Yikes, good find! This is most definitely the reason. The ground and neutral are only supposed to be tied together at the main panel. In this case, instead of only the neutral carrying current, both the ground and neutral will carry it.

There is no legit reason that I know of to do this at an outlet. I wonder if perhaps the neutral was open and the previous person was trying to cheat to make the outlet work? Do disconnect this. I would check other outlets in the house. An outlet tester ^[1] may help speed this up but they don't detect all conditions.

Grounding is an important safety aspect of your house. If you suspect there is a more systemic problem with the houses grounding, get an electrician to take a look. Better safe than sorry.

It's called a bootlegged ground ^[1]. This is commonly done in older houses that had a two prong receptacle and was updated to a three prong receptacle. The old house didn't have a ground and this tricks the inspector's electric checker, so your house passes inspection.

Considering there is some amount of either wrong, or maybe just misleading, information regarding your broad question which, in turn, can lead to ambiguities and poor and/or dangerous actions, I, a real electrician, will add my hat in the ring backed by the NEC.

Because many people may search and find this post, as it is very generally asked, and in a given situation may opt to run a new grounded circuit to fix this problem and find themselves staring at the exact same situation in their panel, I think it's important to note it is not always wrong to bond the grounded (neutral) and grounding (ground) systems together.

From IAEI ^[1], thoroughly explained in NEC Article 250 - Grounding and Bonding. (empasis mine):

The main bonding jumper is one of the most critical elements in the safety grounding system. This conductor is the link between the grounded service conductor, the equipment grounding conductor and in some cases, the grounding electrode conductor. The primary purpose of the main bonding jumper is to carry the ground-fault current from the service enclosure as well as from the equipment grounding system that is returning to the source. In addition, where the grounding electrode conductor is connected directly to the grounded service conductor bus, the main bonding jumper ensures that the equipment grounding bus is at the same potential as the earth.

NEC 250.35 Grounding Service-Supplied Alternating-Current Systems

(A) System Grounding Connections.

A premise wiring system supplied by a grounded ac service shall have a grounding electrode conductor connected to the grounded service conductor, at each service, in accordance with 250.24(A)(1) through (A)(5).

Again this is to answer the naive statement that they should never be connected. The National Electrical Code absolutely disagrees with that and removing this connection is indeed detrimental to the safety of your system - don't remove it!

Now to address the specific context of your situation:

That wiring configuration is indeed wrong and hazardous. The least dangerous part is using a single grounding screw to "tap" the green and white wires. This isn't correct. If nothing else was wrong with your pic, those wires should be tapped together with a pigtail going to the terminal. The worst part is the actual joining of the two systems together - at this location. That's just wrong.

From a logical standpoint, what would be accomplished in having two separate wires only to join them? From a safety standpoint, in an unbalanced circuit the neutral carries the unbalanced load back to the panel. So the "electrician" willfully energized the safety system in your home. It is okay to do this at the service/main because at this point they both have the same potential as the earth.

If you're in a home where the work in some or all areas is done this way, making it typical for your dwelling, call an electrician to devise a plan to fix it.

One thing to consider is if the bare ground goes back into the wall, it could be that they were adding a grounding system to the building. This is common in some locales as an accepted means to add a legitimate grounding system. Check with your building department before doing. The issue here though is, despite the respectable effort, the final connection is wrong. If this is the case, it might be safe to assume all or many of your outlets are this way.

What to do? Well, you have a few options.

1. If the grounding system in your pic is fine (per local building codes), but the connections are wrong, you can simply separate the connection and use a grounded outlet (NEC 406.4(D)(1)). I probably wouldn't recommend that unless you can, with certainty, verify it's otherwise correct. The work you show would make any self-respecting electrician cringe.

2. If you'd prefer to play it safe and would rather be inconvenienced with non-grounding adapters, you can simply exchange it out for a non-grounding receptacle (NEC 406.4(D)(2)(a)). Obviously you won't be using that ground any longer.

3. If neither of those are pleasing, you can opt to replace it with a GFCI provided you've labeled it "No Equipment Ground" (NEC 406.4(D)(2)(b)). You won't be using that ground in this situation either.

No, the neutral and ground should never be wired together. This is wrong, and potentially dangerous.

When you plug in something in the outlet, the neutral will be live, as it closes the circuit. If the ground is wired to the neutral, the ground of the applicance will also be live. This can be felt as a tingling if you touch the grounded casing of the appliance, because most of the current still goes through the neutral where the lowest resistance is.

However, if there is something wrong and the neutral is disconnected, it will make the appliance dangerous. If you touch the casing, and some real ground (like a water pipe) at the same time, you will close the circuit and carry all of the current.

So, connecting the ground to neutral totally defeats the purpose of having a ground, and actually makes it more dangerous than not having the ground at all.

When the inspector was measuring the ground, he was actually measuring the neutral, which naturally shows a current when something is connected somewhere in the circuit.

That looks as if someone misunderstood something.

If there is no "proper" ground line, it is typical for the ground connector in the outlet to be wired to the neutral line. This gives a small voltage between the grounded metal parts of devices connected to it and true ground if phases are unbalanced, which is clearly suboptimal, but if you have a faulty device where a hot wire touches the case, that will at least blow the fuse.

It is however wrong to connect ground to neutral in the wall.

The ground wire alone doesn't protect a person from getting a shock. the current that will pass through your body to earth will still depend on the point of contact, current density and body's impedance. even though the system is properly earthed, when metal a metal part becomes live you will still feel a little shock. This is the reason why we install RCD's to save us from currents above 30 mA which is below 60mA microshock (potential cause of fibrillation)

I am a real electrician and on most of the older homes a jumper from nutruls went to ground. I been playing out here with you guys. Now i will answer your last question if you run under ground plastic pvc you dont want to use a ground rod. The way your main house panel is you can come back off the subpanel nutrals with a extra wire to all your grounds in garage or shed. You need to learn the old way was just as good as the new way.l just dont ground the box and yes it does work. And yes the inspector does not mess with me any more im hard headed. And his oulet is wrong the ground and nutral should be in box and seperate wires should go to outlet. The new thing today is they have a crazy made up idea that a seperate ground is safer for lightning bullshit all most all

of the old houses are still standing or fell down from old age. When lighting strikes a main service it will go right back to ground rod. Not come back up the nutrals. Lighting does not ever take the long path on under ground power to your house if you have one hell of a run it blows out the power tranformer on pole and a small charge back the ground on the main handles it as far as it comming back a nother 150 feet plus will never happen to far of a path.you got a better chance of seeing god did it for thirty years and all my garages and sheds are still standing.over head is different change the new law every building over head needs a ground rod.