Leading children's charity Kids Company is to cut staff and appoint a new chief executive because of "unprecedented financial strain".
The high-profile campaigner and founder of Kids Company Camila Batmanghelidjh is to take up a new advocacy and clinical role once her replacement as chief executive has been appointed.
Ms Batmanghelidjh has rejected reports bad management of funds at the charity has led to Government pressure for a restructure - insisting such claims are a "red herring".
She has run the charity since 1996 and worked closely with several governments - including David Cameron's administration.
The Government is reportedly withholding a £3 million grant until a new structure is in place.
In a statement, the charity said: "In partnership with a city-based group of philanthropists, the charity is being 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.
"Camila Batmanghelidjh, the founder and chief executive of Kids Company will not be leaving the organisation and will assume an advocacy and clinical role after the appointment of a new chief executive."
It added "core services" would still be delivered though it would be "reducing its staff levels".
Ms Batmanghelidjh earlier told the BBC Radio 4 Today programme she had always planned to leave the chief executive post next year after 20 years.
She said: "We have been debating with government and having a challenging discussion because Kids Company is taking care of far too many mentally ill children and children who are not being protected robustly."
Ms Batmanghelidjh continued: "My interest is to make sure the children are OK.
"But what I am trying to explain is these arguments are being put out to avoid the real discussion which is there are large numbers of children who are unprotected in this country and who are not receiving appropriate help.
"What I am trying to explain is since the Blair government we have received repeated government funding - if we were so dysfunctional and we 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."
Ms Batmanghelidjh said 19 years of audits and a study by the London School of Economics had not revealed problems with the way the charity - which has a £24.5 million budget for 2015/16 - managed money.
She said: "I want to do clinical work - but that is not the point. We are having an argument about something that is a red herring.
"This is briefing to avoid the real issues.
"I have to believe and hope this is not from David Cameron's office. It so happens the type of briefing they are now delivering is one in which they are attempting to discredit me, so my message is weakened."
Ms Batmanghelidjh challenged government officials to bring forward a list of problems if there were genuine concerns about her running of Kids Company.
Of the Prime Minister, she added: "I pray to God it is not coming from David Cameron and his team, I still have to have faith he wants to do the right thing by children."
Alan Yentob, the chairman of the board of trustees, said the changes would protect Kids Company.
He 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."
The charity was founded by Ms Batmanghelidjh in 1996 and provides support to vulnerable inner-city children, young people and families.
The BBC said the charity's latest accounts show it relies on the Government for £4 million of its £20 million funding.
Following a joint investigation with BuzzFeed, the BBC's Newsnight reported that, in order to meet the Government's funding ultimatum, officials have suggested Ms Batmanghelidjh should take the non-executive position of "president".
Mr Cameron, who has shared a platform with Ms Batmanghelidjh in the past, has previously defended the charity's funding against efforts by ministers and officials in the Cabinet Office and Department for Education to cut it or intervene, the programme said.
Officials indicate that Justice Secretary Michael Gove and Chancellor of the Duchy of Lancaster Oliver Letwin have supported a tougher approach to the charity.
A Cabinet Office spokeswoman 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 sustained."
The development is the latest blow to hit the charity. In March, Kids Company's interim finance director, head of human resources and director of development all resigned amid claims of concerns about its funding and "high levels of stress within the workplace", the Sunday Times said.