Children at a Salvation Army boys' home in Sydney were "rented out" to strangers who sexually abused them, the royal commission into child sexual abuse has heard.

The Bexley Boys Home in Sydney's south is one of four homes being examined by the Royal Commission into Institutional Responses to Child Sexual Abuse.

Until now, former residents of two homes in Queensland have given evidence about being beaten and sexually abused.

Today the inquiry turned its focus to the Bexley home, and a police investigation launched in the 1990s after several men came forward.

Detective Inspector Rick Cunningham investigated the allegations of abuse at the home.

A man named FV told police that in 1974 the Superintendent of the Bexley home, Captain Lawrence Wilson, introduced him to a woman in Salvation Army uniform who was accompanied by a man.

FV said they took him back to their home and sexually abused him.

Inspector Cunningham told the commission that when the boy reported the incident it was ignored.

"Captain Wilson said, 'These are good people I send you to' and caned him about 18 times," he told the hearing.

Lawyers representing the Salvation Army asked Inspector Cunningham if he was aware of a paedophile network operating through the home.

"Information from various former residents [was] that they went to homes on weekends, that there were visitors to the Bexley home," he replied.

"But as to who sanctioned or organised if that occurred, it's difficult to say."

Detective Inspector Rick Cunningham (wearing sunglasses) began investigating allegations of abuse at the Bexley home more than a decade after it had closed down. ( ABC News )

Wilson has been described by counsel assisting the commission Simeon Beckett as the "most serious offender" in the Salvation Army's Eastern Territory.

FV's evidence in the 1990s resulted in criminal charges being brought against Wilson, including for buggery, common assault and indecent assault.

He was ultimately acquitted of the charges in 1997, but the commission was told the Salvation Army "expressed surprise" at the decision and has paid more than $1.2 million in compensation to his victims to date.

Captain Wilson died in 2008.

Other homes being examined include the Alkira Salvation Army Home for Boys at Indooroopilly in Queensland, the Riverview Training Farm at Riverview in Queensland and the Gill Memorial Home at Goulburn in southern New South Wales.

Older boys 'also perpetrators of sexual abuse'

The commission has been told both Salvation Army officers and older boys sexually abused vulnerable children at the Bexley Boys Home. ( Supplied )

The inquiry was also told about another Salvation Army captain, known as X17, who worked at the home during the 1960s and 1970s, and in 1994 was described by a man known as EO as "the molester of the home".

X17 was charged with indecent assault in 1974.

He was found guilty and placed on a good behaviour bond.

The inquiry has referred to a letter dated March 5, 1997 from the state's Director of Public Prosecutions hinting to the possibility of further court action against X17.

"There is obviously an indication from the DPP that if this man's health condition does improve, there may be a point at which he could be re-considered for prosecution," Mr Beckett said.

The officer is still alive but the charges have never been pursued.

He has been provided notice of the commission's hearing.

The Bexley Boys Home, also known as the Charles Kolling Memorial Boys Home, opened its doors in 1915.

It originally admitted primary school-aged boys who had been abandoned or relinquished by their parents, but older boys were allowed to stay from 1968 when a public high school opened nearby.

Younger boys and those with intellectual disabilities were housed separately from the other residents in a cottage dormitory.

Former residents have described the conditions as "Dickensian" with a regimented daily routine starting in the early hours of the morning.

The hearing was told many staff members did not provide emotional support to the boys, telling one he had to "get on with it" when told his mother had just died.

Both Salvation Army officers and older boys were the perpetrators of sexual abuse at the home.

Older boys often threatened and intimidated the younger boys, forcing them to perform sexual acts.

The home closed in 1979.

Editor's note: Due to a non-publication order issued by the Royal Commission into Child Abuse the name of a Salvation Army captain has been removed from this transcript and replaced with the pseudonym X17.