The Cabinet Office says is reviewing whether it will take action to recover grant funding of almost £400,000 given to the troubled charity BeatBullying.
The anti-bullying charity said last month that it was going into administration because of "significant financial difficulties".
The charity’s online counselling services had been taken down abruptly several days before, and sources said that staff had been receiving only half of their salaries since August.
The Cabinet Office awarded a grant of £496,552 to BeatBullying last year to expand MindFull, the charity’s online mental health service for children and young people, and to broaden the age range of those who could access it.
A spokeswoman for the department said this week that the charity had drawn down £372,416 of the grant.
Asked by Third Sector if the department intended to seek repayment of these funds, the spokeswoman said the Cabinet Office was reviewing the situation and would "take appropriate action".
She said: "We have been aware of the financial difficulties that BeatBullying was facing over the past few months, and there have been ongoing discussions with the charity to protect taxpayers' money."
The funds came in addition to a £1.3m grant announced in January 2012 from the Office for Civil Society's £20m Social Action Fund to help with the establishment of We’re Altogether Better, a new umbrella group that would include BeatBullying and the charity’s schemes – the employment project FutureYou, the befriending scheme MiniMentors and CyberMentors, which enabled young people to receive advice on bullying from their peers.
The new organisation would also be able to sell Cosmo, a software platform for providing internet chat forums that was developed by BeatBullying, to other charities.
It emerged last month that We Are Cosmo, the community interest company set up by BeatBullying to develop the Cosmo software and market it to other organisations, was almost a year late in filing its first set of accounts.
A spokesman for the BeatBullying trustees said they were unable to comment.