In a large bowl, sift together the flour, baking powder, cinnamon, nutmeg and salt.
In a separate large bowl, whisk the egg, brown sugar and white sugar together, until smooth. Stir in the milk, vegetable oil, applesauce, pumpkin and walnuts, until just combined. Do not over mix.
Fill a cupcake pan with the batter 4/5 full.
Bake in the oven for 16 to 20 minutes, or until a toothpick comes out clean. Allow to cool for 5 minutes before removing to a wire rack to cool.
While the cupcakes are cooling, make the frosting. In a large bowl, beat the the cream cheese, butter and Kahlua together using an electric mixer. Gradually add in the confectioners' sugar until smooth and creamy.