LOCAL TREASURY OPERATIONS

MANUAL

RECEIPT AND COLLECTION OF

LOCAL INCOME, REVENUE AND
OTHER FUND SOURCES

BOOK TWO
Chapter 1 TYPES OF LOCAL INCOME AND REVENUES COLLECTED
BY LOCAL GOVERNMENT UNITS

Section 36. Definition of Income. - Income refers to all revenues and receipts collected or
received forming the gross accretions of funds of the local government unit. (Sec. 306 (i, LGC)

Section 37. Power to Create Sources of Revenue. - Each local government unit shall
exercise its power to create its own sources of revenue and to levy taxes, fees and charges subject
to the provisions of the Local Government Code of 1991, consistent with the basic policy of
local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government
units. (Sec. 129, LGC

Local government units do not have the inherent power to tax (Basco vs. PAGCOR, 197 SCRA
52), except such power as may be delegated to them by law (p. 401, Tax Law and Jurisprudence,
Second Edition, Vitug and Acosta), that is, the 1987 Constitution through R. A. No. 7160 or the
Local Government Code of 1991

Thus, the power to impose a tax, fee or charge or to generate revenue under the Local
Government Code of 1991 shall be exercised by the sanggunian of the local government unit
concerned through an appropriate ordinance. (Sec. 132, LGC

Section 38. Fundamental Principles. - The flowing fundamental principles shall govern the
exercise of the taxing and other revenue-raising powers of local government units:

a) Taxation shall be uniform in each local government unit. (Sec. 130 (a), LGC)

Equality and uniformity in local taxation means that all taxable articles or kinds of property
of the same class shall be taxed at the same rate within the territorial jurisdiction of the taxing
authority or local government unit and not necessarily in comparison with other units
although belonging to the same political subdivision. In fine, uniformity is required only
within the geographical limitation of the taxing authority 21 (p. 416, Tax Law and
Jurisprudence, Second Edition, Vitug and Acosta). Thus, if the tax is a city tax, it must be
uniform throughout the city; if the tax is a municipal tax, it must be uniform throughout the
municipality (Notes on Sec. 130, LGC, p. 18, Philippine Law on Local Government Taxation,
Annotated, 2000 Edition, Ursa!). The uniformity required is only within the territorial
jurisdiction of a province, a city, a municipality or a barangay (Art. 219 (a), IRR,
implementing Sec. 130 (a), LGC).

A tax is considered uniform when it operates with the same force and effect in every place where
the subject may be found. Where the statute or ordinance applies equally to all persons, firms
and corporations placed in similar situations, there is no infringement of the rule on equality.
Inequalities which result from the singling out of one particular class, in respect to other classes,
for taxation and exemption infringe no constitutional limitation (p. 416, Tax Law and
Jurisprudence, Second Edition, Vitug and Acosta).

21 Punzalan vs. City ofManila, 95 Phil. 46

Uniformity is not equivalent to equality in taxation (. 18, Philippine Law on Local
Government Taxation, Annotated, 2000 Edition, Ursa/). The Supreme Court has ruled, "It is
true that the uniformity essential to the valid exercise of the power of taxation does not
require identity or equality under all circumstances, or negate the authority to classify the
object of taxation. The classification made in the exercise of this authority, to be valid, must,
however, be reasonable and this requirement is not deemed satisfied unless:

1) It is based upon substantial distinctions which make the real differences;

2) These are germane to the purpose of the legislation or ordinance;

3) The classification applies, not only to present conditions, but, also, to future
conditions substantially identical to those of the present; and

4) The classification applies equally to all those who belong to the same class.

These conditions are not fully met by the ordinance in question. Indeed, if its purpose were
merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason
why sales thereof by dealers other than agents or consignees of producers or merchants
22
established outside the City of Butuan should be exempt from the tax. (p. 417, Tax Law and
Jurisprudence, Second Edition, Vitug and Acosta)

b) Taxes, fees, charges and other impositions shall:

1) be equitable and based as far as possible on the taxpayer's ability to pay (Sec.
130 (b) (!), LGC). Equitability is characterized by equity. It means being fair to all
concerned and that it is without prejudice, favor or vigor entailing undue hardship. It
is the word fairness that best describes equitable. It the tax is excessive, it is not fair.
When the tax discriminates, aside from violating the rule of uniformity, it is not fir.
If the tax is in restraint of trade (that is, it discourages investors), it is not fair.

The taxpayer's ability to pay must be considered. It cannot be absolute or it cannot be

based on a hard and fast rule. Ability to pay is more equated with the progressive
system of taxation, that is, the more you ear, the more tax you pay. Taxation must be
based, as far as practicable, on ability to pay. (p. 209, Local Government Code
Annotated Nolledo)

The question as to when a tax is said to be "equitable", is related to the distribution of

the tax burden itself Thus, the most equitable tax system is that which is most closely
in conformity with the standards of equity in the distribution of real income. (p. 19,
Philippine Law on Local Government Taxation, Annotated, 2000 Edition, Ursa/)

2) be levied and collected only for public purposes (Sec. 130, (b) (2), LGC). Public
purpose requires that the proceeds of taxation are used to support the existence of the
22
Pepsi-Coln Bottling Co. vs. City of Butunn, 24 SCRA 789
local government or the pursuit of its governmental objectives (. 419, Tax Law and
Jurisprudence, Second Edition, Vitug and Acosta). The tax should be designed to
support the services of the Government and the recognized public needs. The tax
must affect the area as a community rather than as individual (LGC Annotated by
Nolledo).

3) not be unjust, excessive, oppressive, or confiscatory (Sec. 130, (b), (3), LGC). The tax
must be reasonable in order not to be unjust or oppressive (LGC Annotated by Nolledo).

4) not be contrary to law, public policy, national economic policy, or in restraint of trade
(Sec. 130 (b) (4), LGC). A tax is contrary to law if it is a tax beyond the authority of an
LGU to impose (LGC Annotated by Nolledo). Thus, a local ordinance, to be valid,
must not contravene the Constitution or any statute; not be unfair or oppressive; not
be partial or discriminatory; not prohibit but may regulate trade; be general and
consistent with public policy; and not unreasonable (US vs. Abendan, 24 Phil.165). A
tax must not be in restraint of trade in that it must not deter the free flow of commerce the
country, and cause considerable increase in the price of commodities, to the
price of the consuming public ( Sec 133 (e), Annotated, Local Government)

c.) The collection of local taxes, fees, charges and other impositions shall in no case be let to
any private person (Sec. 130, (c), LGC). The Supreme Court has said that entrusting the
collection of the fees to a private person does not destroy the public purpose of the ordinance,
stating that so long as the purpose is public, it does not matter whether the agency through
which the money is dispensed is public or private. (Bagatsing vs. Ramirez, L-41631, Dec. 17,
1976)

d. The revenue collected pursuant to the provisions of the Local Government Code shall
inure solely to the benefit of, and be subject to disposition by the local government unit
levying the tax, fee, charge or other imposition unless otherwise specifically provided in the
same Code (Sec. 130 (d), LGC). In no case can the National Government share in local
taxes even if provided by law. The Constitution provides that local taxes, fees and charges
shall accrue exclusively to the local governments. (Sec. 5, Art. X, 1987 Constitution).

e. Each local government unit shall, as far as practicable, evolve a progressive system
of taxation (Sec. 130 (e), LGC). A progressive tax is one where the tax rate increases as the
tax base increases. ln the case of tax on business, manufacturers pay more taxes per annum as
their gross sales or receipts for the preceding year increases (Sec. 130 (h), Annotated, Local
Government Taxation, Ursa!).
Section 39. Valid Revenue Ordinance -

A. For any revenue ordinance to be valid, it must conform with the provisions of Chapter 5,
Title l , Book II of R. A. No. 7160 or the Local Government Code of 1991, which define both
substantive and procedural requirements therefor.
 B. Procedural Requirements fr a Valid Revenue Ordinance. - The conduct of public
hearings shall be governed by the following procedure:

1) Pre-Publication or Posting. - Within ten (10) days from the filing of the proposed tax
ordinance or revenue measure, the same shall first be published for three (3) consecutive
days in a newspaper of local circulation or shall be posted simultaneously in at least four (4)
conspicuous places within the territorial jurisdiction of the LGU concerned. (Art. 276(b) (), !
RR, implementing Sec. 188, LGC)

Conspicuous places include municipal halls, plazas, barangay halls, public markets, churches
and other public places where the constituents converge.

2) Written Notices to Interested or Affected Parties. - In addition to the foregoing

requirement on publication or posting, the sanggunian concerned shall cause the sending
of written notices of the proposed ordinance, enclosing a copy thereof, to the interested or
affected parties operating or doing business within the territorial jurisdiction of the LGU
concerned. (Art. 276 (b) (2), !RR, implementing Sec. 188, LGC)

Information must reach those that shall be directly affected by the imposition. For example,
when the measure is on the business tax, the LGU may invite the business community in the
public hearing. To ensure compliance with the requirement, sending of written notices is
necessary.

The notice or notices shall specify the date or dates and venue of the public hearing or hearings.
(Art. 276 (b) (3), !RR, implementing Sec. 188, LGC)

3) Public Hearing. - (a) The initial public hearing shall be held not earlier than ten (10)
days from the sending out of notice or notices, or last day of publication, or date of
posting thereof, whichever is later. (Art. 276 (b) (3), IRR, implementing Sec. 188, LGC)

(b) Public hearings shall be conducted prior to the enactment of the tax ordinance or revenue
measure. (Sec. 187, LGC))

(c) At the public hearing or hearings, all affected or interested parties shall be accorded
an opportunity to appear and present or express their views, comments and
recommendations, and such public hearing or hearings shall continue until all issues have
been presented and fully deliberated upon and/or a consensus is obtained, whether for or
against the enactment of the proposed tax ordinance or revenue measure. (Art. 276 (b)
(4), IRR, implementing Sec. 188, LGC)

(d) The deliberations at the public hearing or hearings shall serve as inputs to the members
of the sanggunian. After the sanggunian members have considered the views and comments,
they may modify, pass or suspend judgment on the issue.
(e) No tax ordinance or revenue measure shall be enacted or approved in the absence of a public
hearing duly conducted in the manner herein prescribed. (Art. 276 (c), IRR, implementing Sec.
188, LGC)

4) Preparation of Minutes. - The secretary of the sangunian concerned shall prepare the
minutes of such public hearing and shall attach to the minutes the position papers,
memoranda, and the like submitted by those who participated. (Art. 276, (b) (5), IRR,
implementing Sec. 188, LGC)

The proceedings must be properly documented, so that, the sanggunian can readily access
information on the people's reaction on the proposal.

5) Approval. - (a) Every ordinance enacted by the sangguniang panlalawigan, sagguniang

panlungsod or sangguniang bayan, shall be presented to the provincial governor or city or
municipal mayor, as the case may be. If the local chief executive concerned approves the same,
he shall affix his signature on each and every page thereof. (Sec. 54 (a), LGC)

(b) The local chief executive may veto any ordinance of the sangguniang panlalawigan,
sagguniang panlungsod, or sangguniang bayan on the ground that it is ultra vires or
prejudicial to the public welfare, stating his reasons therefor in writing (Sec. 55 (a), LGC), and
return the same to the sanggunian (Sec. 54 (a), LGC).

The veto shall be communicated by the local chief executive concerned to the
sanggunian within fifteen (15) days in the case of a province, and ten (10) days in the case of a
city or municipality; otherwise, the ordinance shall be deemed approved as if he had signed it.
(Sec. 54 (b), LGC)

The local chief executive may veto an ordinance or resolution only once. (Sec. 55 (c),
LGC)

(c) The sanggunian concerned may override the veto of the local chief executive by two thirds
(2/3) vote of all its members, thereby making the ordinance or resolution effective for all legal
intents and purposes. (Sec. 54 (a), LGC)

(e) Ordinances enacted by the sanggunian barangay shall, upon approval by the majority of all
its members, be signed by the punong barangay. (Sec. 54 (c), LGC)

6) Publication of Tax Ordinances and Revenue Measures. - (a) Within ten (10) days
after their approval, certified true copies of all provincial, city, and municipal tax
ordinances or revenue measures shall be published in full for three (3) consecutive days
in a newspaper of local circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the same may be
posted in at least two (2) conspicuous and publicly accessible places. (Sec. 188, LGC)

(b) If the tax ordinance or revenue measure contains penal provisions, the gist of such
ordinance or revenue measure shall be published in a newspaper of general circulation
within the province where the local sanggunian concerned belongs. In the absence of any
newspaper of general circulation within the province, posting of such ordinance or measure
shall be made in accessible and conspicuous public places in all municipalities and cities of the
province to which the sanggunian enacting the ordinance or revenue measure belongs. (Art.
276, IRR, implementing Sec. 188, LGC)

C. Substantive Requirements for a Valid Revenue Ordinance. 23 - To be valid, a tax or

revenue ordinance must conform to the following substantive requirements:

1) It must not contravene the Constitution or any statute;

2) It must not be unfair or oppressive;
3) It must not be partial or discriminatory;
4) It must not prohibit but may regulate trade;
5) It must be generally consistent with public policy; and
6) It must not be unreasonable. (US vs. Abendan, 24 Phil.165)

D. Effectivity of Tax Ordinances or Revenue Measures. - The tax ordinances or revenue

measures take effect upon compliance with the above procedural and substantive
requirements.

E. Furnishing of Copies of Tax Ordinances and Revenue Measures. - Copies of all

provincial, city, and municipal and barangay tax ordinances and revenue measures shall be
furnished the respective Local Treasurers fr public dissemination.

F. Review of Tax Ordinances or Revenue Measures. - R. A. No. 7160 or the Local

Government Code of 1991, provides the following cautionary steps wherein tax ordinances
or revenue measures of component cities and municipalities are reviewed by the sangguniang
panlalawigan, and ordinances of barangays by the sangguniang panlungsod or sangguniang
bayan:

1) Review of Component City and Municipal Ordinances or Resolutions by the

Sangguniang Panlalawigan. - (a) Within three (3) days after the approval, the secretary
of the sangguniang panlungsod or sangguniang bayan shall frward to the sangguniang
panlalawigan fr review, copies of approved revenue ordinances and resolutions. (Sec.56
(a), LGC)

(b) Within thirty (30) days after receipt of copies of such revenue ordinances and
resolutions, the sangguniang panlalawigan shall examine the documents or transmit them
to the provincial attorney , or if there be none, to the provincial prosecutor fr prompt
examination. The provincial attorney or provincial prosecutor shall within a period of ten
(10) days from receipt of the documents, inform the sanguniang panlalawigan in writing of his
comments or recommendations, which may be considered by the sangguniang panlalawigan
in making its decision. (Sec. 56 (b), LGC)

23
For a more detailed discussion ofthe substantive requirements ofa valid revenue ordinance, refer to LTO Annex
2, this Manual.
 (c) If the sangguniang panlalawigan finds that such an ordinance or resolution is beyond the
power conferred upon the sangguniang panglunsod or sangguniang bayan concered it shall
declare such ordinance or resolution invalid in whole or in part. The sangguniang
panlalawigan shall enter its action in the minutes and shall advise the corresponding city or
municipal authorities of the action it has taken. (Sec. 56 (c), LGC)

(d) The review by the sangguniang panlalawigan of the component city and municipal
revenue ordinances is limited to determining the legality thereof or if the same exceed the
powers conferred upon by law to the sangguniang panglungsod or sangguniang bayan.
Exceeding such powers is ultra vires and amounts to usurpation of the legislative
functions of the city or municipal councils.

(e) The review by the sangguniang panlalawigan is in the nature of legislative check and it is a
measure by which the provincial government exercises its power of general supervision
over component units.

