Authorities in Central China's Henan province are investigating a local charity group that reportedly misused funds, while the Beijing-based China Soong Ching Ling Foundation (CSCLF) is denying that it has any managerial ties with the charity group using the same name.

According to a report in the Southern Weekly on Thursday, the Soong Ching Ling Foundation in Henan reportedly made large loans to several companies and converted a charitable construction project into a luxury apartment building.

In response to the report, officials with the Henan foundation said they were waiting for "instructions from the China Soong Ching Ling Foundation" to clarify the facts.

However, the CSCLF said it had never managed any local Soong Ching Ling foundation and had "no economic cooperation or ties" with such bodies, according to a statement on the foundation's website on Saturday.

The CSCLF only cooperates with local Soong Ching Ling Foundations in some overseas exchange programs, according to the statement. It did not explain why the local organization is allowed to be named after the former Chinese honorary president.

Soong (1893-1981) married Sun Yat-sen, the pioneering Chinese revolutionary and political leader in 1915, and fought for China's independence and liberty. She devoted herself to education and health affairs for children and women after the People's Republic of China was founded in 1949.

Wang Yawei, a publicity official from the provincial United Front Work Department of the Communist Party of China, which has supervisory authority over the Henan foundation, said his department has probed the organization's operations.

The Soong Ching Ling Foundation in Henan said on Friday it would hold a news conference this week to respond to all questions.

When contacted by China Daily, the foundation declined to make any specific comment on the report. The Henan foundation, a public foundation established in 1992, focuses on improving children's welfare and alleviating poverty, according to its website.

Statistics from the China Foundation Center's website show that the Soong Ching Ling Foundation in Henan was first among the country's 2,270 charitable foundations, with net assets of about 3 billion yuan ($470 million) as of the end of 2010.

The Henan foundation received more than 600 million yuan in donations in 2009.

Regulations for charitable organizations require that 70 percent of the funds collected in a year should be spent for charitable purposes in the next year.

However, the foundation spent only 140 million yuan on charitable projects in 2010, rather than the 420 million yuan the regulations would have required.

Statistics from the China Foundation Center's website also show that the Henan foundation raised the largest amount of donations in 2009 and 2010 among all charitable foundations.

In 2008, it received more than 863 million yuan, ranking fourth in the fundraising list. Though unmatched in its fundraising, the foundation only built one-fifth of a planned 60,000-square-meter children's activity center it promised in 2007, citing a capital shortage, Southern Weekly reported.

The rest of the land was taken over by a company in which some of the foundation's staff hold shares, with the purpose of building residential structures, which are expected to be sold at 20,000 yuan a square meter starting in November, according to the newspaper.

Heavy equipment remained at the site on Sunday afternoon amid unfinished buildings. However, groups of workers were leaving with their belonging.

"Our construction head ordered us to stop working on it yesterday morning," a construction worker, surnamed Ren, told China Daily on Sunday afternoon.

Ren said the construction head didn't give a reason for the stoppage or a definite date to resume construction.

Southern Weekly also said most of the donated money the foundation collected from the public was illegally loaned to companies controlled by key foundation officials and went into industries including real estate, iron, the Internet and trade.

Deng Guosheng, director of the NGO Research Center at Tsinghua University, said that charitable foundations are entitled to invest to increase the effectiveness and lasting value of the charitable gifts they receive.

"However, charitable organizations' investments should put funds' safety first instead of purely pursuing profits," Deng said.

"It's definitely forbidden to allow their employees to get personal benefits from such investments."