EXECUTIVE SUMMARY

A. INTRODUCTION

In 1966, Congress enacted Republic Act 4864 otherwise known as the Police Act of
1966 wherein it created the Police Commission (POLCOM) “to achieve and attain a
higher degree of efficiency in the organization, administration and operation of local
police agencies; and to place the local police service on a professional level.” With the
passage of Republic Act No. 6975 on December 13, 1990, a new National Police
Commission created within DILG “for the purpose of effectively discharging the
functions prescribed in the Constitution and provided in the Act.”

The National Police Commission is mandated by the 1987 Constitution and the Major
Police Reform Laws, Republic Act Nos. 6975 and 8551 to administer and control the
Philippine National Police. Under R.A. 8551, otherwise known as the "PNP REFORM
AND ORGANIZATION ACT OF 1998" the Commission's authority over the PNP were
strengthened and expanded to include administration of police entrance examinations, the
conduct of pre-charge investigation of police anomalies and irregularities, and summary
dismissal of erring police officers. NAPOLCOM has 17 Regional Offices to carry-out its
objectives.

The Commission is a collegial body composed of the ex-officio Chairperson and four
regular Commissioners, and the Chief, PNP as ex-officio member, one of whom is
designated by the President as the Vice-Chairperson. The DILG Secretary is the ex-
officio Chairperson, while the Vice-Chairperson and four Commissioners constitute the
Commission Proper which serves as the governing body.

It has a total manpower complement of 1,015 as of December 31, 2016.

B. FINANCIAL HIGHLIGHTS

The National Police Commission’s financial position, financial performance and

sources and application of funds (in thousand pesos) for the calendar year 2016 compared
with that of the preceding year, are as follows:

Financial Position

Increase/
Group of Accounts 2016 2015
(Decrease)
Assets ₱2,243,723 ₱2,076,302 ₱167,421
Liabilities 104,516 138,516 (34,000)
Equity ₱2,139,207 ₱1,937,786 ₱201,421

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Financial Performance

Increase/
Group of Accounts 2016 2015
(Decrease)
Total Revenue ₱53,529 ₱34,958 ₱18,571
Total Current Operating Expenses 1,279,256 1,238,387 40,869
Surplus (Deficit) from Current Operation (1,225,727) (1,203,429) (22,298)
Net Financial Assistance/Subsidy 1,292,498 1,237,931 54,567
Net Loss and Other Gains (479) - (479)
Surplus for the period ₱66,292 ₱34,502 ₱32,190

Sources and Application of Funds

Increase/
Particulars 2016 2015
(Decrease)
Allotments ₱1,324,922 ₱1,272,258 ₱52,664
Obligations 1,295,800 1,241,027 54,773
Balances ₱29,122 ₱31,231 (₱2,109)

C. OPERATIONAL HIGHLIGHTS

Output Target Accomplishments Remarks

MFO 1: POLICE POLICY
Number of plans and High accomplishment was due to the
policies issued, updated high number of policies issued
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and disseminated approving proposed specification
standards for PNP logistics.
Number of stakeholders
who rate NAPOLCOM 60% of the
78% of stakeholders
plans and policy stakeholders
surveyed
advisories as surveyed
satisfactory or better.
Percentage of valid High accomplishment was due to the
plans and policies high number of policies issued
updated, issued and 85% of plans approving proposed specification
disseminated within the and policies 150% (81/54) standards for PNP logistics.
last three (3) years.

MFO 2: POLICE ADMINISTRATION SERVICES

Actual number of cases Actual number of cases received with
evaluated, investigated completed documents as of end of
and adjudicated/ December 2016 was 43. This figure
disposed within included the carried over cases of
prescribed reglementary 2015 (n=20) and the number of cases
56% of cases
period as a percentage 62.79% (27 of 43) received during the year (n=23).
handled
of a total number of
cases handled,
categorized by
seriousness/ complexity
of cases.

