Australian taxpayers may have been defrauded when the infrastructure department paid $30 million for land worth $3 million near the Western Sydney Airport.
Auditor-General Grant Hehir referred the deal to federal police earlier this year, more than two months before releasing an explosive report on the purchase.
"There was information that we found which we couldn't explain and that was suggestive of the fact that the Commonwealth may have been defrauded," he told a Senate estimates hearing on Monday night.
"And having come to that view - as I said, we didn't have direct evidence of that - I thought it was in the public interest for me to provide information to the AFP commissioner."
Mr Hehir contacted the Australian Federal Police on July 10. It was the first time he had done so since taking on the role five years ago.
He agreed it was not common place to contact police about matters uncovered through his audits.
"I think it's unusual - I don't think we're aware of any other circumstances," Mr Hehir said.
Australia's public service commissioner has lamented explosive revelations detailed in the damning report.
Peter Woolcott also fronted Senate estimates in Canberra on Monday to answer questions about the 2018 purchase.
"Clearly there are issues here which make for very grim reading in the auditor-general's report," Mr Woolcott said.
But he doesn't believe there's a "burning platform" of integrity issues across the public service, insisting checks and balances are working.
"Whether it's confined to one particular work unit or wider than that, all of this will come out in the wash," Mr Woolcott said.
The APS commissioner praised Infrastructure Department boss Simon Atkinson's move to instigate a series of independent audits, with two public servants under investigation.
Mr Atkinson agreed it appeared officials had tried to cover up the issue when auditors started hunting for answers.
"I want to get to the bottom of what happened, which is why I've pulled in an independent auditor of my own so that I can get to the bottom of the facts," he said.
"I'm trying to clean it up."
Former intelligence chief Vivienne Thom is investigating one public servant, who has been stood down, over the Leppington Triangle land deal.
Another officer is facing a separate investigation over allegations conflicts of interest were not declared on other matters. They have been reassigned within the department.
Labor frontbencher Penny Wong described the auditor-general's report as a damning indictment of the department.
"I actually find it gobsmacking," she said.
Senator Wong said the report uncovered extraordinary conduct that was outside what any reasonable person would think was appropriate.
The audit found property owner Leppington Pastoral Company had suggested to the government the name of a valuer, which was agreed to by the department.
A departmental accountant flagged concerns the amount paid was much higher than the value of the land.
But the Western Sydney Unit - the part of the department which organised the deal - found there was nothing wrong.
Australian Associated Press