(f) If no action has been taken by the sangguniang panlalawigan within thirty (30) days after
submission of such an ordinance or resolution, the same shall be presumed consistent
with law and therefore valid. (Sec. 56 (d), LGC)

(g) Pending review by the higher council, a revenue ordinance continues to be in force and
effect.

(h) Declaration of invalidity of the revenue ordinance is equivalent to disapproval

thereof.

(i) The signature of the goveror is required in relation to the resolution adopted by the
sangguniang panlalawigan, approving or disapproving the revenue ordinance or
resolution enacted by the sangguniang bayan or sangguniang panlungsod.

2) Review of Barangay Ordinances by the Sangguniang Panlungsod or Sangguniang

Bayan. - (a) Within ten (10) days after its enactment, the sangguniang barangay shall
furnish copies of all barangay ordinances to the sangguniang panlungsod or sangguniang
bayan concerned fr review as to whether the ordinance is consistent with law and city or
municipal ordinances. (Sec. 57 (a), LGC)

(b) If the sangguniang panlungsod or sangguniang bayan, as the case may be, fils to take
action on barangay ordinances within thirty (30) days from receipt thereof, the same shall be
deemed approved. (Sec. 57 (b), LGC)

(c) If the sangguniang panlungsod or sangguniang bayan , as the case may be, finds the
barangay ordinances inconsistent with law or city or municipal ordinances, the
sanggunian concerned shall, within thirty (30) days from receipt thereof, return the same
with its comments and recommendations to the sangguniang barangay concerned for
adjustment, amendment, or modifications; in which case, the effectivity of the barangay
ordinance is suspended until such time as the revision called for is effected. (Sec. 57 (c),
LGC)

G. Appeal on the Legality or Constitutionality of an Ordinance. Appeal on the

constitutionality or legality of an ordinance may be made to the Secretary of Justice or to the
regular courts, as follows:

a) Appeal to the Secretary of Justice:

1) Any question on the constitutionality or legality of tax ordinances or revenue

measures may be raised on appeal within thirty (30) days from the effectivity thereof
to the Secretary of Justice who shall render a decision within sixty (60) days from the
date of receipt of the appeal: Provided, however, That such appeal shall not have the
effect of suspending the effectivity of the ordinance and the accrual and payment of
the tax, fee, or charge levied therein. (Sec. 187, LGC)

2) The appeal to the Secretary of Justice extends only to the determination if the
ordinance is constitutional or legal. The Secretary of Justice shall neither substitute
his own judgment nor replace the same with another version. This appeal to the
Secretary of Justice is one of supervision and not of control.

3) The decision of the Secretary of Justice can be further appealed to the President,
pursuant to the principle of exhaustion of administrative remedies, in order for the
courts to take cognizance of the appeal on the decision of the executive branch of the
government.

b) Appeal through the Courts. - Provided, finally, That within thirty (30) days after receipt
of the decision or the lapse of the sixty (60) day period without the Secretary of Justice acting
upon the appeal, the aggrieved party may file appropriate proceedings with a court of
competent jurisdiction. (Sec. 187, LGC)

H. Penalties for Violation of Tax Ordinances. - The local government unit is authorized
to prescribe imprisonment or fines or other penalties fr violation of tax ordinances but in
no case shall such fines be less than One Thousand Pesos (P 1,000.00) nor more than
Five housand Pesos (P 5,000.00), nor shall imprisonment be less than one ( 1) month nor
more than six (6) months. Such fine or other penalty, or both, shall be imposed at the
discretion of the court. The sangguniang barangay may prescribe a fine of not less than
One Hundred Pesos (P I 00.00) nor more than One Thousand Pesos (¥ 1,000.00). (Sec. 516,
LGC)

I. Attempt to Enforce Void or Suspended Tax Ordinance or Revenue Measure. –

The enforcement of any tax ordinance or revenue measure after due notice of the
disapproval or suspension thereof shall be sufficient ground for administrative disciplinary
action against the local officials and employees responsible therefore. (Sec. 190, LGC)

Section 40. Power to Create Sources of Revenue and Local Taxing Authority. - (a)
Each local government unit shall exercise its power to create its own sources of revenue
and to levy
taxes, fees, and charges subject to the provisions of R. A. No. 7160 or the Local Government
Code of 1991, consistent with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local government units. (Sec. 129, LGC)

Local government units do not have the inherent power to tax. The power to tax inherently
belongs to the State. However, the State may delegate this power through legislation which, in
this case, through the R. A. No. 7160 or the Local Government Code of 1991.

(b) As in all revenue measures, it is up to the particular local government to enact the necessary
tax ordinance that would enable it to avail of its power to impose a given tax.

The power to impose a tax, fe, or charge or to generate revenue under the Local Government
Code of 1991, shall be exercised by the Sanggunian of the local government unit concerned
through an appropriate ordinance. (Sec. 132, LGC)

Section 41. Taxing Powers of Provinces. 24 - Except as otherwise provided in R. A. No. 7160 or
the Local Government Code of 1991, the province may levy only taxes, fes and charges
specifically reserved to provinces 25, as follows: (Sec. 134, LGC)

1) Tax on Transfer of Real Property Ownership (Sec. 135, LGC);

2) Tax on Business of Printing and Publication (Sec. 136, LGC);
3) Franchise Tax (Sec. 137, LGC);
4) Tax on Sand, Gravel and Other Quarry Resources (Sec. 138, LGC);
5) Professional Tax (with required government examination) (Sec. 139, LGC);
6) Amusement Tax (Sec. 140, LGC);
7) Annual Fixed Tax for Every Delivery Truck or Van of Manufacturer’s or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products (Sec. 141, LGC);
8) Real Property Tax (Sec. 232, LGC);
9) Additional Levy on Real Property for the Special Education Fund (SEF) (Sec. 235, LGC; 10)
Additional Ad Valorem Tax on Idle Lands (Sec. 236, LGC);
11) Special Levy on Lands Benefited by Public Works, Projects or Improvements Funded by
LGU concerned (Sec. 240, LGC);
12) Service Fees and Charges (Sec. 153, LGC);
13) Public Utility Charges (Sec. 154, LGC); and
14) Tool Fees or Charges (Sec. 155, LGC).

Section 42. Taxing Powers of Municipalities. - (a) Except as otherwise provided in the
Local Government Code of 1991, municipalities may levy taxes, fees and charges not otherwise
levied by provinces26 (Sec. 142, LGC), as follows:

I) Tax on Business (Sec. 143, LGC);

2) Community Tax (Sec. 156, LGC);

24 Refer to the Local Revenue Tool Kit for Philippine LGUs shown in Annex 3, this Manual.
25
The.fi,11 discussion on the different taxes, .fees and charges and other impositions by provinces is found in Book V
of'this Manual.
26
The .fit!/ discussion of the different taxes, .fees and charges. and other impositions of' municipalities is .found in
Book V of this Manual.
 3) Real Property Tax (municipalities within Metropolitan Manila Area) (Sec. 232, LGC);
4) Additional Levy on Real Property for the Special Education Fund (SEF) (Sec. 235, LGC);
5) Additional Ad Valorem Tax on Idle Lands (Sec. 236, LGC);
6) Special Levy on Lands Specially Benefited by Public Works, Projects or Improvements
(Sec. 240, LGC);
7) Fees and Charges on Business and Occupation (Sec. 147, LGC);
8) Fees for Sealing and Licensing of Weights and Measures (Sec. 148, LGC;
9) Fishery Rentals, Fees and Charges (Sec. 149, LGC);
10) Service Fees and Charges(Sec.153,LGC);
11) Public Utility Charges (Sec. 154, LGC); and
12) Toll Fees or Charges (Sec. 155, LGC).27

(b) Rates of Tax within the Metro Manila Area. - The municipalities within the Metropolitan
Manila Area may levy taxes at rates which shall not exceed by fifty percent (50%) the maximum
rates prescribed fr tax on business. (Sec. 144, LGC)

In the case of the basic real property tax, the municipality within the Metropolitan Manila Area
may fix a uniform rate not exceeding two percent (2%) of the assessed value of real property.
(Sec. 233 (b), LGC)

Section 43. Taxing Powers of Cities. - Except as otherwise provided in the Local
Government Code of 1991, the city may levy the taxes, fees and charges which the province or
municipality may impose:28 Provided, however, That the taxes, fees and charges levied and
collected by highly urbanized and independent component cities shall accrue to them and
distributed in accordance with the provisions of the same Local Government Code

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province
or municipality by not more than fifty percent (50%) except the rates of professional and
amusement taxes. (Sec. 151, LGC)

The taxes, fees and charges that may therefore be levied by the cities are the following:

I) Tax on Transfer of Real Property Ownership (Sec. 135, LGC);

2) Tax on Sand, Tax on Business of Printing and Publication (Sec. 136, LGC);
3) Franchise Tax (Sec. 137, LGC);
4) Gravel and Other Quarry Resources (Sec. 138, LGC);
5) Professional Tax (Sec. 139, LGC);
6) Amusement Tax (Sec. 140. LGC);
7) Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers or
Producers, Wholesalers of, Dealers, or Retailers in, Certain Products (Sec. 141, LGC);
8) Tax on Business (Sec. 143, LGC);
9) Community Tax (Sec. 156, LGC);

27
For the description ofthe above taxes, see Annex 3, this Manual.
28
The full discussion of the different taxes. Fees and charges, and other impositions of cities is found in Book V of
this Manual.
10) Real Property Tax (Sec. 232, LGC);
11) Additional Levy on Real Property for the Special Education Fund (Sec. 235, LGC); 12)
Additional Ad Valorem Tax on Idle Lands (Sec. 236, LGC);
13) Special Levy on Lands Specially Benefited by Public Works, Projects or Improvements
(Sec. 240, LGC);
14)Fees and Charges on Business and Occupation (Sec. 14 7, LGC);
15)Fees for Sealing and Licensing of Weights and Measures (Sec. 148, LGC); 16)Fishery
Rentals, Fees and Charges (Sec. 149, LGC);
17) Service Fees and Charges (Sec. 153, LGC);
18) Public utility charges (Sec. 154, LGC); and
19)Toll Fees or Charges (Sec. 155, LGC).

Section 44. Power to Levy Other Taxes, Fees, or Charges. - Local government units may
exercise the power to levy taxes, fees, and charges on any base or subject not otherwise
specifically enumerated herein or taxed under the provisions of the National Internal Revenue
Code, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not
be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided,
further, That the ordinance levying such taxes, fees and charges shall not be enacted without
any prior public hearing conducted for the purpose. (Sec. 186, LGC)

Section 45. Taxing Powers of Barangays. - (a) The barangays may levy taxes, fees, and
charges, as provided in Article 4, Chapter 2, Title 1, Book II of R. A. No. 7160 or the Local
Government Code of 1991 29, which shall exclusively accrue to them.

(b) Taxes. - On stores or retailers with fixed business establishments with gross sales or receipts
of the preceding calendar year of Fifty Thousand Pesos (P 50,000.00) or less, in the case of cities
and Thirty Thousand Pesos (P 30,000.00) or less, in the case of municipalities, at a rate not
exceeding one percent (1%) on such gross sales or receipts;

(c) Service Fees or Charges. - Barangays may collect reasonable fees or charges for services
rendered in connection with the regulation or the use of barangay- owned properties or service
facilities such as palay, copra or tobacco dryers;

(d) Barangay Clearance. - No city or municipality may issue any license or permit for any
business or activity unless a clearance is first obtained from the barangay where such business is
located or conducted. For such clearance, the sangguniang barangay may impose a reasonable
fee. The application for clearance shall be acted upon within seven (7) working days from the
filing thereof. In the event that the clearance is not issued within the said period, the city or
municipality may issue the said license or permit

(e) Other Fees and Charges. -The barangay may levy reasonable fes and charges:

( 1) On commercial breeding of fighting cocks, cockfights and cockpits;

(2) On places of recreation which charge admission fees; and

29
The detailed discussion of the dierent impositions by the barangays is found in Book V of this Manual.
(3) On billboards, signboards, neon signs, and outdoor advertisements. (Sec. I 52, LGC)

Section 46. Common Limitations on the Taxing Powers of Local Government Units. –
Unless otherwise provided in the Local Government Code of 1991, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not extend to the
levy of the following:

1) Income tax, except when levied on banks and other financial institutions;

2) Documentary stamp tax;

3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except
as otherwise provided in the Local Government Code of 1991;

4) Customs duties, registration fees of vessel and charge on wharves, tonnage dues, and
all other kinds of customs fees, charges and dues except charge on wharves
constructed and maintained by the local government unit concerned;

5) Taxes, fees and charges and other impositions upon goods carried into or out of, passing
through, the territorial jurisdictions of local government units in the guise of charges for
wharves tolls for bridges or otherwise, or other taxes, fes or charges in any form
whatsoever upon such goods or merchandise;

6) Taxes, fees or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen;

7) Taxes on business enterprises certified to by the Board of Investments as pioneer of non

pioneer for a period of six (6) and four (4) years, respectively, from the date of
registration;

8) Excise taxes on articles enumerated under the National Internal Revenue Code, as
amended, and taxes, fees, or charges on petroleum products;

9) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar

transactions on goods or services except as otherwise provided in the Local Government
Code of 1991;

10) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in the Local Government Code of 1991;

11) Taxes on premiums paid by way or reinsurance or retrocession;

12) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all
kinds of licenses or permits for the driving thereof, except tricycles;
13) Taxes, fees, or charges on Philippine products actually exported, except as otherwise
provided in the Local Government Code of 1991;

14) Taxes, fees, or charges on Countryside and Barangay Business Enterprises and
Cooperatives duly registered under R.A. No. 681030 and R.A. No. 693831; and

15) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units. (Sec. 133, LGC)

Section 47. Non-Tax Revenues. - Aside from revenues that they may be generated through
their power of taxation, local government units have access to non-tax revenues 32 from the
following sources:

1) Proceeds from fees and charges that local government units may impose in the exercise
of their regulatory and proprietary powers;

2) Shares of local government units from revenues of the national government, including
their share in the utilization and development of the national wealth or resources within
their territorial jurisdiction and other sources defined by law; and

3) Other receipts from the disposal of assets and from donations and contributions.

Section 48. Service Fees and Charges. - Local government units may impose and collect fes
and service or user charges for any service rendered by it in an amount reasonably
commensurate to such service: Provided, however, That no service charge shall be based on
capital investments or gross sales or receipts of the person or business liable therefor. (Art. 244,
IRR, implementing Sec. 153, LGC)

In the same manner as local taxes, it is the sanggunian that is empowered to impose local fes and
charges33 through appropriate ordinance or revenue measure.

A. Fees

1) Basis of Fees. - Fees are collected by a local government unit in the exercise of its police
power. They are imposed in relation to the services rendered in regulating business and other
activities within its jurisdiction, such as the privilege to operate an establishment or the
practice of a profession. The imposition of a fee must be accompanied by the performance of
corresponding regulatory function, if not, the fe is unjustified.

3o KALAKALAN Bilang 20
31Cooperative Code ofthe Philippines
32
The summary of the non-tax revenues that may be levied by provinces, cities, and municipalities is shown in
Annex 3 of this Manual.
33
The dierent fees and charges that may be levied by provinces, municipalities and cities are foundin Sections 41,
42 and 43 of this Manual.
2) Amounts that May Be Imposed. - Fees should be imposed at rates that are considered
reasonable. The reasonableness of a fee is commonly understood to mean that which should
be more or less equated to the cost of issuing the permit or license and the cost of
surveillance and services rendered in relation to the business or activity regulated. It is
therefore important for local government units to prepare cost-computation schedules to
support the rates of fees established. Business gross receipts and capitalization are not
allowed as basis for determining the amount of fees, since they are unrelated to the cost of
regulation.

