Bureau of Local Government Finance Opinion

June 15, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Noel G. Dreu Secretary, Office of the Sangguniang Panlungsod (SP) City Hall, Sorsogon City Sir : This refers to your letter dated May 17, 2011, transmitting a copy of SP Resolution No. 168, series of 2011, resolving to request the Honorable Secretary of Finance to re-classify the City of Sorsogon from 3rd Class to 1st Class, which was referred to this Bureau for appropriate action. Records show that under this Bureau's Memorandum Circular No. 01-C-08, dated November 27, 2008, copy enclosed, the City of Sorsogon was upgraded from 4th Class to 3rd Class with the certified Average Annual Income for CYs 2004-2007, amounting to P285.595 M, and in accordance with the "P240M or more but less than P320M" income benchmark for 3rd Class cities pursuant to Department of Finance Order No. 23-08, effective July 29, 2008. We wish to clarify in this connection 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 Income for the four-year period immediately preceding the year of re-classification. In pursuance thereof, Section 2 of the aforementioned Department of Finance 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 for CY's 2004-2007, viz. : THcaDA "SECTION 2. Classification of Provinces, Cities and Municipalities. As provided for under Section 1 and Section 2 of Executive Order No. 249, 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) Therefore, considering that the latest income re-classification was in 2008, the next re-classification will be undertaken next year, 2012, which will cover annual regular incomes for CYs 2008, 2009, 2010 and 2011. In preparation thereof, we are requiring all provinces, cities and municipalities to ensure submission of their financial reports for the said periods to the Commission on Audit, Central Office, Quezon City as these data will be used for the re-classification. Trusting that this clarifies the matter. IaDSEA Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director