DOJ Opinion No. 022, s. 2002

DOJ OPINION NO. 022 , s. 2002 March 14, 2002 Secretary Jose Isidro N. Camacho Department of Finance Roxas Boulevard corner Vito Cruz Street Manila Sir : This has reference to your request for confirmation of the authority of the Secretary of Finance to issue the Letter of Confirmation (Annex 1 to your letter-request) to the Development Bank of the Philippines (DBP) in connection with the monetization of the unpaid Internal Revenue Allotment (IRA) of local government units (LGUs) for calendar year 2000. You also request for confirmation that the obligation expressed to be assumed by the National Government (NG) through the Department of Finance (DOF) in the above-mentioned Letter of Confirmation is, under the laws of the Republic of the Philippines, legal, valid and binding obligation of the Republic, enforceable against it in accordance with the terms thereof. You state that on December 10, 2001, the NG, represented by the Secretaries of the DOF, the Department of the Interior and Local Government (DILG), and the Department of Budget and Management (DBM) entered into a Memorandum of Understanding (MOU) with the Union of Local Authorities of the Philippines (ULAP) for the monetization of payables to various LGUs in the total amount of P6.712 Billion, which represents the NG's unreleased IRA to the LGUs for calendar year 2000. You further state that in paragraph 5 of the MOU, the DBM was tasked to verify each participating LGU's share in the said P6.712 Billion IRA and issue the corresponding Notice of Payment Schedule (NPS) confirming the payment of this amount in six (6) equal annual installments over a period of six (6) years (the Annual Payments); and that accordingly, DBM issued to each LGU an NPS. Additionally, you inform us that the DBM issued a Circular Letter addressed to the LGUs dated January 11, 2002, paragraphs 3 and 4 of which state that "the national government still owes the LGUs three-fourths (3/4) of the one (1) month delayed IRA in the total amount of P6.712 Billion" and that the said "amount shall be paid in six (6) equal annual installments every April of the year concerned". The Circular also provides in paragraph 5 thereof that "the three-fourths (3/4) unreleased IRA is eligible for enrollment in the IRA Monetization Program", under which "LGUs may opt to collect in advance the discounted value of the annual guaranteed cash payments". You likewise explain in your letter that in order to provide support to the IRA Monetization Program, the NG, through the DOF, will execute a Letter of Confirmation confirming the NG's commitment to pay the LGUs the unreleased IRA for the year 2000 in the amount of P6.712 Billion. On the part of the Republic, the commitment shall be a direct, absolute and unconditional obligation for the payment of money as the Annual Payments fall due. Subject to the extended discussion hereunder given, we hereby confirm your authority, as Secretary of Finance, to issue the abovementioned Letter of Confirmation. We also confirm that the obligation expressed to be assumed by NG in said Letter constitutes a legal, valid and binding obligation of the Republic. The Administrative Code of 1987 (E.O. No. 292) provides that the DOF shall be primarily responsible "for the sound and efficient management of the financial resources of the Government, its subdivisions, agencies and instrumentalities" and "for the formulation, institutionalization and administration of fiscal policies in coordination with other concerned subdivisions, agencies and instrumentalities of government" (Sections 1 and 2, Chapter 1, Title II, Book IV). The said Code likewise provides that the DOF shall have the following powers and functions: "Sec. 3. Powers and Functions . To accomplish its goals, the Department shall: xxx xxx xxx (4) Act as custodian and manage all financial resources of the national government; xxx xxx xxx (8) Coordinate with other government agencies on matters concerning fiscal and monetary policies, credit, economic development, international finance, trade and investment." Furthermore, under Section 6, Chapter 2, Book IV, of the said Code, it is provided that "the authority and responsibility for the exercise of the mandate of the Department and for the discharge of its powers and functions shall be vested in the Secretary, who shall have supervision and control of the Department." We agree with the position stated in your letter that the foregoing provisions of the Administrative Code of 1987, read together with the pertinent provisions of the 1987 Constitution and the Local Government Code of 1991 (Republic Act No. 7160) as well as the ruling of the Supreme Court (SC) in the case of Pimentel vs. Aguirre, G.R. No. 132988, July 19, 2000, provide the legal bases for the authority of the Secretary of Finance to issue the said Letter of Confirmation and therein to confirm the commitment of the NG to pay the IRAs of LGUs according to schedule. These provisions and excerpt from the SC decision are: aCSDIc 1987 Constitution Article X. Local Government . . . "SEC. 6. Local government units shall have a just share, as determined by law , in the national taxes which shall be automatically released to them." (Emphasis supplied) Local Government Code of 1991 "SEC. 284. Allotment of Internal Revenue Taxes . Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year . . . . " "SEC. 286. Automatic Release of Shares . (a) The share of each local government unit shall be released, without need of any further action , directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose." (Emphasis supplied.) Ruling of the Supreme Court in the case of Pimentel vs. Aguirre ". . . A basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the national internal revenue . This is mandated by no less than the Constitution. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of the year and 'shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose.' As a rule, the term 'shall' is a word of command that must be given a compulsory meaning. The provision is, therefore, imperative. " (Emphasis supplied.) Pursuant to Section 6, Article X, of the Constitution supra , the LGUs shall have a just share, to be determined by law, in the national taxes, and which share shall be automatically released to them. The law which determines the share of the LGUs in the national taxes is the Local Government Code of 1991 which provides for the amounts or percentages of internal revenue allotment (IRAs) of LGUs and the automatic release of such IRAs directly to the LGUs concerned on the dates and at regular intervals fixed therein (Secs. 284 and 286, supra ). The NG's obligation to pay the IRA of LGUs is both a constitutional and legal mandate. And as held by the Supreme Court in the case of Pimentel vs. Aguirre, supra , a basic feature of local fiscal autonomy is the automatic release of the IRA to LGUs. Based on the foregoing considerations, we reiterate our confirmation that the Secretary of Finance can issue the abovementioned Letter of Confirmation and that the obligation expressed to be assumed by the National Government (NG), through the DOF, in the said Letter of Confirmation is, under the laws of the Republic of the Philippines, legal, valid and binding obligation of the Republic of the Philippines, enforceable against it in accordance with the terms thereof. It should be stressed, however, that this Department is not rendering opinion on the legality or validity of the IRA Monetization Program which is not within its official competence to resolve because it involves LGUs which are independent and autonomous political units over whose actuations this Department exercises no revisory authority and upon whom the opinions of the Department will have no binding or obligatory force. Very truly yours, (SGD.) HERNANDO B. PEREZ Secretary