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 Output Target Accomplishments Remarks
Actual number of cases The number of appealed cases
evaluated, investigated received in 2016 was 11.66% greater
and than those received in 2015 (n=223).
adjudicated/disposed This was accompanied by a
within prescribed corresponding 6.78% year-on-year in
reglementary period as 91% of cases the number of appealed cases
75.90% (189 of 249)
a percentage of a total handled disposed of. (189 cases in 2016 &
number of cases 177 in 2015).
handled, categorized by
seriousness/complexity
of cases: Regional
Appelated Board
Percentage of police A total of 406 police officers with 2
officers with two or or more summary dismissal cases
more recorded were filed before NAPOLCOM as of
complaints against them 1% 0.25% (406/160,669) end of December 2016. This figure
from the public represent 0.25% out of the total PNP
Summary Dismissal uniformed personnel strength
Cases. (n=160,669).
Percentage of police A total of four (4) police officers
officers with two or were found to have 2 or more
more recorded complaints out of 1,433 complaints
complaints against them filed for pre-charge investigation
1% 0.002 (4/160,669)
from the public Pre- before NAPOLCOM. Those police
Charge evaluation officers represents only 0.002% out
of the total PNP Uniformed Strength
(n=160,669)
MFO 3: POLICE BENEFITS FUND ADMINISTRATION
Number of benefit
100% 100%
claims acted upon
Percentage of claims This indicator was measured in the
correctly paid in the last 99.99% 100% 2nd and 4th quarters of 2016.
two (2) years
Timeliness
Percentage of valid Since payment of claims was
claims paid within 4 dependent on the release of funds
(four) weeks from from DBM, it was proposed that the
receipt of complete 100% 100% indicator for timeliness be changed to
documents % of valid claims paid within 5
working days from receipt of funds
from DBM.

D. SCOPE OF AUDIT

The audit covered the operation and financial transactions of the NAPOLCOM for
CY 2016.

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E. AUDITOR’S REPORT

The auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the National Police Commission due to the following accounting
errors and deficiencies together with the recommendations, as enumerated below:

1. The balance of the Cash in Bank – Local Currency, Current Account of

₱176,391,973.90 as at year-end was misstated due to: (a) unrecorded book
reconciling items totaling ₱150,401.10; and (b) non-cancellation of stale checks
aggregating ₱45,808.45. (Observation No. 4)

We recommend that Management: instruct the Accountant to review the book

reconciling items and make the necessary adjustments to reflect the correct balances
of the affected accounts in the financial statements

2. The accuracy of the balance of the Due from National Government Agencies
account of ₱1,391,501.79 as at year-end cannot be relied upon due to the
discrepancy of ₱705,908.06 between the balance per books and the balance per
Statement of Account of ₱685,593.73 furnished by the Procurement Service-
Department of Budget and Management caused by the accounting errors totaling
₱632,302.28 and unaccounted difference of ₱140,237.18 without supporting
documents. (Observation No. 5)

We recommended that Management: (a) require the Accountant to reconcile its

records with the PS-DBM to facilitate early detection of errors both in the records
of NAPOLCOM and PS-DBM and inform the PS-DBM of the unrecorded transfer
of funds through Advice to Debit Account (ADA); (b) require the Accountant to
account for and substantiate the noted discrepancy and prepare the necessary
adjustments to record valid reconciling items; and (c) require the Property Officer
to furnish the Accounting Unit with a copy of delivery receipts and supporting
documents as basis in the recording of transactions.

3. The accuracy and reliability of the balance of Inventory accounts aggregating

₱6,830,197.19 as at year-end was doubtful due to: (a) discrepancy of ₱282,766.93
between the balances per accounting and supply records; (b) inclusion of semi
expendable properties totaling ₱1,393,802.70 already issued to end-users which
resulted in the overstatement of inventory accounts and the understatement of the
appropriate expense account; (c) non-preparation of Report of Supplies and
Materials Issued for issued inventories; and (e) non-maintenance of Supplies
Ledger Card by the Accounting Unit and Stock Card by the Supply Unit.
Moreover, the balance included 29 expired computer inks amounting to ₱31,570.83
which were procured in CYs 2012 to 2015 but not yet disposed.
(Observation No. 7)

We recommended that Management: (a) direct the Accounting and Property Units
of Regions VI and X to reconcile their records regularly and adjust the noted

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 discrepancy, if warranted; (b) require the concerned regional Accountant to prepare
the necessary adjustment taking up the (i) erroneous classification of accounts;
(ii) issuance of inventories and semi-expendable properties to end-users;
(iii) adjustment of expired office supplies; (c) require the Accounting Unit and the
Property Unit of ARMM and Region IV-B to maintain SLC and SC; and (d) require
the Property Unit of ARMM to prepare the RSMI regularly and submit the same to
Accounting Unit as basis in the recording of issued inventories.

