A FEDERAL department failed to check whether an Aboriginal group, named by the Hillsong church in a grant application, supported the project.

The church's charitable arm, Hillsong Emerge, has been stripped of a $414,479 federal grant after claims that it obtained the funds by deceiving the Aboriginal community that was supposed to benefit from it.

Hillsong Emerge first applied for a grant of almost $500,000 with the support of the Riverstone Aboriginal Community Association, in Sydney's northwestern suburbs.

It withdrew the application and submitted a second, which led to its being granted $414,479 in August last year - a grant announced by John Howard.

But the second grant application used letters of support and ideas from RACA, allegedly without the permission of the indigenous body.

Attorney-General's Department assistant secretary Dianne Heriot told a Senate estimates hearing yesterday that the department looked for evidence of local partnerships with indigenous groups.

But asked by Labor senator Trish Crossin whether the reference letters were verified in some way, Dr Heriot said: "We accept the letters, Senator."

Dr Heriot said other checks were undertaken on the eligibility of the organisation, the nature of the project, local need and previous applications for funding.

The hearing was told the department became aware of problems with the grant application through gossip, and asked for a meeting with Hillsong and its partners in the project.

A meeting in October revealed that RACA was disenchanted with the project, and the next month NSW state Labor MP Ian West claimed in parliament that Hillsong Emerge misused the Riverstone Aboriginal community to get taxpayers' money for its own purposes.

When Hillsong Emerge did not reply to two letters from the department in December and January querying whether the project could be delivered, a decision was made to withdraw the grant on February 1.

RACA spokeswoman Vilma Ryan said the events in federal parliament showed Hillsong Emerge "can't be trusted to work with indigenous communities". "The federal Government needs to explain why it never checked up on statements made in the Hillsong Emerge application.

"We call on Hillsong Emerge to come clean on this whole matter. Come on, Hillsong Emerge. What's the story? Are you big enough to apologise?"

A spokeswoman for Hillsong did not return calls.

AAP, Ean Higgins