The Cardiff-based recycling charity Cylch will close in September, with the loss of all jobs.
The charity has been the subject of a nine-month investigation by the Welsh government internal audit service over alleged financial irregularities. The Charity Commission also launched a statutory inquiry on 17 July.
Cylch, a membership body for more than 50 recycling charities in Wales, had 16 staff and an income of £3.69m, according to its most recent accounts, for the year to March 2012.
The charity said in a statement on its website that the Welsh government had made allegations of "potential conflicts of interest involving the Cylch chief executive in that role and in another role as chair of Plastics Sorting Ltd".
But the charity was not under investigation by the Welsh government for any criminal activities or inappropriate personal gain, it said.
The charity said the audit "highlighted some important issues, including Cylch’s ability to continue as a going concern".
As a result, it said, it would not seek any further funding from the Welsh government, which was its major source of income.
"It is very important that Cylch members, our sponsors and the wider public understand that the investigations into Cylch do not include any matters that are criminal in nature, any misappropriation of funds or inappropriate personal gain from Cylch's activities or any of the companies or projects associated with Cylch," the statement said.
Nobody from the charity was available to confirm how many staff it had.
A spokeswoman for the Charity Commission said the regulator had opened a statutory inquiry into the charity "due to concerns around serious failings in the governance of the charity, conflicts of interest and substantial loss of charitable funds resulting from loans and investments".A spokeswoman for the Welsh government said she was unable to comment on its investigation.