A corruption inquiry in New South Wales is drawing national attention to the accountability of Catholic school funding – and reigniting calls for sweeping legislative reform.
The NSW Independent Commission Against Corruption (ICAC) is investigating allegations that Catholic Schools NSW made illegal political donations to the NSW Liberal Party. The inquiry entered its third week of public hearings in August 2026.
At the centre of the allegations is Dallas McInerney, who has since stood aside from his role as chief executive of Catholic Schools NSW. The ICAC has heard evidence that up to $265,000 in Catholic Schools NSW funding may have been diverted to a conservative Liberal factional group, known as the Reformers.
Those funds allegedly supported branch-stacking activities within the Liberal Party and staff employed by Catholic Schools NSW and connected to the Reformers allegedly recruited party members during work hours.
Donations were allegedly not declared and exceeded legal caps under NSW electoral funding laws
Catholic school funding and public money at stake
The scale of public money flowing to the sector gives the allegations significant weight.
In 2024, NSW Catholic diocesan schools received:
- $2.9 billion from the federal government
- $749 million from the NSW government
- $550 million in school fees
- $100 million in private income, donations and investments
That total represented almost 80% of the sector’s income, according to the ICAC public inquiry. Catholic Schools NSW – the governing body for almost 600 schools – distributes this funding across the diocesan school system.
Questions about how that money is governed are not new. Debate over the equity of funding arrangements for NSW schools and the government’s per-student calculations has persisted for years, with accountability gaps identified across sectors.
What teachers and school staff are saying
Carol Matthews, Secretary of the Independent Education Union of Australia (IEUA) NSW/ACT Branch, said members expected full transparency in how public funding is used.
“This funding should be used to improve student academic outcomes and enhance the learning experience for students,” Matthews said.
She said responsible school expenditure should cover professional learning for school staff, development of curriculum materials, support for students with disabilities, and adequate pay and working conditions for staff.
Matthews said teachers and support staff already face significant workload pressures and resourcing constraints. Any diversion of funds from their intended purpose, she said, would be a serious concern.
The IEUA is backing legislative changes to extend financial oversight beyond individual schools. Currently, the NSW government scrutinises expenditure at the school and proprietor level. But it does not apply the same scrutiny to peak bodies like Catholic Schools NSW that receive funding on behalf of diocesan schools.
“The union believes legislative provisions should be broadened to provide greater transparency at all stages of the funding process,” Matthews said.
The concern about where school money ends up is not isolated to this inquiry. Separate analysis has examined a pattern of school funds allegedly being diverted into growing bureaucratic structures, rather than reaching students. This is a problem school leaders have flagged across multiple states.
Governance failures cast a wider shadow
Australian Catholic University Honorary Professor Anne Benjamin said the inquiry’s impact reaches well beyond those appearing as witnesses. Benjamin, a former executive director of schools in the Diocese of Parramatta in New South Wales, said faithful educators and school leaders were being unfairly tainted.
A letter published in the Sydney Morning Herald in August 2026 captured a sentiment shared widely among educators. Former Catholic primary school teacher Anthony Frazer wrote that while teachers are required to account for every cent, leadership had seemingly operated without consequence.
“The Catholic Church must face the same financial accountability and transparency with government funds that it demands from its hard-working educators,” Frazer wrote.
The broader Catholic school funding debate
The ICAC inquiry arrives as the national debate over non-government school funding has intensified.
A June 2026 Save Our Schools report found Catholic school funding in Queensland grew 37.8% per student between 2009 and 2024, adjusted for inflation. Public schools saw growth of just 23.7%.
Separate national analysis tracking the widening gap between private school funding growth and public school resourcing has reinforced calls for tighter conditions on how public money flows to all non-government sectors.
The ICAC investigation is ongoing. The inquiry has renewed pressure for Catholic school funding to be subject to the same oversight as other recipients of public money.