3) Beneficiaries of Regulatory Services. - There are two general categories of regulatory

services delivered by local government units:

a) Those whose beneficiaries are in mass, whose pricing therefor cannot be allocated to
individuals (such as traffic enforcement); and

b) Those whose beneficiaries can be readily identified. The rates under this category can
be more easily determined and, thus, set at reasonable levels. Local government units
must be judicious, however, in selecting and identifying the proper subjects for
service fees.

B. Charges. - Local government units can also impose charges for the use of their facilities.
Many local government units own ferries, markets, slaughterhouses, hospitals, utilities, toll
roads and bridges. While many such facilities and services have been assumed by the private
sector, some local government units prefer to continue to operate them directly for two
reasons:

1) It is strategically beneficial to the community as a whole, and/or

2) The private sector has not taken interest and prefers that these responsibilities
continue to be performed by the local government units.

Section 49. Shares in the Proceeds of National Taxes. - By prov1s1on of law, local
government units share from the income generated by the national government from all taxes and
revenue sources, as follows:

I) Internal Revenue Allotment (IRA) (Sec. 284, LGC)

2) Tobacco Excise Tax (R. A. No. 717134)
3) Proceeds from the utilization of national wealth within their territorial jurisdiction (Sec.
289, LGC and
4) Special shares from other national taxes, particularly on ECOZONES (R.A. 722735) and
on specified portions of the Value Added Tax. (Sec. 2, R. A. No. 764336)
34 An Act to Promote the Development of the Farmers in the Virginia Tobacco Producing Provinces
Bases Conversion and Development Act Of 1992
35
36
An Act to Empower the Commissioner of Interal Revenue to Require the Payment ofthe Value-Added Tax Even; Month and to
Allow Local Government Units to Share in VAT Revenue.
Section 50. Internal Revenue Allotment (IRA) -
A. Allotment of Internal Revenue Taxes. - (a) 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 as follows:

1) On the first year of the effectivity of the Local Government Code of 1991, Thirty
Percent (30%)
2) On the second year, Thirty-Five Percent (35%) and
3) On the third year and thereafter, Forty Percent (40%)
(Sec. 284, LGC

(b) In the event that an unmanageable public sector deficit is incurred by the national
government, the Secretary of Finance, the Secretary of the Interior and Local Government
and the Secretary of Budget and Management shall submit to the President of the Philippines,
a joint recommendation that will institute necessary adjustments in the IRA of LGUs.

(c) Upon receipt of the joint recommendation on the Secretary of Finance, the Secretary of
the Interior and Local Government and the Secretary of Budget and Management and subject
to consultation with the presiding offices of both Houses of Congress and the presidents of
the leagues of LGUs, the President of the Philippines shall authorize the necessary
adjustments of the total IRA to be distributed among the LGUs for the given year, provided
that in no case shall the adjusted amount be less than thirty percent (30%) of the national
internal revenue tax collections of the third fiscal year preceding the current fiscal year
during which the reduction is to be made.

Adjustments to the IRA share of LGUs shall be made only after affecting a corresponding
reduction of the national government expenditures including cash and non-cash budgetary
aids to government-owned or controlled corporations (GOCCs), government financial
institutions (GFls) and Bangko Sentral ng Pilipinas. (Art. 379, IRR implementing the 2 and
nd

rd 3 paragraphs of Sec. 284, LGC)

The term "budget deficit" means a shortfall of revenues against disbursements; while "public
sector" refers to the national government itself, plus the fourteen (14) major government
corporations, the government financial institutions, all the local government units, the
Bangko Sentral ng Pilipinas, and the social security institutions. Hence, the sum of the
deficits of all these different units within the public sector is what is referred to as the "public
sector deficit". (. 404 Philippine law on Local Government Taxation Annotated 2000
Edition, Ursa!)

Thus, public sector deficit means the shortfall of revenues against disbursements of the
national government, the fourteen (14) major government corporations, the government
financial institutions, all the LGUs, the Bangko Sentral ng Pilipinas, and the social security
institutions.
B. Allocation to Local Government Units. - The total annual IRA due the LGUs shall be
allocated among provinces, cities, municipalities and barangays as follows:

1) General Allocation:

a) Share of All Provinces-Twenty-Three Percent (23%)

b) Share of All Cities- Twenty-Three Percent (23%)
c) Share of All Municipalities -Thirty-Four Percent (34%)
d) Share of All Barangays -Twenty Percent (20%)

2) Share of Each Province, City and Municipality. -The share of each province, city, and
municipality shall be determined on the basis of the following distribution formula:

a) Population -Fifty Percent (50%)

b) Land Area-Twenty-Five Percent (25%)
c) Equal Sharing-Twenty-Five Percent (25%)

3) Share of Each Barangay. -(a) Every barangay with a population of not less than one
hundred (100) inhabitants shall be entitled to an IRA of not less than Eighty Thousand
Pesos (P 80,000.00) per annum chargeable against the twenty percent (20%) share of the
barangay from the total IRA.

(b) After deducting the aggregate sum of the individual barangay share of P 80,000.00 each from
the total twenty percent (20%) allocation for all barangays, the remaining balance of said
twenty percent (20%) allocation shall be further distributed to the barangays on the basis of
the following formula:

1) On the first year of the effectivity of the Local Government Code of 1991 (CY
1992):

i. Population- Forty Percent (40%) and

ii. Equal Sharing -Sixty Percent (60%)

2) On the second year:

i. Population -Fifty Percent (50%)

ii. Equal Sharing - Fifty Percent (50%)

3) On the third year and thereafter:

i. Population- Sixty Percent (60%)

ii. Equal Sharing -Forty Percent (40%)

4) Newly created barangays -Financial requirements of barangays created by

LGUs after the effectivity of the Local Government Code of 1991 shall be the
responsibility of the LGU concerned. (Art. 382, !RR implementing Sec.285,
LGC)
C. Automatic Release of IRA Shares.

(a) The individual shares in IRA of each LGU shall be

automatically released, without the need of any further action, direct to the provincial, city,
municipal, or barangay treasurer, as the case may be, on a quarterly basis but not beyond five
(5) days after the end of each quarter.

(b) For this purpose, the comprehensive Advice of Allotment (AA) for the IRA shares of all LGUs
fr the whole year shall be released by the DBM within the first ten (I 0) days of January of every
year.

The corresponding Notices of Cash Allocation (NCA) and checks, however, may be released on a
monthly basis but in no case shall the total amount due any LGU for each quarter be released
beyond five (5) days after the end of the corresponding quarter.

(c) No local government shall receive an annual share in IRA that will be less than the total
amount it actually received in 1991.(Art. 383 (a), (b) and (d), !RR implementing Sec. 286,
LGC)

D. Exemption to the Lien or Holdback of the IRA Shares. - The IRA share of LGUs shall not be
subject to any lien or holdback that may be imposed by the national government for
whatever purpose unless otherwise provided in the Local Government Code of 1991 or other
existing laws and loan contracts or project agreements arising from foreign loans and
international commitments, such as the premium contributions of LGUs to the Government
Service Insurance System and loans contracted by LGUs under foreign-assisted projects.
(Article 383 (c), !RR implementing Sec. 286, LGC))

E. Mandatory Appropriation for Local Development Projects. - It shall be mandatory for

each LGU to set aside in its annual budgets amounts no less than twenty percent (20%) of its
IRA for the year as appropriation for local development projects that are embodied or
contained in the local development plans. Copies of the development plans of LGUs shall be
furnished the DILG. (Art. 384, !RR implementing Sec 287, LGC

Section 51. Share in the Proceeds of the Tobacco Excise Tax. - (a) The national
government shall extend special support to the farmers of the Virginia tobacco-producing
provinces in terms of financial assistance for developmental projects to be implemented by the
local governments of the provinces concerned.

(b) The special support to the Virginia tobacco-producing provinces shall be utilized to advance the
self-reliance of the tobacco farmers through:

(1) Cooperative projects that will enhance better quality of products, increase
productivity, guarantee the market and as a whole increase farmers' income;
(2) Livelihood projects particularly the development of alterative farming systems to
enhance farmers' income;

(3) Agro industrial projects that will enable tobacco farmers in the Virginia tobacco
producing provinces to be involved in the management and subsequent ownership of
these projects such as post-harvest and secondary processing like cigarette
manufacturing and by-product utilization; and

(4) Infrastructure projects such as farm-to-market roads.

(c) The financial support given by the national government for the beneficiary provinces shall
be constituted and collected from the proceeds of fifteen percent (15%) of the excise taxes
on locally manufactured Virginia-type of cigarettes.

The funds allotted shall be divided among the beneficiary provinces pro rata according to the
volume of Virginia tobacco production.

Provinces producing Virgipia tob cco shall be the beneficiary provinces: Provided, however,
Thus to qualify as beneficiary, a province must have an average annual production of Virginia
leaf tobacco in an amount not less than one million kilos: Provided, further, That the Department
of Budget and Management shall each year determine the beneficiary provinces and their
computed share of the funds, referring to the National Tobacco Administration (NTA) records of
tobacco acceptances, at the tobacco trading centers for the immediate past year. (R. A. No. 7171)

Section 52. Share in the Proceeds from the Development and Utilization of the National
Wealth. - (a) Local government units shall have an equitable share in the proceeds derived from
the utilization and development of the national wealth within their respective areas, including
sharing the same with the inhabitants by way of direct benefits. (Sec. 289, LGC)

(b) The term national wealth shall mean all natural resources situated within the Philippine
territorial jurisdiction including lands of public domain, waters, minerals, coal, petroleum,
mineral oils, potential energy forces, gas and oil deposits, forest products, wildlife, flora and
fauna, fishery and aquatic resources and all quarry products. (Art. 386, IRR implementing Sec.
289, LGC)

(c) Amount of Share of Local Government Units. - LGUs shall, in addition to the IRA, have a
share of forty percent (40%) of the gross collection derived by the national government from the
preceding fiscal year from the following:

(1) mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or
charges, including related surcharges, interests, or fine, and from its share in any co
production, joint venture or production sharing agreement in the utilization and
development of the national wealth within their territorial jurisdiction.

(2) administrative charges accruing to the national government whether collected by the
national government collecting agencies or in certain cases by the LGUs.
Proceeds from the development and utilization of national wealth where the local
government actually collects and automatically retains its share of at least forty percent
(40%) of such proceeds shall not from part of the revenue base in the computation of the
forty percent (40%) share. (Art. 387, IRR implementing Sec. 290, LGC)

(d) Share of Local Government Units from any Government Agency or Government
Owned or Controlled Corporation. - Local government units shall have a share based on the
preceding fiscal year from the proceeds derived by any government agency or government
owned or controlled-corporation engaged in the utilization and development of the national
wealth based on the following formula whichever will produce a higher share for the
local government unit:

l) One percent ( 1 %) of the gross sales or receipts of the preceding calendar year; or
2) Forty percent (40%) of the mining taxes, royalties, forestry and fishery charges and such
other taxes, fees or charges, including related surcharges, interests, or fines the government
agency or government-owned or controlled-corporation would have paid if it were not
otherwise exempt. (Sec. 291, LGC)

(e) Allocation of Shares. - The share in the of local government units from any government
agency or government-owned or controlled-corporations shall be distributed in the following
manner:

1) Where the natural resources are located in the province:

a) Province -Twenty Percent (20%)

b) Component City/Municipality- Forty-Five Percent (45%); and
c) Barangay-Thirty-Five Percent (35%)

Provided, however, That where the natural resources are located in two (2) or more provinces,
or in two (2) or more component cities or municipalities or in two (2) or more barangays, their
respective shares shall be computed on the basis of :

a) Population- Seventy Percent (70%); and

b) Land Area -Thirty Percent (30%)

2) Where the natural resources are located m a highly urbanized or independent

component city:

a) City - Sixty-Five Percent (65%); and

b) Barangay-Thirty-Five Percent (35%)

Provided, however, That where the natural resources are located in such two (2) or more
cities, the allocation of shares shall be based on the formula on population and land area s
specified in paragraph (e) (I) of this section. (Sec 292, LGC)
(f) Computation and Remittance of Shares of Local Government Units in the National Wealth. -
The computation and remittance of the shares of LGUs from the utilization and development of
national wealth shall be in accordance with the following procedures:

(1) The computation of the forty percent (40%) share of each LGU in the proceeds from
the development and utilization of the national wealth from the preceding year,
indicating the corresponding share of each province, city, municipality and barangay
where the national wealth is being developed and/or utilized, shall be submitted by
the revenue collecting agencies to the DBM not later than March 15 of each ensuing
year.

(2) The allotment representing the share of each LGU 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. (Art. 390 (a) and (b), !RR implementing Sec. 293, LGC)

(g) Remittance of the Share of Local Government Units from Government Agencies and
Government-Owned or Controlled Corporations. - Share of LGUs fom the proceeds derived by any
government agency or GOCC engaged in the utilization and development of national wealth shall
be directly remitted by such corporations to the provincial, city, municipal or barangay treasurer
concerned within five (5) days after the end of each quarter. Within three (3) days from the date of
remittance, the agency or GOCC concerned shall furnish the Treasurer of the Philippines with a
copy of the remittance advice. (Art. 390 (c),!RR implementing Sec. 293, LGC)

(h) Mandatory Appropriation fr Local Development and Livelihood Projects. - The

proceeds from the share of local government units from the national wealth shall be appropriated by
their respective sanggunian to finance local development and livelihood projects: Provided,
however, That at least eighty percent (80%) of the proceeds derived from the development and
utilization of hydrothermal, geothermal, and other sources of energy shall be applied solely to
lower the cost of electricity in the local government where such a source of energy is located.
(Sec. 294, LGC)

Section 53. Other Special Shares of Local Government Units from National Taxes. -

A. Share in Special Economic Zones. - Businesses and enterprises in Special Economic

Zones37 shall pay gross income tax of five percent (5%) in lieu of all national and local taxes. The
equivalent of three percent (3%) shall accrue to the national government and one percent(I%) to the
host local government unit. The remaining equivalent of one percent (1 %) is to be distributed to
the areas contiguous to the economic zone. (R.A. No. 7227)

B. Share from Excess Collection in Value Added Tax (VAT) - (a) In addition to the Internal
Revenue Allotment, fifty percent (50%) of the national taxes collected by the Bureau of
37
ECOZONES
Integral Revenue under Sections 106 and I 08 of the National Internal Revenue Code (NIRC)
of 1997 (formerly Sections 100, 101 and 102 of the NlRC of 1977) in excess of the increase in
collection fr the immediately preceding year shall be distributed as follows:

(1) twenty percent (20%) shall accrue to the city or municipality where such taxes are
collected and shall be allocated in accordance with Section 150 of R. A. No. 7160
or the Local Government Code of 1991; and

(2) eighty percent (80%) shall accrue to the national government.

(b) Local Government Units' share in the Incremental Collection from VAT pursuant to R.
A. No. 7643, shall be allocated among local government units entitled to such share in
accordance with Section 150 of the Local Government Code of 1991, to wit:

If VAT is paid by manufacturers, producers without branch or sales outlets:

One hundred percent (100%) to the city or municipality where the
business is located;

If VAT is paid by manufacturers, producers, with factories, project

offices, plantations and plants:

1) Thirty percent (30%) to the city or municipality where the principal

office is located;

2) Seventy percent (70%) to the city or municipality where the factory,

project offices, plant or plantation is located.

If VAT is paid by manufacturers, producers, exporters where the plantation is

located at a place other than the place where the factory is located:

I) Thirty percent (30%) to the city or municipality where the principal office
is located;

2) Forty two percent (42%) the city or municipality where the factory ts
located;

3) Twenty eight percent (28%) to the city or municipality where the plantation is located.

i. If VAT is paid by the manufacturers, producers, exporters and has two (2) or
more factories, plants, and plantations:

ii. Thirty percent (30%) to the city or municipality where the principal office
is located;
 iii.) Seventy percent (70%) shall be prorated among the localities where the
factories, project offices, plants, and plantations are located.