4. The accuracy and existence of the PPE accounts with an aggregate balance of
₱1,871,709,619.60 as of December 31, 2016 cannot be relied upon due to: (a) the
inclusion of the borrowing cost amounting to ₱90,021,723.40 to the value of land
and building acquired from the Bangko Sentral ng Pilipinas (BSP); (b) erroneous
classification of semi-expendable properties totaling ₱2,292,746.03 as PPE;
(c) unrecorded major repairs/construction of various structures totaling
₱126,980,074.35 and acquisition of office equipment amounting to P2,866,781.10;
(d) unreconciled difference of ₱6,138,846.46 between the property and accounting
records; (e) inadequate provision of depreciation to nine PPE valued at
₱1,748,716.13 which resulted in the net understatement of PPE by ₱37,532,386.02.
Moreover, the value of NAPOLCOM Quezon City office building with
undetermined amount was not recorded in the books while title to the parcels of
land with an area of 1,700 square meters as a result of the Joint Venture
Development Agreement was not yet transferred in the name of NAPOLCOM.
(Observation No. 9)

We recommended that Management: (a) require the Accountant: (i) to prepare the
necessary adjustments on the borrowing cost included in the value of the land and
building acquired from BSP; (ii) to record the value of the (i) NAPOLCOM Quezon
City office building based on its estimated construction cost; (iii) Property/Supply
Officers of the concerned regions to reconcile the noted discrepancy between their
records and prepare the necessary adjustment, if any; (iv) to record the major repair
and/construction of structures in different regions and the acquired office equipment
based on the relevant documents submitted by the BMHI; (v) to provide
depreciation to all PPE and prepare the necessary adjustment on the affected
accounts in the financial statements; and (b) facilitate the transfer of title of the land
and building acquired from BSP in favor of NAPOLCOM as well as the parcels of
land conveyed by BCDA.

5. The accuracy of the year-end balance of the Accounts Payable account of

₱2,781,371.27 was unreliable due to the inclusion of unpaid: (a) salaries and other
emoluments of NAPOLCOM employees totaling ₱220,118.51; (b) terminal leave
benefits of retired employees amounting to ₱144,694.44; (c) back pensions of
beneficiaries amounting to ₱595,353.09; and (d) subsidy to NAPOLCOM Negros
Island Region in the amount of ₱375,000.00. This resulted in the overstatement of
the Accounts Payable account by ₱1,335,166.04 and the understatement of the
accounts Due to Officers and Employees, Due to Regional Office and Other

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 Payables by ₱220,118.51, ₱375,000.00 and ₱740,047.53, respectively.
(Observation No. 10)
We recommended that Management require the Accountant to: (a) prepare the
necessary adjustment on the affected accounts for fair presentation in the financial
statements; and (b) ensure that the financial transactions are recorded under the
appropriate accounts prescribed in the Revised Chart of Accounts of the
Government Accounting Manual Volume III.

6. The Accounts Salaries and Wages – Regular of ₱719, 001.88, Due to NGAs of
₱719,001.88, Computer Software of ₱470,000.00, Subsidy from Central Office of
₱483,460.00, Other Personnel Benefits of ₱215,000.00, Cash in Bank – LCCA of
₱42,040.00, and appropriate expenses of ₱17,770.57 were understated while the
accounts Subsidy from Other NGAs of ₱525,500.00, Other Professional Services of
₱215,000.00, Salaries and Wages – Regular of ₱17,770.57 and Due from NGAs of
₱470,000.00 were overstated due to erroneous/non-recording of transactions.

We recommended that Management: (a) require the concerned Accountant to

analyze thoroughly the transactions and prepare the necessary adjustment in the
books to reflect the correct balance of the affected accounts in the financial
statements; and (b) require the Accountant to strictly adhere to the chart of accounts
provided under the Government Accounting Manual (GAM) for National
Government Agencies, Volume III.

