Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 465)
The purpose of Presidential Decree No. 465 is to provide a new classification system for provinces, cities, and municipalities in the Philippines based on their average annual income and to fix the maximum amounts expendable for salaries and wages of local officials and employees.
The Secretary of Finance has the authority to classify provinces, cities, and municipalities based on their average total revenues, as certified by the Chairman, Commission on Audit.
The classification of provinces and cities must be updated every four fiscal years, except in cases of diminishing revenues when a readjustment can be ordered sooner.
1. First Class: average total revenue of three million pesos or more per annum; 2. Second Class: one million five hundred thousand pesos or more but less than three million pesos; 3. Third Class: one million pesos or more but less than one million five hundred thousand pesos; 4. Fourth Class: five hundred thousand pesos or more but less than one million pesos; 5. Fifth Class: less than five hundred thousand pesos per annum.
Municipalities are divided into six classes based on their average annual income for the last four fiscal years, from First Class (one million five hundred thousand pesos or more) to Sixth Class (less than one hundred thousand pesos per annum).
Excluded sources include unappropriated balances, proceeds from bond issues, repayment of loans, aid from the National Government, private donations, return of advances to economic enterprises, sales of fixed assets and real property, prior year's adjustments, and other non-regular receipts.
For first and second class provinces, cities, and municipalities, a maximum of 45% of the total annual income from regular sources can be appropriated for salaries and wages.
Yes, the Secretary of Finance may authorize appropriations exceeding the set limits by up to 25%, provided conditions are met and there is no overdraft or imminent overdraft.
First Class-A: average total revenue of seven million pesos or more; First Class-B: five million pesos or more but less than seven million; First Class-C: three million pesos or more but less than five million.
Presidential Decree No. 465 took effect on July 1, 1974.