(c) The LGUs' share shall be released directly to the LGUs concerned subject to the
approval of special budget pursuant to Section 35, Chapter 5, Book VI of E. 0. No. 292
duly supported by the certification of actual VAT collections and remittances under
Section 106 and108 of the NIRC of 1997 by the BIR.(Sec. 2, R. A. No.7643, implemented
by DBM-DOF-DILG Joint Circular No. 1-02, February 6, 2002)

Section 54. Other Receipts. - Other common sources of LGU revenues outside taxation,
fees and charges, and shares in national taxes and wealth are the following:

a) Sale of Fixed Assets - pertains to the proceeds from the sale of fixed assets like
buildings, equipment’s, machines, lands and tangible assets.

b) Contributions - include contributions in cash from any source.

c) Sale of Waste Materials - includes the proceeds from sale of waste materials such as
office records authorized to be disposed and other waste materials, except scrapped fixed
assets.

d) Interest Income - pertains to interests earned by LGUs from bank deposits, and
legitimate loans and investments in interest-bearing instruments.

Section 55.Credit Financing. -

A. General Policies:
I) It shall be the basic policy that any local government unit may create indebtedness, and
avail the credit facilities to finance local infrastructure and other socio economic
development projects in accordance with the approved local development plan and public
investment program;

2) A local government unit may avail of credit lines from government or private banks and
ending institutions for the purpose of stabilizing local finances; (Sec 296, LGC)

3) Subject to the rules and regulations of the Central Bank and the Securities and
Exchange Commission, provinces, cities and municipalities are authorized to issue bonds,
debentures, securities, collaterals, notes and other obligations to finance self-liquidating,
income producing development or livelihood projects pursuant to the priorities established
in the approved local development plan or the public investment program. The
sanggunian concerned shall, through an ordinance approved by a majority of all its members,
declare and state the terms and conditions of the bonds and the purpose for which the
proposed indebtedness is to be incurred. (Sec. 299, LGC
 B. Rationale of Credit Financing. - Credit financing enables local government units to pursue
development projects and benefits now, at current prices to be paid later. Socially desirable
projects generally require levels of funding that would take time to accumulate if the local
government unit were to rely only on local savings. Given the pressure on local government units
to constantly increase expenditures for the delivery of mandated services, it is unlikely that many
of them can actually accumulate the needed funds through savings.38

Chapter 2 COLLECTION OF REVENUES AND OTHER RECEIPTS

Section 56. Fundamental Principles in the Collection of Local Taxes, Fees, Charges and Other
a
Receipts. - The following fundamental principles shall be applied in the collection of local
) fees and charges and other impositions:
taxes,
Local revenue is generated only from sources expressly authorized by law or ordinance, and the
collection thereof shall at all times be acknowledged properly (Sec. 305 (c), LGC);
b) The collection of local taxes, fees, charges and other impositions shall, in no case, be let to
any private person (Sec. 130 (c), LGC);
c) All monies officially received by a local government officer in any capacity or on any
occasion shall be accounted for as local funds, unless otherwise provided by law. Government
Code of 1991, shall inure solely to the benefit of, and be subject to disposition by, the
local government unit levying the tax, fee, charge or other imposition

d) The revenue collected pursuant to the pertinent provisions of the Local Govern unless
otherwise specifically provided therein (Sec. 130 (d), LGC); and

e) Every officer of the local government unit whose duties permit or require the possession or
custody of local funds shall be properly bonded, and such officer shall be accountable and
responsible for said funds and for the safekeeping thereof in conformity with the provisions of
law. (Sec. 305 (, LGC)

Section 57. General Controls on Collection. -

A. Separation of Personal Money from Public Funds. - (a) Local Treasurers and other
accountable officers shall keep personal monies separate and distinct from local public funds in
their custody and shall not make profit out of public money or otherwise apply the same to any use
not authorized by law or ordinance. (Sec. 312, LGC)

(b) Local Treasurers/Cashiers are prohibited from holding positions as treasurers or cashiers
of savings and loan associations or any other association or organization. (Sec. 67, Book Il,
Vol. I, GAAM

B. Acknowledgement of Collections/Issuance of Official Receipts. - (a) No payment of any

nature shall be received by a collecting officer without immediately issuing an official receipt

The legal basis for LGUs to avail of credit financing.for local development is embodied in Title 4, Book fl ofR.
A. No. 7160 or the Local Government Code of 1991, the details of which are presented in Book V ofthis Manual
in acknowledgement thereof. The receipt may be in the form of cash tickets and the like, or
officially numbered receipts, proper subject to custody, accountability, and audit.

(b) Where mechanical devices are used to acknowledge cash receipts, the Commission on
Audit may a prove, upon request, exemption from the use of accountable forms. (Sec. 68, P.
D. No. 1445 9; Sec. 44, Title I (B), Book V E. 0. No. 292)

C. Prohibition Against the Use of Temporary Receipts. - At no instance shall temporary

receipts be issued to acknowledge the receipt of public funds. (Sec. 72, Book II, Vol. I, GAAM

D. Collections Received Through Mail and Procedures for Handling. - Collections received
through mail shall be acknowledged, and remitted or deposited, and recorded just like other
collections. Basic controls, shall, however, be maintained:
1) Incoming mail shall be opened by or under the supervision of a responsible officer of the
Records Section of the LGU. (Sec. 75 (a), Book II. Vol. I, GAAM

2) In addition to the usual records maintained for incoming mail, a list shall be prepared by
the Records Section of all checks, money orders, warrants, or currency received, listed
individually and totaled. The list shall contain spaces for information on the
acknowledgement of receipt of the collection as well as its subsequent remittance or
deposit with authorized depositories. The list shall be certified correct by the Chief of the
Records Section. (Sec. 75 (b), Book II, Vol. I, GAAM

3) After accomplishing the list, the Records Section shall immediately deliver the duplicate
copy direct to the COA Auditor. The three (3) other copies and the collections and
covering letters shall be delivered direct to the Collecting Officer who shall verify the
correctness of the list, sign the acknowledgement portion on all three (3) copies, and
retur the last copy to the Records Section. (Sec. 75 (c), Book II, Vol. I, GAAM

4) The Collecting Officer shall immediately issue an official receipt for each and every
collection in the list. The official receipt number and the date of issue shall be recorded
on the appropriate spaces of the original and triplicate copies of the list. (Sec. 75 (d),
Book II, Vol. I, GAAM

5) Collections arising therefrom shall also be included in the Report of Collections and
Deposits together with the other collections for the day. The prescribed procedures in the
tum-over of collections and accomplishments of the firms shall likewise be observed.

6) The Treasurer shall insure that the official receipt was correctly and properly recorded in
the list. The payor's copy of the official receipt shall be forwarded to the Records Section
which shall mail it to the payor with a covering letter. The Treasurer shall, however,
forward to the Records Section fr mailing, only the official receipts of cleared checks. In
case of dishonored checks, the procedures dishonored checks in this Manual shall be
followed.

39
Goverment Auditing Code of the Philippines
E. Acceptance of Checks in Payment for Taxes or Other Indebtedness to the Government. -
Local Treasurers and other officers charged with the collection of revenue or the receiving of
monies payable to the government shall accept payment for taxes, dues or other
indebtedness to the government in the form of checks and warrants issued in payment of
government obligations, upon proper endorsement and identification of the payee or
endorsee. Checks drawn in favor of the government in payment of any such indebtedness shall
likewise be accepted by the officer concerned. (Sec. 67 (]), P. D. No. I 445)

F. Drawing of Checks Payable to the Local Government Unit. - Checks in payment of taxes
and other indebtedness to the government must be drawn by the payor himself and made
payable to the LGU or LCE or Treasurer of the LGU. In the case of the LCE or Treasurer of
the LGU, only the official title or designation of the LCE or Treasurer concerned shall be
stated as the payee. (Examples: "City Government of Las Pinas "; "Cit Mayor of Las
Pinas "; "Cit Treasurer of Las Pinas "). Under no circumstance shall the following checks be
accepted:

1) Checks drawn payable to the name of the Head of the LGU or any of its officers;
2) Checks drawn payable to "Cash" ;
3) Indorsed checks;
4) Post-dated checks; and
5) Stale checks. (Sec. 77, Book II, Vol. I, GAAM)

G. Issuance of Official Receipts fr Payment by Checks. - Before issuing an official receipt, the
Collecting Officer shall carefully scrutinize the check presented to him and make sure that it is
complete and correct particularly as to date, signature or countersignature, and amount in
words and figures appearing on the face of the check. The collecting officer shall, in all cases,
indicate on the official receipt, the drawee bank, the number, date and amount of the check as
well as the complete name and address of the payor to facilitate communication with him, if
necessary. For purposes of cross reference, the number and the date of the official receipt
shall also be indicated at the back of the check. (Sec. 78, Book II, Vol. I, GAAM)

H. Issuance of a Separate Official Receipt in Case Amount Due is Less than the Face Value
of the Check. - No change shall be given to the payor in the event that the amount of the
taxes or dues is less than the face value of the check in payment thereof. The difference shall be
receipted for by the issuance of a separate general receipt and shall be accounted for
simultaneously with the collection as miscellaneous trust liabilities. (Sec. 81, Book II, Vol. I,
GAAM)

I. Payment by Private Check for Goods Delivered and Services Rendered by Government
Agencies. - When payment for goods or services is made by private check, no such service
shall be rendered or goods delivered by the local government unit concerned unless the check in
payment thereof has been honored by the drawee bank. (Sec. 82, Book II, Vol. I, GAAM

J. Prohibition Against Encashment of Private Checks with Public Funds. - At no instance

should money in the hands of the Collecting Officer be utilized for the purpose of encashing
private checks. (Sec. 67(3), P. D. No. 1445) A private check is a check drawn by a natural or
juridical person other than a government agency. (Sec. 105, Book II, Vol. I, GAAM
 K. Transfer of Government Funds from One Officer to Another. - Transfer of government funds
from one officer to another shall, except as allowed by law or regulation, be made only upon
prior direction or authorization of the Commission on Audit or its representative. (Sec. 75, P. D.
No. 1445)

When government funds are transferred from one accountable officer to another, or from an
outgoing officer to his successor, it shall be done upon properly itemized invoice and receipt
which shall invariably support the clearance to be issued to the relieved or outgoing officer,
subject to regulations of the Commission on Audit. (Sec. 77, P. D. No. 1445)

L. Notification to the Auditor: Application for Relief from Accountability for Government
Funds. - When loss of government funds occurs while they are in transit or the loss is caused by
fire, theft, or other casualty or force majeure, the officer accountable therefor or having custody
thereof shall immediately notify the Commission on Audit or the auditor concerned, and within
thirty (30) days or such longer period as the Commission or auditor may, in the particular case,
allow, shall present his application for relief, with the available supporting evidence. Whenever
warranted by the evidence, credit for the loss shall be allowed. An officer who fails to comply
with this requirement shall not be relieved of liability or allowed credit for any such loss in the
settlement of his accounts. (Sec. 73, P. D. No. 1445)

Section 58. Handling of Dishonored Checks Received in Payment of Taxes and Other
Indebtedness to the Government. -

A. Dishonored Checks. - A check is said to be dishonored by non-payment when, upon its

being duly presented for payment, such payment is refused or cannot be obtained. (Sec. 83,R.
A. No. 203141) Checks may be dishonored for the following reasons:

1) Lack or insufficiency of funds

2) Format defects, such as, lack of countersignature, amount in words not the same as
amount in figures, etc. (GAO Circular 110)

B. Non-Acceptance of Checks. - When a check drawn in favor of the government is not

accepted by the drawee bank for any reason, the drawer shall continue to be liable for the sum
due and all penalties resulting from delayed payment. (Sec. 67 (2), P. D. No. 1445)

C. Cancellation of Official Receipts fr Dishonored Checks. - In case a check received as

payment for taxes or dues is dishonored, the official receipt covering the dishonored check
shall be immediately cancelled by the collecting officer and the fact of cancellation noted by him
on the duplicate (if no longer in his possession, by the accountant or auditor, as the case may be)
and the triplicate copies of the receipt, in the following manner:

"Cancelled, (date of notice of dishonor)

be observed and the requirements in the application for relief from accountability are
discussed under Section 123, this Manual.
40

The
proc
edur
es to
41 Negotiable Instruments Law
Check dishonored per Bank/Treasury Debit Voucher/

Memo No. dated

The cancellation shall also be noted on all subsidiary records pertaining to the transaction. The payor
shall be immediately notified by the agency head or treasurer concerned of the cancellation and
dishonor by means of a "Notice of Dishonor" as required in the succeeding sections. (Sec. 84, Book
II, Vol. I, GAAM

D. Notice of Dishonor. - When a negotiable instrument has been dishonored by non-acceptance

or nonpayment, notice of dishonor must be given to the drawer and to each endorser, and any
drawer or endorser to whom such notice is not given is discharged (Sec. 89, R. A. No. 2031).
It is, therefore, indispensable that the notice of dishonor be given to the drawer (or to the
indorser-payor of the government check) to protect the interest of the government. The
collecting officer or Local Treasurer neglecting or filing to give the required notice of
dishonor to the drawer (or to the indorser-payor of the government check) who, as a result
thereof is discharged from liability, shall be personally answerable for the resulting loss
suffered by the government. (Sec. 85, Book II, Vol. I, GAAM

E. Form of Notice of Dishonor. - Ordinarily, a dishonored check is returned by the depository

bank concerned to the collecting officer or Local Treasurer who has deposited it, together
with the original of the debit memo. Upon receipt of the dishonored check and debit memo,
the collecting officer or Local Treasurer shall, within three (3) days, accomplish the "Notice
of Dishonor" and sign it in behalf of the local chief executive.

The notice of dishonor shall be prepared in five (5) copies and distributed as follows:
Original to drawer, delivered personally under receipt or
sent by registered mail with return card on the same day.
Duplicate Local Chief Executive
Triplicate Local Accountant for the preparation of the required
Adjusting Journal Entry (AJE)
Quadruplicate COA Auditor
Quintuplicate Local Treasurer's File (Sec. 86, Book II, Vol. I, GAAM

F. Action on Dishonored Checks. - Should the drawer of a dishonored check fail to settle his
account or deposit the amount sufficient to cover the same within five (5) days from receipt
of the notice of dishonor, the local chief executive upon the recommendation of the Local
Treasurer, shall immediately transmit the certified copies of the dishonored check, debit
memo from the bank and notice of dishonor to the city or provincial prosecutor for the
institution of the necessary criminal or civil action as the circumstances may warrant.

The aforementioned provision applies only to cases where the check has been dishonored for
lack or insufficiency of funds. Where the check has been dishonored by reason of formal
defects, such as lack of countersignature, the local chief executive through the Local
Treasurer shall nevertheless take immediate steps to collect the taxes or dues previously paid
under the dishonored check, for which the official receipt covering the check has been
subsequently cancelled and, if necessary, initiate the prompt institution of the corresponding civil
action fr the collection of the amount involved. (Sec. 87, Book II, Vol. I, GAAM

G. Recording and Reporting of Dishonored Check by the Local Treasurer -

Upon receipt of the debit memo and the dishonored check(s) from the bank, the Local Treasurer
shall cause the immediate photocopying of the dishonored checks and recording in the cashbook. He
shall record the dishonor by a credit in the appropriate Cash in Bank cashbook with the following
explanation:

"To take up the Journal Entry Voucher No. dated

____ _ _ _, covering dishonored Check(s) No. for
P , acknowledged by O.R. No. dated
"

The dishonored checks shall be retained by the Local Treasurer who shall ensure its safekeeping.

