Probe Finds Faked Data at Pentagon

The Pentagon agency charged with exposing fraud destroyed documents and replaced them with fakes to avoid embarrassment when its own operations were audited, an internal inquiry found.

The incident last year cost the government thousands of dollars and “could adversely affect the confidence of the public” in Defense Department audits, says the report obtained by Associated Press.

The destruction of the records occurred as the Pentagon inspector general’s work was about to be reviewed by Internal Revenue Service auditors--part of a routine program where one U.S. inspector general checks the work of another.

The unsuspecting IRS reviewers found no problems with the Pentagon’s audit work after poring over the phony documents, the internal report said. The document destruction was substantiated in the report, written by an inspector general’s employee assigned to investigate her own agency.

“It’s a very sad day indeed when the watchdog gets caught cheating,” Sen. Charles E. Grassley (R-Iowa) wrote Defense Secretary Donald H. Rumsfeld in demanding to know more about the incident.

The inspector general’s office and the Defense Department public affairs office declined to comment on the incident.

Grassley, chairman of the Senate Finance Committee, began investigating the destruction recently after a Pentagon whistle-blower brought it to his attention.

While the inspector general is supposed to root out government fraud and waste, the report said the 983 hours spent creating the fake documents cost taxpayers $63,000.

“As soon as we became aware of the allegation and findings, we immediately withdrew our previous opinion,” said David C. Williams, the inspector general for the IRS. As a result, Pentagon audits must include a disclaimer that the work fails to meet established audit standards.

The IRS auditors had selected eight Defense Department audits for review, and senior Pentagon auditors realized that working papers for a 1988 audit report would never get a passing grade, the report said.

“Instead of submitting it and suffering the consequences, a decision was made to destroy all the original work papers and to re-create an entirely new set,” Grassley wrote Rumsfeld. He said 12 to 15 officials in the Defense Department inspector general’s office were involved, including senior auditors.