Ghost Employees on the Payroll
Posted by Pamela S. on Wednesday, September 12th, 2012
If you are a large corporation, you may not know all of your employees personally. There may be one or two who no one has ever seen. Ghost employees are a type of payroll fraud. An employee listed on payroll doesn’t really work for your company. Ferr
eting out these ghosts, and exposing them is a ghost-busting job for a private investigator and forensic accountant who is a Certified Fraud Examiner.
How do ghost employees get on the payroll? Usually a payroll processor is involved. This individual adds the ghost employee to the payroll for a cut of the profits. He may be a relative of the ghost employee. The ghost employee may not even be a real person. Sometimes this invisible person is dead.
This kind of payroll fraud is
not new. In fact, it was probably easier to commit this crime before accounting software became available. Most companies have accounting controls in place to prevent this kind of fraud, however a payroll processor who is not audited or overseen can still get away with it. Sometimes, an individual will get a bit too greedy and invent more than one ghost. As usually happens with fraud, those who get greedy get caught.
What are the warning signs?
- There will be no personnel file to match the ghost employee’s information.
- There will be no tax records, or social security payments to match the employee’s Social Security number.
- The employee number will be out of synch with other employee numbers.
- Sometimes the check amount will be a round number.
- Payroll expenses won’t add up.
- If payroll is made through direct deposit, bank accounts may not match the name of the employee.
- The employee’s address is usually a post office box.
How do you prevent this type of fraud?
- Direct deposit makes it more difficult to commit ghost employee fraud.
- Perform occasional audits of payroll.
- Use a payroll or accounting system that has the proper checks and balances in place, such as Caseware.
- Auditnet.org has valuable tips and training on payroll fraud for accountants.
- Read “Keep Ghosts Off the Payroll” by Joseph T.Wells CPA, CFE. Wells is the founder and chairman of the Association of Certified Fraud Examiners in Austin, Texas, and professor of fraud examination at the University of Texas.
A Certified Fraud Examiner can advise you before your place of work becomes a ghost town. Many private investigators hold this certification. We can recommend a forensic accountant, if it appears that you have been conned in this way. We can help you uncover and expose the ghost employee or employees in your organization.
Former FBI Assistant Director Tom Sheer has recruited the best from the FBI, DEA, IRS and Secret Service to build a formidable team at Sheer Investigations. Our private investigators have the sensitivity and experience to handle the most delicate investigations.