The Local Treasurer shall forward the debit memo and the photocopy of the dishonored checks to
the local accountant fr the preparation of the Journal Entry Voucher (JEV) in three (3) copies.
The local accountant shall furnish the Local Treasurer with a copy of the duly approved JEV fr the
latter's recording of the "JEV No." in the entries previously made in the appropriate Cash in Bank
cashbook. The original copy of the JEV taking up the dishonored checks and its supporting
documents shall be submitted to the Auditor and the duplicate copy shall be retained by the local
accountant.

The dishonored check(s) and corresponding cancelled official receipt shall also be reflected in the
individual taxpayer's records/index cards and other records of collections maintained by the local
treasury. At the end of each month the Local Treasurer shall prepare a report of dishonored checks
in four (4) copies to be distributed as follows:
Original Local Chief Executive
Duplicate COA Auditor
Triplicate Local Accountant
Quadruplicate Local Treasurer's file

H. Redemption of Dishonored Checks. - The following rules shall be observed when a

dishonored check is redeemed:

1) A dishonored check shall be redeemed by tendering payment in cash or by certified

check to the Local Treasurer or collecting officer concerned. No other mode of
payment shall be accepted. (Sec. 89 (a), Book 11, Vol. I, GAAM

2) Upon receipt of the cash or certified check, the Local Treasurer or collecting officer
shall issue an official receipt for the amount received by him. The nature of the
payment to be indicated shall be the same as that in the previous official receipt
cancelled, except that the following notation shall be placed on the receipt: "Previous
payment acknowledged by O.R. No. , dated , cancelled
on (date of notice of dishonor)." Accordingly, the redemption of the dishonored check shall
be recorded in the cashbook together with other collections. (Sec. 89 (b), Book fl Vol. L GAAM

3) If the payor is liable fr the payment of fine or penalty arising from delayed payment,
the amount corresponding to the fine or penalty shall also be imposed and collected in
addition to the principal tax or dues paid by him. (Sec. 89, (c), Book II, Vol. I, GAAM
The fine or penalty to be imposed shall be in pursuance to the duly approved
ordinance of the local government unit concerned.

4) Upon redemption of the dishonored check in the manner herein prescribed, the Local
Treasurer or collecting officer shall not return the check to the payor concerned
unless the latter first surrenders the previous official receipt therefore, provided that no
case has as yet been filed. If the previous receipt is no longer available, a sworn
statement to the effect that it has been lost or misplaced should be submitted by the
payor. The Local Treasurer or collecting officer shall forthwith cancel the surrendered
official receipt and forward it (or the affidavit) to the accounting unit to be attached to
the corresponding JEV where the cancellation was recorded. (Sec. 89 (e), Book 1,
Vol. I, GAAM

5) In the Report of Collections, an asterisk shall be placed opposite the line on which the
official receipt is indicated and a corresponding footnote shall be placed on the last
page of the report just below the totals as follows: "Redemption of dishonored check
previously acknowledged by 0. R. No._______dated ________, which was cancelled on
(date of notice of dishonor). This footnote, together with a copy of the previous official
receipt (or affidavit) shall be the bases of the accounting unit for making the reversing entry
in the proper journal. (Sec. 89 (, Book 1, Vol. I, GAAM

I. Custody of Dishonored Checks. - Pending their redemption, dishonored checks

shall remain in the custody of the Local Treasurer, unless the court shall direct otherwise, in
which case appropriate receipts should be secured from the officer authorized to take
custody of the checks. The Local Treasurer shall immediately advise the auditor concerned
of the transfer of custody of the checks. (Sec. 90, Book II, Vol. I, GAAM

J. Payors with Previously Dishonored Checks. - Whenever a payor has a record of

a previously dishonored private check drawn by him in payment of taxes and dues, even if
such check has already been settled, any private check presented by him shall no longer be
accepted. In such cases, the payor shall be required to pay only in cash or certified check.

The Local Treasurer shall make a list of payors whose checks have been dishonored and shall
circularize the list to all collecting officers under his jurisdiction.

Section 59. Control and Accountability fr Official Receipts and Other Accountable
Forms.

A. Revenue Collection and the Use of Accountable Forms. - The Provincial, City, Municipal
and Barangay Treasurers shall be responsible for the use of all accountable forms invoiced to
 them and receipted by them in person or entrusted by them to their designated collectors for care,
custody and use. A Local Treasurer's accountability for accountable forms of all kinds is
determined in connection with the audit and examination of his accounts which show that each
receipt is properly accounted for:
1) By taking up in the accounts the amount shown to have been collected therefrom;
2) By presenting the unissued and cancelled official receipts; and
3) By producing satisfactory evidence that they are in the hands of authorized personnel.

B. Types of Accountable Forms. - Accountable forms for acknowledging collections are of

two classes: accountable forms with money value, and accountable forms without money
value. (Sec. 493, Vol. JI, GAAM

1) The Accountable Forms with money value consist of the following:

Tvpe of Form Utilization

(1) Cash Tickets, Accountable Forms No. 55 For the temporary use of market spaces, parking areas and
(55A-F) other income generating activities where the issuance
of a regular receipt is not practicable

(2) Certificate of Transfer of Large Cattle, Evidence of transfer of large cattle; when issued, it
Accountable Form No. 52 supersedes the original certificate of ownership

(3) Certificate of Ownership of Large Cattle, Evidence of original ownership of large cattle
Accountable Form No. 53

(4) Marriage License Certificate, Issued to contract marriage

Accountable Form No. 54

2) The Accountable Forms without specific money value printed on the face of each
form consist of the following:

Type of Form Utilization

(I) Official Receipt, Accountable Form No. To acknowledge payment of taxes, licenses and
51 other dues or fees to the government fr which no
special accountable forms have been authorized

(2) Real Property Tax Receipt, Accountable To acknowledge payment of real property taxes
Form No. 56

(3) Slaughter Permit and Fee Receipt, Serves as permit and official receipt fr
Accountable Form No. 57 slaughtering of large cattle

(4) City/Municipal Burial Permit and Fee Serves as funeral permit and official receipt for fees
Receipt, Accountable Form No. 58 collected

(5) Checks Serially numbered forms purchased from the

 servicing bank fr use in disbursements charged against
the account with the bank

(6) Community Tax Certificate, BIR Form For the use of individual taxpayers and corporate
Nos. 0016 and 907 entities, respectively

C. Issuance of Cash Tickets. - Local government units shall devise their own system in the
issuance of cash tickets to ensure proper control, accounting and audit. Control measures
include but not limited to the following:

1) Serial numbers may be assigned or the name or logo of the city or municipality may be
stamped at the back of the cash tickets before they are issued to collectors assigned in
public markets, parking areas or those tasked to accept collections not acknowledged by
the regular receipt or other accountable forms;
2) The collector shall affix his initial and state the date of issuance in the cash tickets before
issuance;
3) The collector shall ensure the tearing off of cash tickets to avoid possible re-issuance; and
4) Surprise inspection on the proper issuance of cash tickets shall be conducted by the
market administrator or his authorized representative.

Cash tickets issued to transient vendors in the public market to acknowledge market fes shall
pertain only to the vendor buying the same and shall be good only for the space or spaces of
the market premises to which he is assigned. If the vendor disposes of his merchandise by
wholesale to another vendor, the latter shall purchase new tickets if he desires to sell the
merchandise, even if done in the same place occupied by the previous vendor. The name of the
vendor, the place and date of issue shall be indicated at the back of the cash tickets issued to a
vendor. (Sec. 74, Book II, Vol. I, GAAM

D. Issuance of Real Property Tax Receipts. - Only one real property tax receipt shall be issued to
cover the payment of basic and additional tax accruing to the Special Education Fund.

E. Name of Agency on the Face of Official Receipts. - For purposes of control, all official
receipts being used by the local government unit shall bear the name of the local government unit
printed or stamped on the fce thereof. (Sec. 96, Book 11, Vol. I, GAAM

F. Preparation of Official Receipts. - Pre-numbered official receipts shall be issued in strict

numerical sequence.

In preparing official receipts, all copies of each receipt shall be exact copies or carbon
reproductions in all respects of the original.

If payment has been tendered in money order or check, the official receipt shall be prepared
with the date, number, and the amount of such money order, or check together with the
purpose for which the payment has been received. The address of the payor shall also be
indicated on the official receipt to facilitate communication with him, if necessary. (Sec. 73,
Book II, Vol. I, GAAM
G. Accountability for Official Receipts. - An official receipt is an accountable form held in
trust by the Local Treasurer or other person duly authorized to possess or have custody
thereof. He shall be responsible fr its safekeeping, the proper and authorized use or
application thereof and the reporting of its use and condition, and shall be liable for loss,
damage or deterioration occasioned by negligence in the keeping or use thereof (Sec. 91,
Book II Vol. I, GAAM

H. Exclusive Jurisdiction of the National Printing Office. - The National Printing Office shall
have exclusive jurisdiction over the printing, binding and distribution of all standard and
accountable forms of provincial, city and municipal governments (Sec. 92, Book 11, Vol. I,
GAAM.

Any requirement for printing services outside of the exclusive jurisdiction of the National Printing
Office can be awarded by requiring the agency, subject to government accounting and auditing
regulations, to any private printer or may be undertaken at the printing facilities of government
agencies without the necessity of securing a waiver or certification covering the same from the
National Printing Office.

I. Inspection of Accountable Forms Received from the National Printing Office. – Upon receipt of
accountable forms from the National Printing Office, the Local Treasurer shall
examine carefully each book or pad. He shall segregate any book or pad found to contain
defects, such as incorrect series of numbers, or missing leaves or sheets, etc., and submit it to
the auditor/audit team of the Commission on Audit together with a statement of the defects
and deficiencies noted.

The auditor/audit team of the Commission on Audit shall examine the book or pad. If he
finds that the defects are due to error in binding and printing, he shall make proper notations
on the book or on the defective sheet itself. He shall also furnish immediately the Local
Treasurer concerned with two (2) copies of the certification covering his action. The Local
Treasurer shall use this certification in support of a credit to his account for the missing or
defective form thus noted by the auditor. The Local Treasurer, through the auditor, shall send
two (2) copies of the certification to the head of the National Printing Office. These copies
shall contain the initials or numbers that are written on the respective card covers of the
defective books or pads, or on a slip covering such information for the guidance of the
National Printing Office in locating employees responsible for the error or deficiency. (Sec.
94, Book II, Vol. I, GAAM

J. Use of Computer-Generated Official Receipts and Other Accountable Forms. The use
by local government units of computer-generated official receipts and other accountable
forms in lieu of the printed forms by the National Printing Office shall require the prior
approval of the Commission on Audit. (Sec. 68 (2), P. D. No. 1445) The reason fr this
requirement is to insure that all the pertinent information and control features are
substantially included on the face of the computer-generated forms.

K. Custodianship of Accountable Forms. - The Local Treasurer shall be the custodian of all
accountable frms requisitioned by the local government unit. He shall maintain a complete
record of the receipt, issue and transfer of accountable forms. (Sec. 24, COA Circular No.
92-382)

L. Permanent Record Book for Accountable Forms. - Local Treasurers accountable for
receipts, stamps and other accountable forms in their possession or in the hands of deputies
and other employees entrusted therewith, shall keep adequate permanent record books which
should show, among other things, the whereabouts of the accountable forms with which they
are charged, the name and title of the officer or employee to whom such forms have been
given, the evidence of the receipt and subsequent sale and issuance of the same. The record
books shall contain the following column headings:

1) Booklet Number/Quantity (in case of official receipt without money value)

2) Serial Number/Total Value (in case of official receipt with money value)
3) Name (in print) of Accountable Officer to whom issued
4) Signature of Accountable Officer
5) Date received by Accountable Officer
6) Date reported totally used, sold, issued

These columns shall be utilized for recording consecutively all accountable frms in the order
they are received by the Accountable Officer. (Sec. 95, Book 1, Vol. I, GAAM4)

M. Recording of Receipts of Accountable Forms in the Permanent Record Book. - When

accountable forms are received in the Office of the Local Treasurer, these will be entered
immediately after verification in the record book. The recording of each batch of accountable
forms received shall be headed by data on the invoice number and date, the date the
accountable forms were received, the quantity, and the inclusive serial numbers and/or total
value of the accountable forms. (Sec. 95, Book 1, Vol. I, GAAM

N. Recording of Issues of Accountable Forms in the Permanent Record Book. - In the city
and municipal treasuries where accountable forms are issued directly to Barangay
Treasurers, collectors/tellers or other accountable officers, it is advisable that only one unit of
accountable form per denomination be recorded per line in the record book. In other words,
books of real property tax or other official receipts, cattle registration certificates, burial
permit receipts, etc., that are bound as such, will be recorded in the record book one line per
book per stub; and unnumbered and unbound stock, as cash tickets, per quantity to each line
in the record book as in the opinion of the Local Treasurer will be sufficient to meet the daily
or weekly requirements of the particular Barangay Treasurers, collector/teller or other
accountable officers, but with the total value per line. Recording in provincial treasuries will
be in larger quantities per line per denomination, since issues will be mostly to Municipal
Treasurers for their stock and the provincial collecting officers fr their use.

When the column provided fr 'Date reported totally used, sold, issued' of the record book is
not yet filled out, this indicates that the accountable forms are still in the stock and the Local
Treasurer concerned, or the officer in charge of the same, has the said forms in his possession
and is responsible fr their safekeeping. When a book or stub of receipts or sheet of cash
ticket or any other quantitative unit of other accountable forms in the hands of collector/teller
or other accountable officers has been partly issued and the balance is returned for any reason
whatsoever, the last column of the record book, 'Date reported totally used, sold, issued', should be
filled out, and the remaining unissued accountable forms returned will again be entered in a new
line in the record book as a new entry, in the same way would it be entered if it were a new
requisition.

0. Daily Issues of Accountable Forms. - All accountable form beginning balances, received,
issued and on hand shall be reported in Box C of the Report of Collections and Deposit. The
collectors/tellers should submit to the Provincial, City and Municipal Treasurer concerned,
the stubs of the official receipts in their hands fr verification. The Provincial, City, and
Municipal Treasurer or his duly authorized representative shall indicate his verification by
affixing the signature at the back of the triplicate copy of the last official receipt issued with
the following notation:
i nature'=n=dc)
"Verified here: ___,-Sig Date'

P. Requisition of Accountable Forms by Collectors/Tellers. - Collectors/Tellers shall file

requisitions of accountable forms for their use with the Local Treasurer through a Requisition
and Issue Slip. 42 They shall be accountable for all accountable forms issued to them. There
shall be no transfer or borrowing of accountable forms between collectors/tellers. (Sec. 25,
COA Circular No. 92-382)

Q. Issuance of Accountable Forms to Accountable Officer. - Accountable forms shall be

issued to bonded officers only in sufficient quantities based on their actual needs but not to
exceed three (3) months' use. (Sec. 97, Book II, Vol. I, GAAM

R. The Local Treasurer's Report of Accountability for Accountable Forms. -

Collectors/Tellers and other accountable officers shall render their report of accountability for
accountable forms in the Report of Accountability for Accountable Forms at least once a month.
Such report shall also be prepared in the case of transfer of office or accountability by the accountable
officer. The Local Treasurer shall summarize/consolidate these reports in the Consolidated Report of
Accountability for Accountable Forms, and submit the consolidated report accompanied by the
individual reports to the Unit Auditor concerned not later than the fifth day of the ensuing month.
(Sec. 37, COA Circular No. 92-382)

The Barangay Treasurer shall report on his accountability for accountable forms using the
Barangay Report of Accountability for Accountable Forms. The report shall be prepared at the end
of each month and upon transfer of accountability of the Barangay Treasurer. All accountable frms
handled by him shall be reported in the form, including under a separate caption, accountable forms
issued to him fr his use as a deputized Treasurer and distributed in the manner prescribed in the
Barangay Accounting Manual.

