The Pentagon's inspector general's office, the office charged with exposing fraud in the federal government, provided the IRS with fake documents in order to avoid embarrassment in an audit.

The audit was part of a routine program where one U.S. inspector general checks the work of another. The inspector general's office apparently spent nearly 1,000 hours creating fake documents to cover up a 1988 audit report that they feared would not pass audit muster. It is estimated that the cost to taxpayers of preparing the false documents is approximately $63,000.

The IRS reviewers gave the Pentagon’s audit work a clean bill of health after examining the fake documents. A report was filed by an employee of the Pentagon's inspector general bringing the falsification to the attention of the Senate Finance Committee. "It's a very sad day indeed when the watchdog gets caught cheating," said Senator Charles Grassley, R-IA, in a letter to Defense Secretary Donald Rumsfeld. Senator Grassley is chairman of the Senate Finance Committee.