Bureau of Local Government Finance Opinion

June 7, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Elizabeth E. Lozano LSO I Office of the City Secretary Urdaneta City, Pangasinan Madam : This refers to your letter dated December 22, 2010, addressed to His Excellency, President Benigno Simeon C. Aquino III, relative to that city's Sangguniang Panlungsod Resolution No. 066-10, resolving to request for the upgrading thereof from 2nd Class to 1st Class, in order to implement the salary schedule for 1st Class cities, alleging the tremendous economic progress and development it has obtained. Records show that under this Bureau's Memorandum Circular No. 01-C-08, dated November 27, 2008, Urdaneta City was classified as 2nd Class with an Average Annual Income for CY's 2004-2007, amounting to P385.786 M which falls within the "P320 M or more but less than P400 M" income benchmark for 2nd Class cities per Department of Finance (DOF) Order No. 23-08, dated July 29, 2008. In this connection, we wish to clarify that Executive Order No. 249, dated July 25, 1987, mandated the general re-classification of provinces, cities and municipalities once every four years on the basis of the average annual income for the four-year period immediately preceding the year of re-classification. In pursuance thereof, Section 2 of the aforementioned 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 income obtained from CYs 2004 to 2007, viz. : IEAHca "SECTION 2. Classification of Provinces, Cities and Municipalities. As provided for under Section 1 and Section 2 of Execu tive Order No. 24 9, 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 reclassification. "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 . . . ." Considering that that city maintained its 2nd Class status effective July 29, 2008 pursuant to the aforementioned DOF Order No. 23-08, the maximum amount expendable for the salaries and wages, including the salary scales and rates of allowances, per diems and other emoluments that the officials and employees of the city government may be entitled to, is therefore subject to the limitations for 2nd Class cities. STADIH Nonetheless, may we inform that a general income re-classification will be undertaken next year, 2012, covering the audited annual regular incomes actually obtained in CYs 2008, 2009, 2010 and 2011, and we are now in the process of gathering the income data of all provinces, cities and municipalities. Thus, may we request for the prompt submission of the financial reports of that city for the said periods to the Commission on Audit, Central Office, Quezon City which will be used in the reclassification. Trusting that this clarifies matters. HITEaS Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director