CHARITIES sending aid to flood-ravaged southern China are keeping close tabs on relief funding, mindful of tighter aid budgets as well as widespread criticism that money was misused during the last major floods in 1991. Chinese officials, warning any misappropriation of funds will be severely punished, have denied previous relief aid was ever diverted from flood victims. Lu Bingsu, head of the administration and finance department at Xinhua (the New China News Agency), repeated the pledge yesterday at a flood relief charity event in Sheung Wan. He said Xinhua had already received $205 million for flood assistance from Hong Kong. But many aid agencies, adamant that previous donations may have lined the pockets of Chinese cadres, are determined to oversee the use of all funding. ''You have to watch every penny,'' one relief agency source said. ''Things have had a tendency of disappearing in China if you're not careful.'' And monitoring may be more critical this year than ever before, as funding for flood relief appears tight. Yesterday the Hong Kong Government approved allocations of $20 million from the Disaster Relief Fund. However, the money is nearly half the amount requested by local aid groups. Three grants were approved: $12 million for the Hong Kong Red Cross, $5.5 million for World Vision Hong Kong, and $2.5 million for Medecins Sans Frontieres (MSF). MSF had requested $4 million, while World Vision had petitioned for $10 million. As the disaster toll mounts and the dollars are in short supply, many relief agencies have decided to pull together to pool resources. So far, the amount of aid being sent over the border to help flood victims is much less than three years ago. Fears of misuse of aid is only part of the reason. Aid groups say the recent flooding has not caused as much damage as in 1991. And, as relief groups are the first to admit, China has also responded better to the plight of its own people this time. MSF representative, Dr Jaime Bendeck, toured the worst-hit areas last week. He praised China's immediate response, noting that food, shelter and health needs seemed to have been given high priority. However, other organisations and individuals continue to donate millions of dollars without any idea how the money is eventually spent. The Hong Kong Tobacco Company has reportedly donated $50 million, while the local real estate sector has raised $72 million. Yet many fear the flow of aid has been slow because of questions about past misuse of flood relief funds. China has vowed to punish any officials caught diverting money donated to the flood relief operations. Hundreds of cases of corruption were reported by Hong Kong and other foreign media following the 1991 floods. Zhang Xinguo, an official from the Ministry of Civil Affairs' Ten Year Disaster Reduction Committee which is responsible for co-ordinating overseas donations, said the Government had instituted a foolproof system whereby the use of donations would be made public and subject to an independent audit. ''Strict measures will be taken to ensure the money is not diverted,'' Mr Zhang said. The committee had established a special bank account for all donations, which as of Tuesday stood at $70 million, and that money would be used exclusively for flood relief work, he said.