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Currently the federal government funds a large portion of Catholic Charities funds.

That is really not correct.

Rather, Catholic Charities currently dispenses a significant amount of public assistance on behalf of the federal government. All of the federal monies dispensed in this manner must be dispensed as stipulated by federal law, and are subject to audit by the federal government.

The significant point here, however, is that Catholic Charities is not the exclusive dispenser of this assistance, but rather one of many dispensers, many of which have various affiliations and many of which are secular. Each beneficiary of this assistance may receive the assistance from the dispenser of his or her choice, whether religious or secular. Thus, the dispensation by religious charities meets the constitutional test of religious neutrality.

I don't think people realize how intertwined our government and private sectors are.

Actually, there's no excuse for ignorance. President Eisenhower explained this quite clearly with his immortal words: "Beware the military-industrial complex." Now, it has expanded into public assistance.

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