This has worked rather well for quite some time now but the Catholic Church, which benefits massively from this process, has declared that it's actually a form of money laundering. The U.S. Conference of Catholic Bishops didn't make this statement with respect to funding church charities, but rather about an amendment offered by Brad Ellsworth (D-Ind.) to the recent health care reform bill. Ellsworth's amendment would have created a separation between government funds and funds that pay for abortion, a distinction much like that relied upon by churches which receive government funds.
The U.S. Conference of Catholic Bishops (USCCB), which speaks for the approximately 300 active bishops in the United States, sent a memo to congressional staff on Thursday about the issue. The memo, a copy of which was obtained by CNSNews.com, says that the Ellsworth amendment is not a "meaningful compromise," because merely segregating the funds would not prevent federal money from being used to fund abortion. ...
In the case of the bill's public option, the Ellsworth amendment mandates that the government segregate federal subsidy payments from individual premiums. The bishops called this a "money-laundering system" because once premiums are paid into a public option, they become federal funds. ...
Doug Johnson of the National Right to Life Committee (NRLC) told CNSNews.com that House Democrats were "desperately trying to disguise" the fact that their health care overhaul would allow the federal government to pay for abortions. ...Johnson called the Ellsworth amendment a "fig leaf made out of cellophane," adding that it was nothing more than a "last minute effort" to cloak the reality of the bill.
Source: CNS News
I wonder if any of the bishops thought to run their memo by a lawyer or someone who might know to check to see if any of its contents might create problems for the USCCB. If they had, they might have been informed that the "fig leaf made out of cellophane" was something they relied upon heavily for millions of dollars in government aid. If that fig leaf is strong enough to protect their charitable program from breaching the wall separating church and state, then I'm sure it's strong enough to protect federal funds from abortions.
On the other hand, if the Catholic bishops want to insist that it's not possible to truly separate federal funds from abortion funds, then they should be willing to accept the consequences for their own charitable program. Indeed, they should be willing to take the first step and stop accepting all government funds just as a matter of principle because they cannot guarantee that their will never be any violations of church/state separation. The would demonstrate far more moral principle than I think I have seen from the USCCB, though.