Islamabad, Pakistan (CNN) -- An official with Falah-e-Insaniyat Foundation, a group with alleged links to a banned Pakistani terrorist organization, says the U.S. Agency for International Development's administrator visited a camp the group is running and praised the work being done there.
The United States is denying that claim.
On Wednesday, the head of USAID, Dr. Rajiv Shah, went to Sukkur, Pakistan, to get a firsthand look at the needs of the flood survivors and how aid is being distributed. He visited two relief camps.
One of the camps was inside Double Session High School, where the charity with alleged terrorist ties says it had a banner up in Urdu.
Inside the camp, aid was being distributed in big bags from USAID. Representatives from the World Food Program also were there, as was the U.S.-based Save the Children charity.
But the Falah-e-Insaniyat Foundation's leader in Sukkur, Khateeb Ullah, said his group is running that camp and others.
"Our charity is running five camps in the city and providing accommodations, food and medicine to 3,500 flood victims. Jamaat-ud-Dawa is supporting us financially and morally," Ullah said.
Jamaat-ud-Dawa has been banned by Pakistan and the United Nations as a terrorist front group.
Hafiz Saeed, the leader of Jamaat-ud-Dawa, has "provided us dry food in huge quantity to help the flood victims," Ullah said.
The Indian government has accused Saeed of being the mastermind behind the 2008 Mumbai terror attacks, in which 10 Pakistani terrorists took over five-star hotels and a Jewish center in India and left more than 160 people dead. Saeed was put under house arrest but was released by a Pakistani court that cited insufficient evidence.
A spokesman with the U.S. Embassy, Richard Snelsire, said, "They may have had a banner up, and the organization may have been there and distributed aid earlier, but that doesn't mean the group is running the camp."
A statement from the U.S. Embassy in Pakistan later in the day read in part: "USAID partners have been providing assistance to victims of the flooding at the school since August 16th. The Double Session High School is a Pakistan government school and is under the supervision of the government of Pakistan. At no time during his visit did Dr. Shah encounter or meet with any members of a banned extremist organization."
Foreign Ministry spokesman Abdul Basit said, "I am not aware of any camps being run by any banned organization."
Although Falah-e-Insanyiat is not a banned terrorist organization, it allegedly is the charity wing of one.
Pakistan is a strategic country in the war on terrorism, and analysts say the United States cannot afford to let a lack of Western aid increase the impact of charities associated with militant groups.
Amjad Jamal, the spokesman in Pakistan for the World Food Program, which also is providing assistance at the school, said: "Our systems of engaging partners in every country are very clear. World Food Program does not work with any charity linked to terrorism."
The United States pumped millions of dollars into Pakistan before the floods. With millions more new aid coming into the country because of the flooding, it is insisting the government be transparent about how aid money from around the world is being spent.