S. Immediate Issuance of Notice of Loss of Accountable Forms. - Any loss of accountable

forms in the custody of Accountable Officers shall immediately be reported by the
Accountable Officer concerned to the Local Treasurer. The Local Treasurer shall at once

42 RIS, LTO Form 72

issue a circular or notice of loss for the information and guidance of all concered to prevent the
possible fraudulent use of such accountable forms. The notice to be issued shall specify the
kind, quantity, and inclusive serial numbers of the lost accountable forms and the place or places
where, and approximate dates, when the same were lost.

The circular or notice of loss shall be issued only for accountable forms especially designed for
the exclusive use of the local government unit.

The Local Treasurer is not precluded from undertaking other measures which may prevent the
fraudulent use of the lost accountable forms, like the publication of such loss in
newspapers of general circulation.

Compliance with the foregoing provisions shall be one of the requirements in the request for
relief from accountability for the loss of accountable forms. (Sec. I 00 , Book II, Vol. I,
GAAM

An accountable officer found to have caused the issuance of official receipts reported by him to
have been lost in the performance of his duties, and for which the money value of the official
receipts in question was not remitted, shall be liable therefore without prejudice to the filing of
administrative and criminal charges against him in accordance with the provisions of civil service
rules and regulations and penal laws.

T. Submission to COA Auditor of Obsolete, Spoiled, and Cancelled Accountable Forms.

-Accountable officers shall submit to the Unit Auditor all obsolete, spoiled, and cancelled
official receipts and other accountable forms for inspection and destruction. Under no
circumstances shall accountable officers destroy on their own, accountable frms of any
description, then be relieved fom any accountability.

In the case of obsolete accountable forms with or without fixed money value, the accountable
officer shall submit to the Unit Auditor an inventory in four (4) copies.

In the case of spoiled or damaged accountable forms which have fixed value, the accountable
officer shall submit an affidavit in four (4) copies stating:
l) The denomination and the total value of the forms; and
2) The reason for the damage and the circumstance surrounding the cause of such
damage or the reason for cancelling the form, and the name of the officer or employee
responsible.

The COA Unit Auditor or his authorized representative shall promptly inspect and destroy the
accountable forms, and make a certificate on such actions below the affidavit or
inventory. The destruction shall be witnessed and certified to by the accountable officer or Local
Treasurer. The auditor shall return the affidavit or inventory, with his certificate of destruction,
to the accountable officer who will drop the accountable forms destroyed from his Monthly
Report of Accountability. The accountable officer shall attach one (l) copy of the certified
affidavit or inventory to the Monthly Report of Accountability and retain the other copy for file.
The COA Unit Auditor shall retain the original copy.
In the case of spoiled or cancelled accountable forms which do not bear fixed money value, such as
printed official receipts, Gen. Form No. 51, etc., the accountable officer shall submit the cancelled
original and duplicate copies with the Report of Collections with such cancellation properly
noted on the record or abstract of collection concerned.

Where the damage or cancellation of accountable forms is due to negligence, or lack of proper
care, appropriate proceedings will be instituted against those responsible as the facts in each case
may warrant. (Sec. 99, Book II, Vol. L GAAM

Section 60. Daily Turnover and Verification of Collections. -

A. Daily Turnover of Collections. - At the close of the business day, Collectors/Tellers shall
tum over all their collections intact to the Local Treasurer/Cashier. They shall accomplish the
Report of Collections and Deposits in four (4) copies. The original and two (2) copies,
together with the duplicates of official receipts issued and the cash collected, shall be
submitted to the Local Treasurer/Cashier. The fourth copy of the Report of Collections and
Deposits shall be retained by the collector/teller concerned Barangay Treasurers deputized to
collect taxes imposed by provinces, cities, and municipalities shall follow the same procedure in
submitting their collections to the Local Treasurer/Cashier concerned.

In the case of collectors assigned to the field, where travel time fom their places of
assignment to the Local Treasury Office is more than one (1) day, tum over of collections shall
be made at least once a week or as soon as the collections reach P
5,000.00. (Sec. 26, COA Circular No. 92-382)

B. Verification of Collections and Accountable Forms. - The Local Treasurer/Cashier shall

verify the Report of Collections and Deposits as to initial balances on hand, receipts, sales
and issues, and the new balances on hand; make a physical count of the accountable forms
remaining in the custody of the Collector/Teller; and check the same to the new balances on
hand column. He shall indicate his verification by affixing his signature at the back of the
triplicate copy of the last official receipt issued. He shall count the money tured over to him
and sign the certification and receipt portion of all copies of the Report of Collections and
Deposits. (Sec. 27, COA Circular No. 92-382)

Section 61. Designation of Liquidating Officers for Collections. - (a) The Local Treasurer may
designate liquidating officers from among the collectors/tellers whenever necessary. (Sec. 29, COA
Circular No. 92-382)
(b) Collectors/Tellers shall tur over their collections to their designated Liquidating Officer,
fllowing the procedures prescribed in Section 60 (A) hereof. The Report of Collections and
Deposits shall however be prepared in five (5) copies, four (4) copies to be submitted to the
Liquidating Officer, the fifth copy to be retained by the Collector/Teller. (Sec. 31, COA Circular
No. 92-382)
(c) The Liquidating Officer shall perform the procedures for the receipt and verification of
collections tured over to him, as in Sec. 60 (B) hereof. He shall also accomplish the Report of
Collections and Deposits in fur (4) copies to summarize the collections tured over to him by
the Collectors/Tellers as well as his own collections. (Sec. 32, COA Circular No. 92-382)
(d) The liquidating officer shall tur over intact the cash collections to the Local
Treasurer/Cashier together with the original and two (2) copies of the Report of Collections and
Deposits of Collectors/Tellers and the duplicates of the official receipts issued. The Local
Treasurer/Cashier shall acknowledge receipt of the cash and all accompanying documents by
signing all copies of the Report of Collections and Deposits of the Liquidating Officer on the
certification and receipt portion of the frm. The fourth copies of the Report of Collections and
Deposits of Liquidating Officer and the Report of Collections and Deposits of Collectors/Tellers
shall be retained by the Liquidating Officer. (Sec. 33, COA Circular No. 92-382)
(e) The Local Treasurer/Cashier shall deposit all collections and prepare the Report of
Collections and Deposits summarizing the collections and deposits for recording in his cashbook
and submission to the accountant, accompanied by all supporting documents. (Sec. 34, COA
Circular No. 92-382)

Section 62. Procedures and Controls on Deposit of Collections with Authorized

Depository Banks.
A. Depository Accounts of Local Government Units. - Local Treasurers shall maintain
depository accounts in the name of their respective local government units with banks,
preferably government owned, located in or nearest to their respective areas of jurisdiction.
Earings of each depository accounts shall accrue exclusively thereto. (Sec. 311, LGC)

B. Opening of Depository Accounts. - (a) Local Treasurers shall open and maintain, in the
name of their respective LGUs, separate depository accounts for each fund in his custody(Sec.
310, LGC).

(b) All Provincial, City and Municipal Treasurers shall deposit their fnds and maintain
depository accounts with:

(1) Land Bank of the Philippines; and

(2) Development Bank of the Philippines.

(c) By way of exception, and subject to prior approval of the Department of Finance,
Provincial, City and Municipal Treasurers may likewise deposit their funds and maintain
depository accounts with banks where government has shares of stocks or which are allowed by
law to be goverment depository banks:

(1) Philippine National Bank43

(2) Philippine Postal Savings Bank 44

(3) Thrift, Rural and Cooperative Banks45

43 BSP Monetary Board Resolution No. 493, dated April 26, 2007, granted PNB authorihJ to accept government deposits on a
continuing basis.
44 Subsidiary of Philippine Postal Corporation, created under R. A. No. 7354 (Postal Service Act of 1992).
4
s May act as official depository of local government fnds pursuant to R. A. Nos. 7906 (Thrift Banks Act of 1995); 7353 (Rural
Banks Act of 1992; and 6938 (Cooperative Code of the Philippines).
(4) Al Amanah Islamic Investment Bank of the Philippines46

(5) Philippine Veterans Bank47

In all other cases, the Provincial, City and Municipal Treasurers shall secure the pnor
approval of the Department ofFinance. 48
(d) Local government units requesting authority to open and maintain depository accounts
with banks other than authorized government-owned depository banks shall comply and
submit to the Bureau of Local Government Finance, Central Office the following documents fr
proper approval of the Department ofFinance 49:

( 1) A Resolution of the local sanggunian concered, authorizing the LGU to open

and maintain depository account with non-government-owned depository bank
with the approval of the Local Chief executive;

(2) A Certification from the LGU concerned on the absence of any government
owned depository bank located in or nearest its area of jurisdiction;

(3) A Certification to the effect that the Philippine Government owns shares of stocks
in the proposed depository bank or is allowed by law to be a government
depository bank;

(4) An Accreditation issued by the Monetary Board of the Bangko Sentral ng

Pilipinas in fvor of the proposed depository bank to accept government deposits
for the current year; and
(5) A Certification of the proposed depository bank that no elective or appointive
local goverment official of the LGU concerned is a director, officer or
stockholder ofsaid bank, unless certified that it is the only bank existing therein.

(e) The barangay shall maintain only one depository account in the name of the barangay,
either as a trust fund with the city/municipal treasury, or in a current account with a
government-owned bank located within or nearest its area of jurisdiction or any bank
accredited by the Bangko Sentral ng Pilipinas as local government depository bank. The
choice of a depository bank for barangay funds shall be subject to the authorization of the
Sangguniang Barangay and approval of the Punong Barangay.

C. Daily Deposit of Collections with the Banks. - (a) The Local Treasurer/Cashier shall
deposit intact all his collections, as well as all collections tured over to him by the
Collectors/Tellers with the authorized depository bank daily or not later than the next
banking day. He shall record all deposits made in the Cashbook- Cash in Treasury and
Cashbook-Cash in Bank.

46 Authorized to accept government deposits under R. A. No. 6848 (Al Amanah Islamic Bank Charter.
47 Authorized to accept government deposits under R. A. No. 7169.
48 DOF Order No. 27-05, December 9, 2005

49 BLGF Memorandum Circular No. 03-2006, dated Februan; 20, 2006

In the case of municipalities where travel time to the depository bank is more than one ( 1) day,
deposit of collection shall be made at least once a week, or as soon as the collections reach P
10,000.00. (Sec. 28, COA Circular No. 92-382)

(b) The Barangay Treasurer shall deposit all collections with the city or municipal treasury or in
the depository account maintained in the name of the barangay within five (5) days after
receipt thereof (Sec. 334 (a), LGC). He shall likewise record all deposits in the Cashbooks
maintained fr Cash in Treasury and Cash in Bank.

D. Deposit of Field Collections. - Collections of field collectors shall be remitted to the

Cashier/designated Liquidating Officer of the field office of the local government unit. When
travel distance from the field office to the local treasury may expose goverment funds to risk
such as loss in transit, the Cashier/designated Liquidating Officer, upon authorization by the
Local Treasurer, may deposit the collections in the authorized depository bank near the field
office of the local goverment unit.

E. Time Deposit Accounts. - (a) Provinces, cities, municipalities and barangays may deposit
with duly authorized goverment depository banks, idle fnds in the General Fund under time
deposit accounts, upon prior authority of the sanggunian and approval of the local chief
executive. (Sec. 21, COA Circular No. 92-382)
(b) Idle funds shall mean available cash which the local goverment unit can freely invest
in goverment securities and/or fixed term deposits with authorized goverment
depository banks, after having provided or earmarked funds fr regular and recurring
operating expenses like salaries and wages, repairs and maintenance, inventories and
supplies, debt servicing, programmed disbursements for capital outlays and other non-
recurring expenses, within the context of the cash operating cycle of the local government
unit. Unremitted collections and funds set aside for the payment of obligations to other
local government units, goverment agencies and private entities shall not from part of
idle funds. (Sec. 22, COA Circular No. 92-382)

F. Bank Statements/Snapshots. - Bank statements and/or snapshots of bank transactions

transmitted to the Local Treasurer by the depository bank shall be immediately forwarded to the
Local Accountant who shall be responsible for the preparation of the bank reconciliation
statement. If the bank statements are sent by the bank directly to the Local Accountant, a copy
thereof should also be furnished immediately to the Local Treasurer. In case the bank
statements are not readily available, a snapshot of the local government unit transactions may be
obtained by the Local Treasurer from the bank as basis in updating/recording of entries in the
Local Treasurer's Cashbook and for reconciliation purposes.

G. Remittance of Collections to Other Local Government Units. - Collections made by

Provincial, City, or Municipal Treasurers for other government units shall be promptly
remitted to the government units concerned. At least once a week, the Accountant concerned
shall prepare the disbursement voucher covering such remittances and the supporting
statements containing the complete descriptions of the collections being remitted. The
disbursement vouchers and their supporting documents, duly certified by the Accountant,
 shall be transmitted to the Local Treasurer for certification as to availability of fund 50s, and
forwarded to the Local Chief Executive or the duly authorized official for approval. The
disbursement vouchers and statements shall then be returned to the Local Treasurer for the
preparation of the checks to cover the remittances. The checks duly approved or signed, each
accompanied by a copy of the corresponding statements, shall be transmitted to the local
government units concerned immediately but not beyond the period prescribed by said units.
The recipient local government units/national agencies/financial institutions or their duly
authorized collecting agents shall acknowledge the remittances by the issuance of official
receipts. (Sec. 36, COA Circular No. 92-382)

H. Remittances of Collections to Other Local Government Units through Inter-Bank

Transfer.51 - Aside from check remittances, collections made by local government units
intended for other local government units, such as the share of the municipality or province
from the collections of real property taxes, may be remitted to the concerned local
government unit by means of bank-to-bank transfer. This method facilitates the transfer and
receipt of the local government units' corresponding shares in real property taxes and other
taxes. The procedure in the inter-bank transfer shall follow the same procedure as in the
remittance through check as follows:

1) Preparation of disbursement voucher with supporting documents by the accountant at

least once a week;

2) Approval of the disbursement voucher by the local chief executive or duly authorized
official;
3) Preparation by the Cashier/Treasurer of the Advice fr Bank Transfer, duly approved
by the local chief executive, authorizing the transfer of funds from the bank account
of the province/city/municipality for credit to the bank account of the
province/municipality/barangay.

4) Acknowledgment by the recipient local government unit of the receipt of the fund
transfer by furnishing the remitting local government unit a copy of the bank credit
advice/memo.

Section 63. Maintenance and Use of the Cashbook by Local Treasurers, Cashiers,
Liquidating Officers, Tellers, Collectors and Other Local Accountable Officers.

A. The Treasurer's Cashbooks. - The Treasurer shall maintain the following cashbooks:
1) Cashbook- Cash in Treasury. 52 - The Cashbook for Cash in Treasury shall be used by
the Local Treasurer/Cashier to record the daily collections (Debit Column) and deposits
to the bank (Credit Column) based on the Report of Collections and Deposits. The

so COA Circular No. 2006-002, January 31, 2006

51The process/lowfor the receipt, collection, remittance, deposit and recording ofRPT is shown in LTD Annex 4 of this
Manual.
s2
LTO Fann 5
cashbook shall be maintained by fund and shall be updated and balanced daily.(Sec. 378, NGASfor
LGUs53)

2) Cashbook - Cash in Bank.54 - The Cashbook for Cash in Bank shall be used by the
Local Treasurer/Cashier to record all deposits of collections (Debit Column) and
withdrawals thru checks issued from the banks(Credit Column) for the day. Separate
cashbooks shall be maintained for each depository bank account and by fund, and shall
be updated and balanced daily.(Sec. 379, NGASfor LGUs)

3) Cashbook-Cash Advances.55 - The Cashbook for Cash Advances shall be used by the
Local Treasurer/Cashier/Disbursing Officer to record cash advances received (Debit
Column) and payments, refunds and adjustments (Credit Column), and the balance
(Balance Column).(Sec. 380, NGASfor LGUs)

B. The Liquidating Officer's Cashbook.56 - The Liquidating Officer's Cashbook shall be used by
the designated Liquidating Officer to record all collections tured over to him by Tellers, Field
and Market Collectors (Debit Column), and remittances to the Local Treasurer/Cashier Credit
Column). Separate cashbooks shall be maintained for each fund and shall be updated and balanced
daily.

