The Public Administration and Constitutional Affairs Committee will conduct an inquiry into the closure of Kids Company and the charity’s relationship with successive UK governments.
A statement from the committee said there were "serious questions about the financial management and leadership of the charity and the degree of sustained and substantial support it had received from government ministers".
It said that the decision by Cabinet Office ministers to ignore warnings from senior civil servants and award a £3m grant to the charity just days before it announced its closure was of particular concern.
The statement said the inquiry would focus on, among other things, the government’s relationship with the charity, including the appropriateness of the level of government funding given to it.
The charity received government grants totalling more than £35m during its 19-year existence.
The committee said it would also examine the competitiveness of the process by which government support was given to the charity and whether it benefited from any unfair advantages in the amount of funding it attracted.
Kids Company’s financial management and its failure to build up sufficient reserves will also be examined by the committee, as will the oversight role performed by the Charity Commission.
Earlier this week, the Liberal Democrat peer Baroness Barker called for an inquiry into the government’s funding of Kids Company and what she called the Charity Commission’s "significant failure" to take action to prevent its closure.
The Conservative MP Bernard Jenkin, chair of the committee, said last month that it expected to carry out an inquiry into Kids Company.
The committee will take oral evidence in October.