Camila Batmanghelidjh and David Cameron
Britain's Prime Minister David Cameron and Kids Company charity founder Camila Batmanghelidjh (L) in the cabinet room of 10 Downing StreetREUTERS/Ben Stansall/POOL

One of Britain's most iconic charity chiefs has been told to step down from her role or her organisation will not get any more public funding.

Camila Batmanghelidjh, the colourful chief executive of Kids Company, has been told to stand down by the Cabinet Office, which has concerns about it being able to run itself, according to BBC Newsnight and BuzzFeed.

About £3m of public funding is being withheld from Kids Company.

Batmanghelidjh told the BBC: "At this stage, I'm not at liberty to comment. I have to safeguard the provision for the children and the staff."

The charity, which started in south London and supports deprived young people and their families, relies heavily on public funding - it received about £4m from the government of its annual £20m funding in 2013.

Batmanghelidjh, who has been been defended by Prime Minister David Cameron against allegations of mismanagement, has been asked to take a non-executive position of "president", sources told the BBC.

Cabinet Office officials were clear that they wished the charity to continue its work and sang its praises.

But they told the BBC: "Making sure that every child has the best start in life is our top priority. This is why we are continuing to support Kids Company during this difficult financial time, and we want to make their important work sustainable, so we have requested changes to their management structure which is in the best interests of the charity."