The global development secretary is meeting the charity on Monday and warns it can not remain a "partner" if it fails to account for its actions, reported BBC. Priti Patel, the former worldwide development secretary, revealed that more than 300 people in the wider aid sector had been accused of sexual abuse in the past year alone.
The news comes after Oxfam workers were accused of using prostitutes in Haiti following the 2010 quake.
The former Secretary of State said that "the reason why Oxfam has landed in this position is because they have not been fully open and transparent about what happened".
Ministers have launched an investigation into claims that foreign aid officials brushed off allegations of child abuse committed by aid workers.
She admitted she was considering whether the organisation should receive any more funding from the Department for International Development - which gave it £32m in the last financial year.
"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", Oxfam said when asked to comment on a report in The Times of London that aid workers had paid prostitutes for sex.
Priti Patel, who resigned as International Development Secretary in November, made the shock allegation amid revelations about Oxfam.
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If Oxfam doesn't fully cooperate "then I can not work with them anymore as an aid delivery partner", she said.
The UK-based charity is also facing fresh accusations that its workers used prostitutes in Chad in 2006, the Observer reported.
"Sexual abuse is a blight on society and Oxfam is not immune", Thomson said.
The Chad mission was led by Roland van Hauwermeiren, who resigned in 2011 after he admitted prostitutes had visited his villa in Haiti during the humanitarian mission to the country after the 2010 natural disaster.
In an emailed statement to dpa on Sunday, Oxfam said it would "strive to clarify as soon as possible whether the [Chad] allegations were known to us and what measures were taken".
On Saturday the Charity Commission said that while Oxfam had reported that it was investigating inappropriate sexual behaviour, bullying, harassment and staff intimidation, it had not given the full details.
Oxfam has denied any cover-up.