F. OTHER OBSERVATIONS AND RECOMMENDATIONS

7. The implementation of the value for value land swap agreement between the BCDA
and NAPOLCOM disclosed the following deficiencies: (a) title and ownership to
the parcels of land which were the subject of the agreement have not yet been
transferred to NAPOLCOM; (b) Joint Technical Working Group responsible to
monitor and implement the obligations of the parties in the agreement was not
created; (c) collections from the amortization of housing units in the Pamayanang
Diego Silang (PDS) were deposited to the Special Account maintained by BCDA
Management and Holdings, Inc. (BMHI) and directly appropriated and utilized
instead of the Bureau of the Treasury pursuant to the pertinent provisions of
Presidential Decree No. 1445; and (d) no clear identification of operating expenses
that can be charged by BCDA Management and Holdings, Inc. (BMHI), Estate
Development Manager against the collection of the 2,250 housing units.
(Observation No. 1)

We recommended that Management: (a) make strong representation with BCDA to

facilitate the transfer of land title which are the subject of the land swap;
(b) designate its representative to the JTWG under the MOA; (c) comply with the
pertinent provisions of PD No. 1445 on the remittance to the BTr of the
proceeds/amortizations from the sale of the housing units maintained under the
“Special Account”. In case of utilization of the funds, Management should request
the issuance of SARO and NCA from the DBM; (d) coordinate with the BCDA on

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 the maintenance of a special account exclusively for the collection of amortization
of housing units net of management fee and operating expenses; and (e) take
appropriate action on the incurrence of grossly excessive expenditures by
BMHI/BCDA charged against the funds.

8. Out of 1,969 cases, only 714 cases or 36.26 percent were terminated/disposed of in
CY 2016 due to insufficiency of manpower at the Legal Affairs Service.
(Observation No. 2)

We recommended that Management: (a) undertake measures to remedy the

voluminous pending cases; and (b) consider the submission of a proposed revised
organizational structure to the Department of Budget and Management to address
the insufficiency of manpower at LAS so as to improve the disposition of cases.

9. The payment to NAPOLCOM employees of death and disability benefits totaling

₱31,432,612.51 is without legal basis in view of the repeal of Presidential Decree
No. 448 under Section 49 of Presidential Decree No. 1184 which extends such
benefits only to the member of the Integrated National Police (now Philippine
National Police). (Observation No. 3)

We recommended that Management stop immediately the payment of medical

expenses, gratuity pay, pension and burial benefits to the current and former
employees of the NAPOLCOM.

10. Advance payment recorded under Other Receivables account for the procurement
of goods totaling ₱11,117,811.63 was contrary to Section 88 of Presidential Decree
No. 1445. At year-end, only ₱221,333.35 was delivered. (Observation No. 6)

We recommended that Management: (a) require the Chief Accountant to prepare

the necessary adjustment in the books taking up the unrecorded deliveries; and (b)
stop the practice of paying in advance the procured goods from suppliers and
comply with the provisions of Section 88 of PD 1445, failure to do so will
constitute neglect of duty and shall be a ground for administrative disciplinary
action against the public officer responsible therefor.

11. The grant of cash advance totaling ₱743,900.00 for the repair of the NAPOLCOM
building in Makati City is not in keeping with the provisions of Section 4.1.3 (viii)
of COA Circular No. 2009-002 dated May 18, 2009. Moreover, cash advances
totaling ₱2,777,537.08 remained unliquidated due to lack/deficient supporting
documents and dormant accounts caused by retirement, death and separation from
service of accountable officers. (Observation No. 8)

We recommended that Management: (a) observe strictly the pertinent provisions of

COA Circular Nos. 2009-002 which prohibits the grant of cash advance for
infrastructure project or other undertaking on a project basis; (b) require the
concerned AO in NCR and Region XIII to submit the lacking documents to support

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 the grant and liquidation of cash advances; and (c) request for the write off of
dormant accounts in Region VII pursuant to COA Circular 2016-005 dated
December 19, 2016.

The foregoing findings and recommendations embodied in the report were discussed
with the concerned officials of the agency during the exit conference on May 17, 2017.
Management views and reactions were considered in the report, where appropriate.

G. STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT

RECOMMENDATIONS

Of the 52 recommendations contained in the CY 2015 Consolidated Annual Audit

Report, 34 were implemented, nine were partially implemented and nine were not
implemented.

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