C. The Teller's/Collector's Cashbook. 57 - The Teller's/Collector's Cashbook shall be

maintained by individual Tellers, Field and Market Collectors and other authorized personnel
receiving collections outside of the local goverment office, to record all collections received
(Debit Column) and all remittances to the designated Liquidating Officer (Credit Column).

D. Daily Recording in the Cashbook. - At the end of each day, all transactions shall be entered in
the appropriate cashbook. For Cashbook - Cash in Treasury, Cashbook-Cash in Bank and
Cashbook-Cash Advances, the balances obtained at the end of the day shall be reconciled with
the cash on hand. At the end of the month or when required to do so by competent authority,
the month's account and transactions shall be closed, ruled, and the accountable officers will
accomplish the certificate of transactions in the respective cashbooks.

E. Accountable Officer's Certificate of Transactions in the Cashbook. - Local

Treasurers/Cashiers entrusted by reason of their duties with collections, custody and/or
disbursement of local funds shall at the end of the month, or when required to do so by
proper competent authority, accomplish the following certificate:

"I HEREBY CERTIFY that the foregoing is a correct and complete record of
all my cash and depository transactions had by me m my capacity as
(designation) of (Name of the LGU) , during the

period from , 200_, to __ _ _ _ _ _ , 200_,

inclusive, as indicated in the corresponding columns.

(Signature Over Printed Name)

Title
----- - - -' 20_"
 F. Reconciliation of Cashbook Balances. - All accountable officers required to maintain a
cashbook shall reconcile his cashbook balances every end of the month or as the need arises with
the subsidiary accounting records. A certification of balances as appearing in the subsidiary
accounting records shall be obtained from the Accountant at the end of the month or as required
by competent authority.

G. Safeguarding of Cashbook. - At the close of office either for the noon break or at the end of
the day, all cashbooks shall be locked up in fire-proof vaults or safes. This duty devolves upon
the officer entrusted by law to keep such cashbooks irrespective of whether he is or not the one
personally making the entries of the cash transactions which are to be recorded therein.

Section 64. Forms and Reports Used by Local Treasury Officials:

A. Report of Collections and Deposits 58• - The Report of Collections and Deposits shall be
prepared daily by the following:
l) Tellers/Collectors - for collections received and remittances made to the designated
Liquidating Officer, if any, or to the Cashier/Local Treasurer.

2) Liquidating Officers - for collections received from Tellers/Collectors and remittances

made to the Cashier/Local Treasurer.

3) Local Treasurer/Cashier - for collections received from Liquidating Officers, taxpayers

and other sources, and deposits to the depository banks.

The Report of Collections and Deposits shall include a report of accountability for
accountable forms showing the name of the frms and number, beginning balance, received,
issued and ending. It shall also contain a summary of collections and remittances/deposits and
breakdown of collections as to cash and details of checks received.

The Accountable Officer shall certify as to the correctness of the report. The Liquidating
Officer/Local Treasurer shall verify the report and acknowledge receipt of collections and
remittances. (Sec. 384, NGASfor LGUs)
For Real Property Tax payments, separate Report of Collections and Deposits shall be
prepared fr collections pertaining to the Basic Tax and the Additional Tax accruing to the
Special Education Fund. In case of Real Property Tax payments in municipal treasuries,

ss RCD, LTO Form 12

additional copies of Report of Collections and Deposits fr the Basic Tax and SEF shall be
prepared fr submission to the Provincial Treasurer as reference in the computation of the
province's share therefrom. The procedures to be followed in the filling-up the form shall be the
same.

The Report of collections and Deposits shall be distributed, as follows:

Original Auditor
Duplicate Local Treasurer
Triplicate Collecting Officer
Quadruplicate Liquidating Officer (in case one is so designated)
Additional Copy Local Treasurer

B. Report of Accountability for Accountable Forms.59 - The Report of Accountability for

Accountable Forms shall be used to report the quantity of accountable forms received, issued or
cancelled by the Accountable Officer as of the end of the month.

Collectors/Tellers and other Accountable Officers shall render this Report of Accountability for
Accountable Forms at the end of the month fr consolidation by the Local Treasurer. Such
report shall also be prepared in case of transfer of office or accountability by the
Accountable Officer. (Sec. 397, NGASfor LGUs)

C. Consolidated Report of Accountability fr Accountable Forms 60• - The Consolidated

Report of Accountability for Accountable Forms shall be prepared by the Local Treasurer to
consolidate the Report of Accountability fr Accountable Forms of Accountable Officers. The
consolidated report accompanied by the individual reports shall be submitted to the Unit
Auditor concerned not later than the fifth (5 111) day of the ensuing month fr verification.
(Sec. 398, NGASfor LGUs)

D. Other Reports/Records Required by the Bureau of Local Government Finance. 61 - (a) The
following reports/records shall be prepared and submitted by the Local Treasurer to the Bureau
of Local Government Finance:
Frequency of
Title of Report Submission

62 Quarterly
]. Statement ofReceipts and Expenditures
2. Statement ofReceipt Sources Quaiterly
3. Economic Enterprises Statement ofFinancial Operations Quarterly
4. Municipalit/Cit Quarterly Report on Real Propert Tax Colections Quarterly
5. Provincial Quarterly Report on Real Propert Tax Collections
6. Statement ofExpenditures Quarterly
7. Statement ofIndebtedness, Payment and Balances Quaiterly
8. Ouarterlv Report of Collections on Business Tax, Fees and CharKes Quarterly

59 RAAF, LTO Form 10

60 CRAAF, LTO Form 11
61
Refer to BLGF Statement ofIncome and Expenditures (SIE)/Statement ofReceipts and Expenditures (SRE)
Manual.
(b) The following financial records, however, shall also be maintained by the Local Treasurer for
monitoring and control purposes:

1) Record of General Collections. - The Record of General Collections covers the

following:

1. Tax on Business
11. Regulatory Fees
111. Other Taxes
1v. Service or User Charges
v. Grants and Donations
v1. Loans and Borrowings
v11. Fund Transfers

2) Record ofReal Propert Tax Collections

3) Real Propert Tax Account Register 63

Section 65. Policies, Rules and Procedures on Barangay Collections, Remittances and
Deposits.

A. Basic Policies on Receipt of Barangay Collections:

(1) The Barangay Treasurer shall be responsible in handling collections of income and other
receipts of the barangay and the deposit thereof with Authorized Government Depository
Bank64.

(2) All collections, either in cash or in check, shall be acknowledged by the issuance of a pre
numbered Official Receipt - General Form or its equivalent like the Real Property Tax
Receipts and the Community Tax Certificate,65 subject to property custody,
accountability and audit.

(3) Temporary or provisional receipts shall not be issued to acknowledge collections.

(4) All accountable forms shall be secured from the City/Municipal Treasurer.

(5) All checks shall be in the name of the barangay.

6
2The detailed discussion on the preparation and submission of the Statement of Receipts and Expenditures (SRE),
formerly titled Statement of Income and Expenditures (SJE). and all supporting schedules, reports, and records is
contained in the BLGF SJEISRE Manual. The format for the SREs is shown in Annex 14 of this Manual.
63 RPTAR

64AGDB
65
CTC
(6) Endorsed checks shall not be accepted as payment of obligations to the barangay.

(7) For checks received, the Official Receipt number and date of issue shall be indicated at
the back of the check for reference purposes.

(8) All particulars in the Official Receipt shall be filled out. Duplicate and Triplicate copies
thereof shall be the exact carbon copy of the Original.

(9) Overages discovered during the cash count/cash examination shall be receipted and
added to the accountability of the Barangay Treasurer.
(10) Cash shortages, including the loss of cash through force majeure, theft, robbery, fire, etc.,
shall be deducted from the total cash account of the Barangay Treasurer/Accountable
Officer and shall be held personally accountable, pending the result of the Request for
Relief from Cash Accountability submitted to the Commission on Audit.

(11) All collections by the Barangay Treasurer fr the barangay shall be reported the
summary of Collections and Deposits.

8. Policies and Procedures for Deposit of Barangay Collections:

(1) The Barangay Treasurer shall deposit all his collections including those turned over by
the deputized Barangay Collectors with the Authorized Government Depository Bank
intact daily or not later than the following banking day. In the case of a barangay where
travel time to the depository bank is more than one (1) day, deposit of collections shall be
made at least once a week or as soon as the collections reach P 10,000.00.

(2) In the absence of an Authorized Government-Owned Depository Bank, deposits may be

made in any bank nearest the barangay and authorized by the Monetary Board (MB) of
the Bangko Sentral ng Pilipinas as government depository bank.

(3) The selection of a depository bank other than the Authorized Government-Owned
Depository Bank shall be covered by a resolution of the Sanggunian Barangay) and
approved by the Punong Barangay). The Sanggunian Barangay Resolution shall indicate
the name of the bank, the type of deposit to be maintained, whether current, savings or
time deposit and the authorized signatories to the checks/fund withdrawals.

(4) Funds earmarked for future operation which are not immediately needed may be
transferred to time deposit account of the barangay. Placement in time deposits shall be
duly authorized by the Sangguniang Barangay and approved by the Among Barangay.
Certificate of time deposit/bank book shall be in the name of the barangay. Upon
maturity, the check for the proceeds shall be issued in the name of the barangay. Pre
termination of time deposit or its renewal/roll-over shall have prior authorization of the
Sangguniang Barangay and approval of the Punong Barangay.
4) In case of dishonored check, Notice of Dishonor shall be immediately sent to the payor
upon receipt of the Debit Memo and the dishonored check from the bank.

5) The original of the dishonored check and a copy of the bank Debit Memo shall remain
with the Barangay Treasurer.

6) All deposits by the Barangay Treasurer fr the barangay shall be reported m the
Summary of Collections and Deposits.

C. Policies and Procedures on the Receipt and Remittance of Collections by the Barangay
Treasurer as Deputized by the City/Municipal Treasurer:

(1) The City/Municipal Treasurer shall issue a written authority deputizing the Barangay
Treasurer to collect Real Property Tax, Community Tax Certificate, etc., on his behalf

(2) Collections made by the Barangay Treasurer as deputized on behalf of the

City/Municipal Treasurer, shall be remitted intact daily to the City/Municipal Treasurer.

(3) For a barangay where travel time to the City/Municipal Treasurer's Office is more than
one (1) day, remittance of collections shall be made at least once a week , or as soon as
the collections reach P 5,000.00.

(4) All remittances shall be supported by a Summary of Collections and Remittances.

(5) The Barangay Treasurer shall be accountable for all the forms received from the
City/Municipal Treasurer for use in the collection.

D. Policies and Procedures on the Receipt and Remittance of Collections by the Barangay
Collector as deputized by Sangguniang Bayan:

( 1) The Sangguniang Bayan shall issue a resolution deputizing the Barangay Collector to
collect market fees, parking fes, community tax, etc., on behalf of the Barangay Treasurer.

(2) Collections of the deputized Barangay Collector shall be remitted daily to the Barangay
Treasurer.

(3) All remittances shall be supported with Summary of Collections Report and Report of
Accountability fr Accountable Forms.

(4) The deputized Barangay Collector shall be accountable for all forms received from the
Barangay Treasurer.

Section 66. Direct Remittance to Barangay Bank Account. - Credit Memo received from
the bank for direct remittance made by local goverment units or the Department of Budget and
Management fr the barangay share in Real Property Tax or the Intern ! Revenue Allotment,
respectively, shall be recorded direct to the Cash on Hand and in Bank Register and in the Cash
Receipts and Deposits Register.

Section 67. Recording of Receipt, Deposits and Remittances of Barangay Collections.66 -

A. Recording in the Summaries:

(1) Summary of Colections and Deposits 67

a) Collections and deposits by the Barangay Treasurer of the barangay shall be recorded
in the Summary of Collections and Deposits daily or as transaction occurs.

b) Issued official receipts including those cancelled shall be recorded m correct

numerical sequence.

c) Deposits shall be based on Validated Deposit Slip 68 which shall be recorded as

deposits are made.

d) Collections and remittances by the deputized Barangay Collector recorded in the

Summary of Collections and Deposits shall be recorded in the Summary of
Collections and Deposits of the Barangay Treasurer daily or as transaction occurs.

e) Collections and remittances by the deputized Barangay Collector recorded in the

Summary of Collections and Remittances-Barangay Treasurer69 shall also be
recorded in the Summary of Collections and Deposits.

f) The Summary of Collections and Deposits shall be sub-totaled daily.

g) The daily sub-totals of the Summary of Collections and Deposits shall be recorded in
the Cash on Hand and in Bank Registers maintained by the Barangay Treasurer.

h) Weekly, the Summary of Collections and Deposits shall be totaled, balanced and
ruled and submitted to the BRK supported by the duplicated copies of the official
receipts issued and the original of the validated deposit slips.

i) Receipt of the certified Summary of Collections and Deposits and its supporting
documents shall be acknowledged by the Barangay Record Keeper.70

6
6The detailed narrative.flow ofprocedures on the receipt, deposit and recording ofbarangay collections are shown
in LTO Annexes 22, 23, 24, and 25.
67 SCD, LTO Form 19
68
VOS
69 SCR-BT, LTO Form 20
70 BRK
j) The Summary of Collections and Deposits shall serve as basis of the BRK in
recording the weekly collections and deposits in the Cash Receipts and Deposits
Register.

(2) Summar of Colections and Remittances71

a) Barangay Treasurer as deputized by City/Municipal Treasurer -

1. Collections of Barangay Treasurer shall be recorded daily in the Summary of

Collections and Remittances-Barangay Treasurer or as a collection is made.

11. Issued Official Receipts, Community Tax Certificates, Real Property Tax
Receipts including cancelled ones shall be recorded in correct numerical
sequence.

m. Remittance of collection to the City/Municipal Treasurer shall be covered by a

certified Summary of Collections and Remittances supported by the duplicate
copies of the issued Official Receipts.

1v. Remittances shall be done daily, which shall be acknowledged by the City/Municipal
Treasurer in the appropriate portion of the Summary of Collections and Remittances. For a
barangay where the travel time to the city/municipality is more than one (1) day, remittance of
collections shall be made at least once a week or as soon as collection reaches P 5,000.00.

b) Barangay Collector as deputized by Sangguniang Bayan -

1. Collections of deputized Barangay Collector as deputized by the Sangguniang

Bayan shall be recorded daily in the Summary of Collections and Remittances-
deputized Barangay Collector as collections are made.

11. Issued Official Receipts and accountable frms with money value shall be
recorded in batches showing the inclusive serial numbers (if available), quantity issued and
the total amount collected.

m. Remittance of collections to the Barangay Treasurer shall be covered by the

certified Summary of Collections and Remittance supported by duplicate
copies of the Official Receipts issued.

I. Remittances shall be done daily which shall be acknowledged by the

Barangay Treasurer in the appropriate portion of the Summary of Collections and Remittances.

