In the Philippines, as in many other countries, ghost employee fraud is a perennial public corruption problem. Ghost employees are people who are listed on an organization’s payroll but who do not actually work there. (In some cases the ghost employees are entirely fictitious; in other cases, they are real people who do not work at the organization but are included on the payroll—sometimes with their knowledge, and sometimes without.) The corrupt managers of agencies or departments will falsify payroll records to authorize the issuance of paychecks to the ghost employees, while these managers and their accomplices pocket the money that is supposed to pay the ghost employees’ salaries. The scale of ghost employee fraud can be staggering. In the Philippines, senior government officials—particularly at the local level—have used such schemes to siphon millions of pesos from government institutions. Indeed, back in 2016, when current President Rodrigo Duterte was the mayor of Davao, he was credibly accused of pocketing around ₱708 million through the hiring of 11,000 ghost employees. This is just one out of many cases of ghost employee fraud haunting the country (see, for example, here, here, and here). Despite the scope and scale of the problem, the Philippine government has taken no proactive steps to address it. This must change. Though the problem is serious and widespread, there are a number of things the government could do:
- First, national government agencies and local government units (LGUs) should be required to institute a screening process, with an independent committee performing background checks on all employees to be placed on the payroll; this vetting process would include verifying personnel details, such as dates of birth and government identification numbers, with relevant local government agencies, such as the Philippine Statistics Authority and Philippine Social Security System. The Commission on Audit (COA), an independent constitutional commission primarily tasked with auditing public expenditures, should have the power to constitute these independent committees. (Rather than having a single committee for all government units, each LGU should have its own committee, consisting of members from the LGU’s personnel and budget departments as well as COA personnel.)
- Second, because ghost employee fraud is associated with poor personnel management systems, with non-transparent accounting and budget procedures, each LGU should implement an electronic payroll and personnel management system. Such systems—which centralize payment systems, replace cash and check salary payments with automated direct deposits, and facilitate easy storage, updating, and retrieval of employee records and payment information—facilitate the detection of ghost employees, including through regular computer-assisted audits. These systems can also make use of biometric identification technology that makes it substantially more difficult to use ghost workers to disguise fraudulent diversion of money.
- Third, the COA should periodically monitor each LGU’s payroll records, and should assess the veracity of these records by ensuring that the employees listed on the payroll have specific roles in the government institution along with designated tasks to be completed during their terms of employment. The payroll records should include accomplishment reports and time records. Furthermore, with respect to contractual employees, the COA should ensure that there are valid job orders and work projects. If the COA finds discrepancies or anomalies in the payroll reports, it should conduct unannounced inspections, and if there are sufficient grounds to suspect the presence of ghost employees, the COA should conduct a full-blown audit.
If the Philippine government continues to fail to actively address the presence of ghost employees in its payroll, then corrupt government officials will continue to amass millions of pesos earmarked for public expense. It is therefore of vital importance that the country establish and implement reforms along the lines described above.