Tim Hulbert, who worked for the Voluntary Services Unit (VSU) during the 1970s and 1980s, told the Westminster strand of the Independent Inquiry into Child Sexual Abuse he had seen the payment recorded on a spreadsheet.
He said the payment to the Paedophile Information Exchange (PIE) had been marked on official documents as a grant made to the Women’s Royal Voluntary Services (WRVS).
Mr Hulbert said he had been made aware of the grant via a senior colleague called Alan Davies who was new to the VSU – the body responsible for deciding which UK voluntary organisations should receive government funding.
He said in a statement: “[Alan Davies] and I got on well and used to talk informally about things we were working on.
“I believe, though I cannot be sure, that it was during one of these informal chats over coffee that I discovered the unit was funding PIE – about which I knew little except that it was an organisation campaigning for the lowering of the age of consent to four.”
The statement said Mr Hulbert was aware that PIE also had a magazine called Magpie and that he had seen a copy of the magazine in the VSU’s London offices.
He said the payment to PIE had been listed in the “grant renewals” section of the spreadsheet and marked “WRVS (P.I.E)”.
“This seems improbable, but if the intention was to conceal the grant, then to use a cover organisation like WRVS whose grant was one of the largest might have been an option.”
Mr Hubert was approached by police about his claims after he contacted the BBC following the 2013 screening of the film Secret Life of a Paedophile about social worker Peter Righton – one of the founding members of PIE.
Earlier today, the inquiry heard evidence from civil servant Mike Box who had assisted a 2014 review of allegations historic child sexual abuse within Westminster.
He said no trace of any payment to PIE had been found in government documents from the era and the review had been unable to track down Alan Davies.
A contemporary of Mr Hulbert at the VSU also had no recollection of grant payments made to PIE, Mr Box said.
Mr Hulbert was challenged on the fact there was more detail in his later statements than his first one.
He said: “I have a very visual memory – I have a very clear memory of the entry on the sheet.”
Mr Hulbert added: “I can recall visually the document – at the top of the spreadsheet there was a column or line that said PIE.”
The inquiry heard the WRVS had run a “rural district pie scheme” – selling pies to agricultural workers – during the Second World War.
The scheme continued into the 1950s.
Brian Altman QC, lead counsel to the inquiry, asked: “As far as you’re concerned there’s no other explanation for what you saw? It’s only consistent with PIE being funded through grants to the WRVS?”
Mr Hulbert replied that was the only explanation as there were no other organisations using that acronym.
Mr Hulbert said he had taken the matter to his superior, Clifford Hindley, but was blocked from taking it any further.
“He acknowledged we were talking about PIE, he said it was an appropriate organisation – a campaigning organisation,” he said.
“And however much you might dislike what they were campaigning on, they had a perfect right to do so.”
Mr Hulbert said Mr Hindley had effectively told him to “back off” and drop the matter.
The Westminster strand of the far-reaching inquiry into historical sexual abuse in British institutions is scheduled to last three weeks and is due to finish on 29 March.