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Catholic Church pays abuse compensation from grant interest
CHILD sex abuse victims are being compensated out of interest the Catholic Church earns from investing the billions of dollars it receives in government grants for schools.
The Royal Commission into Institutional Responses to Child Sexual Abuse has received evidence from a church whistleblower suggesting at least one Catholic diocese ultimately profits from interest received on state and commonwealth government education grants.
The Australian has also confirmed that the practice, under which the grants are compulsorily invested in accounts held within each diocese’s “internal treasury” or development fund, also takes place elsewhere across NSW, Victoria and Queensland.
Each diocese’s development fund acts like a bank, repaying an agreed rate of interest on the education funds they hold to the schools. They also pool this money with other assets invested with commercial banks at a higher rate of interest, often generating multi-million-dollar, tax-free surpluses each year.
Part of this money is, in turn, transferred to special funds under the direct control of each bishop and at least one regional diocese is understood to have transferred more than $1 million in this way last year. In some dioceses, these discretionary funds are then used to pay for the lawyers and compensation payments involved in abuse cases brought against the church.
Details of the church’s finances are rarely made public and the existence of this money trail has been criticised, including by those who have received compensation payments for such
abuse. Chrissie Foster, two of whose daughters were raped by a Catholic priest, said: “It shouldn’t be the government’s money, nor the parishioners’ money paying for all of this. It should be the church coffers, money from Rome or selling assets. Otherwise they’re just getting away with it. That (financial) loss focuses them to do the right thing.”
When the royal commission was announced in November 2012, the leaders of the Australian Catholic Bishops Conference estimated the church would need to find about $60m to meet the likely legal fees and increase in compensation payments involved.
While there is nothing improper about the church’s use of interest payments to meet this cost, a church source said he had a “moral concern” about how the funds were managed. “I don’t know of any other organisation whose subordinates receive hundreds of millions of dollars in government grants and they’re compelled to transfer that money to a centralised fund which profits from it,” said the source, who has spent decades working in the church.
The development fund is also able to use the grant money it holds to lend money to individual schools to fund specific developments, the source said — money that is then repaid plus interest.
“That money that the bishop gets, he can do what he likes with it. He can fund his diocese or he can fund sexual abuse payments. I’ve got a big moral concern about it,” the source said.
NSW Catholic Education Commission executive director Brian Croke said there was an expectation and a legal requirement that any interest earned on government school grants was spent on education. “As far as the commission is concerned, all the funds from state and commonwealth are fully and externally audited at every level, and are paid and distributed for the purposes they’re designed, including the interest earned by those funds,’’ he said.
A NSW Education Department spokesman said it “does not prescribe to the Catholic system where funds should be held before being disbursed to the dioceses” but legislation “requires that funds are used for the running of the school”.
Catholic schools in the state are audited and the diocesan education system required to certify it “does not operate for profit within the meaning of” this legislation, he said. “If there is evidence that funds are not being used for this purpose or are being withheld or misused, then this would raise questions about compliance …
Any such evidence should be provided to the NSW government for investigation.”
As church organisations are not required to publish accounts, The Australian has not been able to establish how much revenue many Catholic dioceses generate in interest paid on education grants. The federal and state governments last year provided more than $6.3 billion in education funding to dioceses nationwide. Church sources suggest that after meeting commitments to schools, individual dioceses retained a likely tax-free margin of up to 2 per cent on their investment of this money. Only a fraction of these proceeds may be used to meet the dioceses’ liabilities for child abuse, the bulk of which are often reclaimed from the church’s insurer.
Nor is every diocese within the church understood to operate in this way. The Archdiocese of Sydney, whose accounts were publicly revealed for the first time during last week’s royal commission hearings, does not insist that all the roughly $615m education funding it receives annually be invested in its development fund.
The roughly $3m the Sydney archdiocese last year spent on “Special Issues” and other royal commission costs was also met from a separate Procurement Fund, which itself controls more than $426m in assets.
The archdiocese’s business manager Danny Casey said “The internal treasury, the Sydney Catholic Development Fund … does generate a surplus. The surplus has not been used to meet obligations to victims of abuse nor has it been used to cover the costs of the royal commission.”
Francis Sullivan, chief executive of the Catholic Church’s Truth, Justice and Healing Council, defended the wider church’s use of money made from interest payments on education funding.
“If (it) is about using it for the purposes that the church is for, which is relieving distress, disadvantage and people who are underprivileged, then it’s justified. Certainly, providing compensation payments and repatriation payments for clerical sexual abuse is justified,” he said.
Review payments to abuse victims: commissioner
- The Australian
- April 01, 2014
Judge Peter McClellan, who is chairing the royal commission, yesterday told a child protection workers’ conference that the question of whether a national redress scheme should be set up for abuse survivors was challenging but some institutions had already taken “significant” steps.
He pointed to a Salvation Army commitment to review all payments made to abuse victims to ensure they were fair, and a similar “opinion” from Cardinal George Pell regarding people abused within the Sydney Archdiocese.
“I suspect, and the Commissioners are hopeful, that as a result of the Royal Commission’s focus on this issue other institutions will respond in a similar manner,” Justice McClellan said.
“It is apparent from the work we have already undertaken that designing a fair redress scheme, assuming that one should be created, raises significant and difficult questions.
“We are listening to people whose lives have been damaged and in some cases destroyed by the perverted actions of adults, people who both they and their parents had a right to trust.”
Child abuse survivors have pushed for the commission to recommend a national redress scheme, and the removal of legal barriers that prevent successful lawsuits against organisations where abuse occurred.
Justice McClellan gave the Melbourne Childaware conference updated statistics on the cases brought to the commission, saying he had referred 141 matters to police.
Analysis of the 1426 private sessions with the commissioners shows that 62 per cent of people who told their stories were sexually abused in a faith-based institution.
Almost 35 per cent were abused as children in a school setting and 30 per cent of people were abused in welfare institutions, including orphanages, children’s homes and residential facilities.
Justice McClellan said 41 per cent of institutions mentioned in private sessions were run either by a Catholic order or diocese, while government-run institutions accounted for 21 per cent.