The British Government announced late Friday it was reviewing all work with Oxfam amid revelations the charity's staff hired prostitutes in Haiti during a 2011 relief effort on the earthquake-hit island.
The Department for International Development (DFID) said the UK-based charity's leaders had "showed a lack of judgement" in investigating the matter and in its openness with the government and Britain's Charity Commission regulator.
"The International Development Secretary is reviewing our current work with Oxfam and has requested a meeting with the senior team at the earliest opportunity," a DFID spokeswoman said.
"The way this appalling abuse of vulnerable people was dealt with raises serious questions that Oxfam must answer."
The move follows growing pressure on the charity after an investigation by The Times found young sex workers were hired by senior staff in Haiti after the 2010 earthquake which devastated the island and left up to 300,000 people dead.
Groups of young prostitutes were invited to homes and guesthouses paid for by the charity for sex parties, according to one source who claimed to have seen footage of an orgy with sex workers wearing Oxfam t-shirts.
In further revelations Friday, the paper reported that Oxfam failed to warn other aid agencies about the implicated staff, which allowed them to get jobs among vulnerable people in other disaster areas.
Roland van Hauwermeiren, 68, who Oxfam has confirmed was forced to resign as Haiti country director in 2011 after allegedly admitting hiring prostitutes, went on to become head of mission for Action Against Hunger in Bangladesh in 2014, according to The Times.
The French charity told the paper it made pre-employment checks but that Oxfam "did not share with us any warning regarding (his) unethical conduct, the reasons for his resignation or the results of internal inquiry".
"Moreover we received positive references from former Oxfam staff who worked with him, among them a (former) HR person," a spokesman added.
- 'Totally unacceptable' -
Even before the latest allegations, Britain's government ordered Oxfam Friday to hand over files on implicated staff to the Charity Commission, which regulates the sector.
Oxfam has said it launched an immediate internal investigation in 2011 which found a "culture of impunity" among some staff, but denied it was behind a "cover-up" to protect its reputation.
It dismissed four staff members while a further three, including van Hauwermeiren, resigned before the investigation concluded.
Oxfam insisted allegations that underage girls may have been involved were not proven.
"The behaviour of some members of Oxfam staff uncovered in Haiti in 2011 was totally unacceptable, contrary to our values and the high standards we expect of our staff," it said in its latest statement Friday.
"Our primary aim was always to root out and take action against those involved and we publicly announced, including to media, both the investigation and the action we took as a result."
But in its statement, DFID said the charity had fallen short.
"We acknowledge that hundreds of Oxfam staff have done no wrong and work tirelessly for the people they serve, but the handling by the senior team about this investigation and their openness with us and the charity commission showed a lack of judgement.
"We have a zero tolerance policy for the type of activity that took place in this instance, and we expect our partners to as well."