B. Recording in the Registers:

71 SCR-DBC (Deputized Barangay Collector, LTO Form 21

1) Cash Receipts and Deposits Registe/2

a) The Barangay Record Keeper shall record weekly all receipts in the Cash Receipts
and Deposits Register based on the Summary of Collections and Deposits.

b) Bank credits and interest earned shall be recorded in the Cash Receipts and Deposits
Register by the Barangay Record Keeper, based on the bank Credit Memo.

c) At the end of the month, the Cash Receipts and Deposits Register shall be totaled,
balanced, ruled, recapitulated and certified.

d) The certified Cash Receipts and Deposits Register together with the Summary of
Collections and Deposits shall be submitted to the City/Municipal Accountant on or
before the 5 day of the fllowing month.
th

2) Cash on Hand and in Bank Register73

a) The Barangay Treasurer shall record all collections and deposits in the Cash on Hand
and in Bank Register daily based on the Summary of Collections and Deposits.

b) Bank credits/charges per Debit Memo, interests eared and withholding taxes as
reflected in the bank statement/passbook shall be recorded in the Cash on Hand and in
Bank Register by the Barangay Treasurer.

c) At the end of the month, the Cash on Hand and in Bank Register shall be totaled,
balanced, ruled, recapitulated and certified.

d) The certified Cash on Hand and in Bank Register shall be submitted to the
City/Municipal Accountant on or before the 5 day of the fllowing month.
th

e) Balance on hand and in bank shall be forwarded to the next month's Cash on Hand
and in Bank Register.

3) Report of Accountability for Accountable Forms74

a) The Barangay Treasurer shall prepare the Report of Accountability for Accountable
Forms for the receipts and issuances of accountable frms and the outstanding
balance under his custody.

b) The deputized Barangay Collectors shall also prepare and submit their individual
Report of Accountability for Accountable Forms daily to the Barangay Treasurer to
summarize the receipts and issuances of accountable forms under their custody.

n CRDReg, LTO Form 15

73 CHBReg, LTO Form 16

74 RAAF, LTO Form 17

c) The Barangay Treasurer shall consolidate the individual Report of Accountability for
Accountable Forms submitted by the deputized Barangay Collectors with his own
Report of Accountability for Accountable Fons and shall submit the certified
Consolidated Report of Accountability for Accountable Fonns 75 to the Barangay
Record Keeper.

d) The Barangay Record Keeper shall certify the Consolidated Report of Accountability
for Accountable Forms and submit to the City/Municipal Treasurer on the fifth (5 th) of
the following month.

Chapter 3. EXAMINATION OF BOOKS OF ACOUNTS AND PERTINENT

RECORDS OF BUSINESSES BY THE LOCAL TREASURER

Section 68. General Provisions. - The following shall govern the examination by the Local
Treasurer of books of accounts and pertinent records of businessmen:

l) Examination of Books of Accounts and Pertinent Records of Businessmen by Local

Treasurer. - Only the Local Treasurer, or his duly authorized representative, of the LGU
imposing the tax, fee or charge, may examine the books of accounts and pertinent records of
business in order to ascertain, assess and collect the correct amount of tax, fe or charge.
(Art. 259 (a), IRR, implementing Sec. 171, LGC. Consequently, no personnel in the Office of the
Local Chief Executive may inspect records of business unless duly deputized in writing by the
Local Treasurer concerned.

The examination of the books of accounts and pertinent records of business is an inherent function
of Local Treasurers and may be performed or enforced without need of an executive order from
the Local Chief Executive or an implementing ordinance of the sanggunian. (BLGF ls'
Indorsement to the City Treasurer ofSantiago City, ·May 13, 1996)

2) Authority to Conduct Examination. - The Provincial, City, Municipal or Barangay

Treasurer may, by himself or through any of his deputies duly authorized in writing, conduct
the examination of the books, accounts, and other pertinent records of any person,
partnership, corporation, or association subject to local taxes, fees and charges (Art. 259 (b),
IRR, implementing Sec. 171, GC) in order to ascertain, assess, and collect the correct amount of
the tax, fee, or charge.

The Local Government Code has not specified the rank of the officials who may be
deputized to examine books of accounts of business establishments. However, under P.O.
No. 231, as amended76, only the deputies duly appointed to, and occupying positions in the
plantilla of personnel as Administrative Deputy, Supervising Deputy, Senior Deputy and
Junior Deputy or such other similar designations as Deputy Provincial and Municipal
Treasurers of the Office of the Provincial Treasurer; or the Administrative Deputy, Senior
Deputy and Junior Deputy of the Office of the City Treasurer, can be duly authorized in
writing by the Provincial or City Treasurer to examine the books of accounts of business

75 Consolidated RAAF, LTO Form 18

76 Local Tax Code
establishments in their respective jurisdictions. Accordingly, a City Treasurer may not
deputize the Administrative Officer of the Sangguniang Panlungsod to examine the books of
accounts of business establishments. (DOF 81h endorsement, October 30, 1974 to the
Secretary of Local Government and Community Development)

3) Written Authority to Conduct Examination. - In case the examination is made by a duly

authorized deputy of the Local Treasurer, the written authority of the deputy concerned shall
specifically state the name, address, and business of the taxpayer whose books, accounts and
pertinent records are to be examined, the date and place of such examination, and the
procedure to be followed in conducting the same. (Art. 259 (d), IRR implementing Sec. 171,
LGC)

4) Time, Frequency and Certification. - The examination of the books of accounts and
pertinent records of the business of the taxpayer shall be made during regular business hours,
not oftener than once a year fr every tax period, which shall be the year immediately
preceding the examination, and shall be certified to by the examining official. Such
certification shall be made of record in the books of accounts of the taxpayer examined. (Art.
259 (c), IRR implementing Sec. 171, LGC)

The tax period that may be examined by the Local Treasurer or his duly authorized
representative is limited to the year immediately preceding the date of examination. The
intent of the law is to remind Local Treasurers that they should examine every year the
books of accounts of the businesses within their jurisdiction to ascertain the correctness of the
amounts of business taxes paid. It may be implied that past years' accounts may no longer
be looked into to prevent undue harassment of the business sector by examiners. (BLGF
Letter, August 27, 1991 to Republic-Asahi Glass Corporation)

5) Access to the Bureau of Internal Revenue Records. - The records of the Revenue District
Office of the Bureau of internal Revenue shall be made available to the Local Treasurer, his
deputy or duly authorized representative.78 (Art. 259 (e), !RR implementing Sec. 171, LGC)

Section 69. Guidelines in the Conduct of the Examination. -

A. Administrative Preparation by the Local Treasurer/Head of the Local Treasury Office.-

Prior to the conduct of any examination of the books of accounts of a business
establishment, the Local Treasurer or Head of the Local Treasury Office concerned shall
undertake the following steps:

(1) From the list of business taxpayers, the Local Treasurer chooses the business entities that
will be verified and examined based on several factors such as: complexity of the
business, materiality and volume of prior years' gross sales, number of sales/distribution
outlets, delinquency in payment of business taxes and other relevant factors.

(2) The Local Treasurer shall create the Examination Team to be composed of staff fom the
Local Treasury Office and/or deputized staff fom other offices of the local government
78
Refer to E. 0. No. 646, Accessibility of Information on Taxpayers Between the BIR and the LGU for Tax Collection
Purposes.
 unit concerned. The Team shall be headed preferably by a Certified Public Accountant or
one who is a holder of the degree of Bachelor of Science in Commerce major in
Accounting.

(3) The Local Treasurer shall issue the Office Order, designating the Team Leader and the
members of the Examining Team, copy furnished the Local Chief Executive.

(4) Preferably, a pair of deputized Examiners shall conduct the examination of the accounts
of business establishments. However, in order to cover more establishments, the
examination may be done by a lone deputy.

(5) No deputized Examiner shall be assigned to the same business establishment he had
examined the previous year.

(6) The Local Treasurer shall prepare the Notification Letter, addressed to the business
taxpayer, informing him of the examination/inspection to be conducted by the LGU
Examination Team. A frmal reply from the business taxpayer should be required befre
the examination date will be scheduled.

(7) The Local Treasurer shall prepare the Letter of Appointment, addressed to the business
taxpayer, indicating the exact date of the examination visit, documents to be examined,
year to be covered by the examination, and the names and signatures of the Members of
the Examining Team.

(8) The Letter of Authority/Appointment 78 shall also be prepared and signed by the Local
Treasurer and shall serve as the authority of the Examining Team to conduct the
examination of the business taxpayer's records, which shall be signed by the Local
Treasurer and the members of the team. The Letter of Authority shall be served to the
business taxpayer immediately after receipt thereof by the deputized Examiners.

(9) In case the Letter of Authority cannot be served, the deputized Examiner concerned shall
report the matter to the Team Leader/Immediate Supervisor, citing the reason(s) for the
inability to serve the Letter of Authority. If the reason/cause is meritorious, the Team
Leader/Immediate Supervisor shall request for another business establishment to
examine. All unserved Letters of Authority shall be returned within ten ( 10) days after
the end ofthe examination period.

B. Responsibilities of the Examination Team:

(I) The Examination Team shall prepare the audit/examination program, detailing the
objectives and procedures to be performed during the conduct of the examination, copy
furnished the Local Chief Executive for his information.

78 LOA, LTO Form 26

(2) The designated Team Leader shall exercise close supervision over the members of the
team in the conduct of the examination and shall ensure that they conduct themselves at
all times with proper decorum.

(3) Deputized Examiners shall wear their prescribed uniforms, if any, when conducting the
examination. They shall properly identify themselves to the owner or manager of the
business establishment by presenting their official Identification Cards in serving the
Letter of Authority together with the Letter of Appointment.

(4) In case the books of accounts and other records are not available on the first visit, another
appointment with the business owner/representative should be made not later than three(3) days after
serving the Letter of Authority.

(5) The books of accounts and pertinent records shall be handled with care. Deputized
Examiners shall avoid making any tick marks or writings on the same, except for the
certification that said books of accounts have been examined, date examined, and the
signature of the Deputized Examiner after the last entry.

(6) Where the examination of the books of accounts and other records could not be
accomplished in one ( 1) day, the deputized Examiner shall indicate on the Tax Data and
Assessment Form, the date and time when the examination started and when terminated.

(7) If at the time of examination of a business entity, the owner or representative cannot be
contacted or could not produce the pertinent records and books of accounts needed for the
examination, this fact must be noted by the Examination Team in the Tax Data and
Assessment Form. In case similar circumstances occur during the second and third visits,
the same facts should be noted in the Tax Data and Assessment Form, indicating the time
and date of each visit. The notation shall also be made in the original copy of the Letter
79
of Authority.

(8) The deputized Examiners shall perform the following activities:

1. Review of pertinent records of the business establishment to be examined

such as Articles of Incorporation and By-Laws, SEC/DTI Registration, minutes of board
meetings, etc.;

11. Review of the working papers, if any, of the business establishment if

previously examined;

111. Submission to the Owner/President of the business establishment to be

examined the Letter of Appointment/Authority to conduct the examination;
and

7 Refer to LTO A1111exes 33 and 34 for the pro-fon11a notices in case of non-prese11tatio11 of documents for
9

exami11atio11
 1v. Acceptance of the following books of accounts and documents for
verification/examination:

l. Mayor's Permit for current year;

2. Business License Receipts for current year;
3. Books of Accounts such as Sales Journals/Registers, Purchase
Journals/Registers, Cash Receipts/Disbursement Journals/Registers,
General Ledgers, Subsidiary Ledgers;
4. Audited or Unaudited Financial Statements (Income Statement,
Balance Sheet and Cash Flow Statement);
5. Privilege Tax Receipt (PTR)
6. Community Tax Receipt
7. Official Receipts, Cash/Charge Sales Receipts/Invoices, Order Slips,
Delivery Receipts, Debit/Credit Memos, Sales Returns
8. Purchase Receipts/Invoices
9. Articles of Incorporation
l 0. Quarterly non-VAT returns
I I . Monthly VAT receipts
12. Others such as Beginning and Ending Merchandise Inventory Reports,
Stock Cards, and such other reports relevant to the business taxpayer's
operations

C. Detailed Audit Activities:

I) For Sales Accounts -

a) Compare/Validate the amount of Gross Sales/Receipts account on the Income

Statement with the sales account in the General Ledger;

b) Check posting to the General Ledger from Sales Journals/Cash Receipts Journals
and other books where sales or service income are reflected;
c) Verify the entries in the Sales Journals/Cash Receipts Journals and other books of
accounts fom the sales invoices/delivery receipts/provisional and/or official
receipts and other documents showing the sales or receipts of income revenues (at

random);

d) Confirm the income/revenues from the customers' Records of Sales/Receipts (at

random); and

e) Compute the correct Gross Receipts/Sales based on the sales records examined.

2) For Purchase Accounts -

a) Verify the amount of purchases reflected 1 the Income Statement from the
General Ledger;
b) Check posting to the General Ledger from Purchases/Cash Payments Jourals; and
Verify entries in Purchases/Cash Receipts Journals with purchase documents (at
random);

3) For Inventory -

a) Check beginning and ending inventory on Financial Statement with General Ledger
balance;

b) Verify computation of the ending balance of the Inventory Account by comparing

it with the last physical inventory count conducted;

If warranted, inspect at random material items in the inventory and check against the physical
inventory count; and

d) Observe the volume of customers, sales act1v1t1es and deliveries of the

business entity to have a sense of daily sales volume.

4) Other Examination Activities -

a) Maintain files of the necessary examination working papers;

b) Secure a copy of the Schedule of Account Receivables/Payables for succeeding

examination of the books of accounts of the business entity; and

Verify the amount shown on the Schedule of Account Receivables/Payables from the
individual Subsidiary Ledgers.

D. Preparation of Working Papers and Tax Data and Assessment Form:

I) Tax Data Working Papers or Tax Data Sheet.so - This working paper shows the
comparison between the gross receipts/sales declared per business permit application and the
gross receipts/sales as appearing in the sales documents examined. The amount of the
understatement or overstatement in gross receipts/sales is likewise presented in the
working papers.

2) Tax Data and Assessment Form.s1 - This shall be accomplished in triplicate and
submitted by the deputies to their immediate supervisor for every examination and
inspection conducted. It contains all the pertinent information on the business concerned
and the detailed findings of the deputies. This form shows the· detailed computation of the
additional assessment fr business tax based on the computed understatement of

so TDS, LTO Form 27

s1 TDAF, LTO Form 28
 sales/receipts declared in the business permit application, the amount of surcharges and
penalties, the interest on the deficiency tax assessed, as well as the signatures of the
Examination Team and the Local Treasurer. The Tax Data and Assessment Form shall be
attached to the Letter of Authority and shall be submitted to their immediate supervisor
for review before submission to the Local Treasurer for approval. The original copy of
the Tax Data and Assessment Form shall be given to the business taxpayer concerned.

4) Issuance of the Letter of Assessment/Assessment Notice82 (1st Notice) signed by the

Local Treasurer to the business taxpayer, showing the amount of tax deficiency inclusive
of penalties, surcharges and interest resulting from the conduct of the examination. A
Second Assessment Notice83 may be sent to the taxpayer in case he fails to respond to
the first notice. A Third Assessment Notice84 (a maximum of three (3) notices) may be
sent before a Final Demand for Payment85 and possible foreclosure proceedings may be
issued to the taxpayer. In accordance with Section 195 of the Local Government Code of
1991, the taxpayer, within sixty (60) days fom receipt of the Letter of Assessment, may
file a written protest with the Local Treasurer contesting the assessment; otherwise the
assessment shall become final and executory.

5) Issuance of the Letter of Confirmation86/Certificate of Confirmation87/Certificate of

Examination88 to the business taxpayer signed by the Local Treasurer to signify the
completion of the examination conducted. The original copy of the Letter of
Confirmation/Certificate of Examination shall be issued to the taxpayer concerned and
the duplicate copy shall be attached to the Tax Data and Assessment Form fr file at the
Local Treasury Office.

6) Submission to the Local Chief Executive by the Local Treasurer of the list of final demand
letters sent to business taxpayers for possible foreclosure proceedings.

82 ]st Assessment Notice, LTD Form 29

83 2"" Assessment Notice, LTD Form 30

8 3rd of Final Assessment Notice, LTD Form 31
4

85
Final Notice before issuance of Warrant of Distraint and Levy, LTD Form 32
86
Letter of Confirmation, LTD Form 35