QuestionsQuestions (DEPARTMENT ORDER NO. 031-2018)
The Department Order is anchored on Sections 7, 8, and 9 of RA 7160 (Local Government Code) and related provisions such as RA 9009. It implements the mandate that the DOF (through BLGF) attests income indicators for the creation, conversion, merger, or abolition of LGUs, while provincial and city treasurers certify the income requirements for specific LGU actions under the LGC.
Income, population, and land area are required verifiable indicators. Income must be sufficient, based on acceptable standards, to provide essential government facilities and services and special functions commensurate with the LGU’s population.
The division shall not reduce the income, population, or land area of the concerned LGU(s) to less than the minimum requirements in the Code. Also, the income classification of the original LGU(s) must not fall below its current income classification prior to the division.
An LGU may be abolished when its income, population, or land area has been irreversibly reduced to less than the minimum standards required for its creation under Book III of the LGC, as certified by national agencies mentioned in Section 17 to Congress or the sanggunian concerned.
Conversion into a component city: DOF (pursuant to Section 450(a) as amended by RA 9009). Creation of a province: DOF (pursuant to Section 461(a) of the LGC).
At least Php100,000,000.00 based on 2000 constant prices, based on the required average annual income for the last two (2) consecutive years.
Not less than Php20,000,000.00 based on 1991 constant prices, using the required average annual income requirement for the period stated by the LGC provisions referenced in the Department Order.
At least Php2,500,000.00 based on 1991 constant prices, based on the required average annual income for the last two (2) consecutive years.
At least Php50,000,000.00 based on 1991 constant prices.
Income accruing to the general fund, exclusive of special funds, trust funds, transfers, and non-recurring income.
Annual Income = Real Property Tax (General Fund) + Tax on Business + Other Taxes + Regulatory Fees (Permits and Licenses) + Service/User Charges (Service Income) + Receipts from Economic Enterprises (Business Income) + Interest Income + Shares from PEZA + Internal Revenue Allotment (IRA).
Locally Generated Annual Income includes Real Property Tax (General Fund), Tax on Business, Other Taxes, Regulatory Fees, Service/User Charges, Receipts from Economic Enterprises, Interest Income, and Shares from PEZA. It excludes IRA.
Use the approved Statement of Receipts and Expenditures (SRE) submitted through the eSRE system for the last two (2) consecutive years and four (4) years prior to the issuance of the latest income reclassification.
(1) Compute CPI growth rate using available constant price data: (CPI_t − CPI_t-1)/CPI_t-1. (2) Estimate required CPI for fiscal year t: Required CPI_t = (1 + growth rate) × Required CP_t-1, with base CPI set to 100 for required constant prices. (3) Compute Required CPI factor = CPI_required_t/100, then convert: AICP_t = Annual income at current prices / Required CPI factor.
To ensure the creation/conversion does not reduce the original LGU’s income below minimum requirements, the reduced average annual income is computed by deducting the shares of income of the proposed LGU from the original LGU’s annual income. The resulting reduced ‘average annual regular income’ then becomes the basis for determining the original LGU’s resulting income classification using DOF’s existing income classification rules.
BLGF must (1) update CPI factors annually, (2) provide a CPI matrix annually for computation and certification, (3) issue a Certificate of Average Annual Income, (4) capacitate provincial and city treasurers, (5) issue clarificatory guidelines/updates subject to proper supervision and approval, and (6) provide an annual report to DOF on certifications issued.
It shall be effective fifteen (15) days after completion of its publication in a newspaper of general circulation.