Bureau of Local Government Finance Opinion

January 3, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon. Emeterio S. Belmonte, Jr. Vice-Mayor and Presiding Officer of the Sangguniang Bayan Municipal Hall Donsol, Sorsogon Sir : This refers to your 1st Indorsement dated December 13, 2010, with the attached Sangguniang Bayan Resolution No. 39, S-2010, requesting to reclassify the Municipality of Donsol, Sorsogon to a higher income classification than its present 3rd Class status. Under this Bureau's Memorandum Circular No. 01-M(68)-08, dated November 14, 2008, the Municipality of Donsol was classified as 3rd Class with Average Annual Income for CYs 2004-2007, amounting to P42.876 M, which is within the "P35M or more but less than P45M" income benchmark for 3rd Class municipalities under Department of Finance (DOF) Order No. 23-08, dated July 29, 2008, providing for the adjusted income benchmarks used for the income classification of local government units effective in 2008, covering annual regular incomes for CYs 2004-2007. Please be clarified 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. : ATESCc "SECTION 2. Classification of Provinces, Cities and Municipalities. As provided for under Section 1 and Section 2 of Ex ecutive 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, annual incomes for CYs 2008 and 2009 were excluded from the computation of the average annual income for the re-classification pursuant to DOF Order No. 23-08, as incomes for the said years shall be considered in the next income re-classification which will be in 2012. Trusting that this clarifies the income classification of the Municipality of Donsol as 3rd Class under this Bureau's Memorandum Circular No. 01-M(68)-08. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director