ILOILO CITY, Philippines ? The employees of the Iloilo provincial government will have to refund around P21 million in disallowed bonuses through salary deductions, according to a provincial capitol official.

Provincial administrator Raul Banias said on Friday that Governor Arthur Defensor was finalizing the payment scheme that would include cuts in bonuses of around 1,500 employees and officials.

Banias said the provincial government has no recourse but to implement the findings and recommendations of the Commission on Audit, which disallowed bonuses granted in 2002 under the administration of then Governor Niel Tupas.

The employees, including the provincial officials, had received an average of P30,000 in additional Christmas bonuses.

The COA ruled that the bonuses violated laws and regulations in granting incentives to government employees because the bonuses exceeded the Personal Services (PS) limitation in violation of Section 325 of Republic Act No. 7160 (Local Government Code of 1991).

The Supreme Court affirmed the COA ruling with finality on June 17, 2008.

Banias said the Bureau of Local Government Finance (BLGF), an arm of the Department of Finance that has jurisdiction over the fiscal and financial affairs of local governments, had recommended that the employees refund the illegal bonuses through an initial payment of 30 percent of the sum and the balance to be paid by installment in three years.

But Defensor was still negotiating for a longer payment schedule for the employees so that their take-home pay would not be significantly affected, according to Banias.

?The refund will start this year through cuts in the bonuses and 13th month pay. We are just waiting for the final scheme and schedule,? Banias said.

The COA has also ruled as illegal the P50,000 granted by the Iloilo provincial government to each employee on December 2009 also under the Tupas administration.

In an audit observation memorandum dated March 15, 2010, state auditors said the bonuses totaling P141,401,198.60 violated laws and regulations in granting incentives to government employees.

Banias said the disallowed bonuses would also be refunded by the employees when the ruling becomes final and executory.