Bureau of Local Government Finance Opinion

May 26, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Honorable Ramon S. Legaspi, Jr. Municipal Mayor Municipal Hall Makato, Aklan Sir : This refers to Sangguniang Bayan Resolution No. 11-88, current series, requesting for the re-classification of that municipality from 4th Class to 3rd Class, together with its unaudited financial statements from CYs 2008 to 2011. Records show that per this Bureau's Memorandum Circular No. 01-M(4)-08, dated November 19, 2008, copy enclosed, that municipality maintained its 4th Class status on the basis of its certified Average Annual Income for CYs 2004-2007, in the amount of P28.802 M, and in accordance with the adjusted income benchmark of "P25M or more but less than P35M" for 4th Class municipalities as provided by Department of Finance Order (DOF) No. 23-08, effective July 29, 2008. In this regard, may we clarify that Executive Order No. 249, dated July 25, 1987, mandates the general re-classification of provinces, cities and municipalities once every four years on the basis of the average annual regular income for the four-year period immediately preceding the year of re-classification. In pursuance thereof, Section 2 of the aforecited DOF Order No. 23-08, specifically stated that the income re-classification in accordance with the adjusted income benchmarks provided therein shall be based on the certified average annual regular income for CYs 2004-2007, viz. : ICDcEA "SECTION 2. Classification of Provinces, Cities and Municipalities. As provided for under Sections 1 and 2 of Exec utive Order No. 2 49, dated July 25, 1987, Provinces, Cities and Municipalities, except Manila and Quezon City which shall remain as special class cities, shall be divided into six (6) main classes according to the Average Annual Income actually realized during the last four (4) calendar years immediately preceding the year of re-classification. Based on the Financial Statements of LGUs for CYs 2004-2007 of the Commission on Audit, the income brackets of Provinces, Cities and Municipalities which shall be used in their re-classification are ranged, . . . ." (emphasis supplied) Accordingly, the next income re-classification will be undertaken in 2012, or four years after the latest income re-classification in 2008, which will cover the audited annual regular income for CYs 2008, 2009, 2010 and 2011 . Trusting that this clarifies matters. cEaTHD Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director