philanthropists' matched contributions to arrive in our account.

"They, and Kids Company, were fully involved in all decisions. The Cabinet Office have also reviewed some of our financial processes."

Spectator publishes emails that reveal interim chief operating officer in charge

Separately the Spectator magazine, which wrote a story at the beginning of this year claiming that there are problems at the charity, has published what it says is a series of leaked emails, revealing how the charity handled the situation.

The latest email, dated 2 August, from trustees to staff, said: “Camila [Batmanghelidjh] is now formally the president of Kids Company and is concentrating on the clinical and advocacy aspects of our services.”

It said that: “Colin Whipp, as the interim chief operating officer is in charge of the operational aspects of the day-to-day running of the charity, which includes finance and signing off expenditures.”

Whipp is a restructuring specialist who was appointed by trustees on 17 July to work with the senior management team while a new chief executive is recruited.

Earlier emails from Camila and other senior members of staff reveal that staff had not been paid as the charity was waiting for funding to arrive.

In an email dated 28 July, Batmanghelidjh said: “I am so sorry you have not been paid yet. We are waiting for exchanges between the government and the philanthropists and trustees to be completed. We had expected for these discussions to be resolved earlier and that’s why you had not received warning communications. We are moving forward with the expectation that a resolution will be arrived at tomorrow.

“I’m sorry for the stress this has caused you, and I really appreciate your patience and your commitment. We understand the urgency and are doing our very best.”

In later email, dated 2 August, Batmanghelidjh said: “The trustees are working around the clock to try and find a workable way forward. At this stage there’s genuinely no plan and it’s literally day-by-day and depending on how things develop.”

Statutory services may pick up Kids Company's work

If the charity closes, statutory services are standing by to protect children looked after by the charity.

A spokesman for Southwark Council said: "We have been in discussions with the Department for Education and other local authorities, preparing for the closure of Kids Company. Although Southwark doesn't refer any children to the charity, some will have sought out their services.

"We are ready to support any vulnerable children and young people in the borough who are affected by the closure of Kids Company."

This morning London mayor Boris Johnson told Radio 4's Today programme that he was prepared to ensure a "safety net" for children.

Johnson said: “Clearly, as people have been seeing over the last few weeks and months, there have been questions raised about some of the financial management of the organisation.

"It is a great shame that it doesn’t seem to be working in the way that everybody who supports the idea would like.

“What I want to happen is to ensure that all the kids who have been receiving care and attention from Camila and her team will have some kind of safety net.

"And if indeed it is correct, as you say, that Kids Company is going to close, then what I want to do is see that other voluntary organisations that we support through City Hall, through Team London, through the Mayor’s Fund for London, that we do what we can to provide some help."

Johnson was asked if he had turned down some funding requests from the charity because of concern other some aspects of the way the charity was run. He said he would have to look back historically at what has been done over many years to help Batmanghelidjh.

He said: “In recent times, there have been concerns about how the money is being administered. That is no comment on the idealism of Camila and her team”.

Civil Society News has contacted Kids Company and the Cabinet Office and will update this story when further information is available. The Cabinet Office has no comment at the moment.

Additional reporting by Alice Sharman