Jitasa Nonprofit Blog

Ghost Employees

The Chronicle of Philanthropy is reporting another sad story of non-profit fraud. The struggling Mark Twain House and Museum in Hartford, CT has been fighting insolvency for some time. Now, to add to their woes, their controller for the past 20 years has admitted to systematically stealing over $1 million from the organization over the past decade.

She used a common trick - ghost employees. For those of us in the sector who have seasonal workers, or a large part-time staff, ghost employees can be a real problem. They are very common on farms and in agricultural situations. The bookkeeper simply "invents" an employee and pays them. Management often doesn't notice as payroll gets entered into the accounting system in a lump sum.

There are several things you can do to avoid this. However the most important is that a pre-payroll register should be approved and signed - and not necessarily by the Executive Director who may be too far removed from the details to sign appropriately. Payroll should be broken into chunks by department by person; so that the people and amounts can be meaningfully looked at and approved.

There is more good than bad in our sector, but it always pays to keep your eyes open and your systems water-tight.