Bureau of Local Government Finance Opinion

June 8, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Honorable Vicente Ty Pimentel, Jr. Municipal Mayor Carrascal, Surigao del Sur Sir : This refers to Sangguniang Bayan (SB) Resolution No. 24, current series, resolving to request for the upgrading of the income classification of that municipality from 4th Class to 1st Class, a copy of which was forwarded to the Department of Finance through the covering letter dated March 11, 2011, of Mr. Celso P. Azarcon, SB Secretary, and which was further referred to this Bureau for appropriate action. It may be noted that under this Bureau's Memorandum Circular No. 01-M(73)-08, dated November 25, 2008, copy enclosed, that municipality maintained a 4th Class status on the basis of its certified Average Annual Income for CYs 2004-2007, amounting to P33.577M, and in accordance with the income benchmark of "P25M or more but less than P35M" for a 4th Class municipality provided for under Department of Finance (DOF) Order No. 23-08, dated July 29, 2008. We wish to clarify in this connection that Executive Order No. 249, dated July 25, 1987, mandated the general re-classification of provinces, cities and municipalities once every four years based on their 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, expressly provided 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. : ECTHIA "SECTION 2. Classification of Provinces, Cities and Municipalities. As provided for under Section 1 and Section 2 of Exe cutive 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 reclassification. "Based on the Financial Statements of LGUs for CY's 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 municipality maintained its 4th Class status effective July 29, 2008, pursuant to 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 municipal government may be entitled to, is therefore subject to the limitations for 4th Class municipalities. 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 municipality for the said periods to the Commission on Audit, Central Office, Quezon City, which will be used in the re-classification. Trusting that matters are clarified herein. AIECSD Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director