A senior Department of Education official warned that the State would be taking on an "unspecified financial burden" 13 months before an indemnity deal was agreed between 18 religious congregations and the last Government.
Mr Tom Boland said in a memo that the indemnity deal was "a kind of retrospective insurance", which potentially supplied religious orders "with a substantial subsidy".
In the memo to the Department's secretary general, Mr John Dennehy, dated April 30th, 2001, and released to The Irish Times under the Freedom of Information Act, Mr Boland said: "The State would be taking on an unspecified financial burden, and relieving the congregations of same (potentially providing them with a substantial subsidy)."
Details of the memo are expected to be divulged at a meeting on Thursday of the Public Accounts Committee at which the deal is being examined.
In the memo, Mr Boland, who was the Department's chief negotiator with the congregations, estimated that it seemed likely 3,000 people could receive awards.
Taking as his benchmark a then recent High Court settlement of £100,000 with a member of the Co Sligo McColgan family, following abuse in the home and consequent responsibility of the health board, he estimated the maximum potential cost of a redress scheme at £300 million (3,000 x £100,000).
He felt the congregations should pay on a 50:50 basis but that their contribution should be capped, as their resources "however extensive, are limited, unlike the State (which in the final analysis always can have recourse to taxation)".
He suggested up to £150 million should be sought from them "as an opening position". If the congregations provided convincing reasons to the contrary "the ceiling could be reduced, but not below £100 million".
That in fact was the figure (€125 million) agreed to in principle by the congregations nine months later, as announced on January 31st, 2002.
In the memo, he said the congregations had argued the State carried "a very large share of responsibility for the harsh conditions in the institutions both because of their funding policies and lack of proper supervision".
They would seek to argue that any contribution they made should take account of the fact, as they saw it, "that in the past they voluntarily took a difficult and thankless task in caring for children" and that damage to their ongoing work should be avoided.
An indemnity would provide "the best 'closure' mechanism for the congregations and bring at least financial finality to the issue of past abuse", he said.
For the State, he pointed out that, however, ineffective its role, "the abuse which occurred in the institutions was perpetrated by people employed by the owner/managers of the institutions who had direct and daily control over them, not by employees of the State".
Inadequate public funding, were that the case, "could never constitute a licence to anyone to abuse children", he said.
In another memo to Mr Dennehy, on June 27th, 2001, following an "only and final offer" from the congregations of £45 million, Mr Boland warned that "a settlement with the congregations which is seen as inadequate could be as damaging to the project of bringing closure to the abuse issue as no settlement".