The Commission on Audit (CoA) has warned the Land Transportation Office (LTO) that it will issue a notice of disallowance should the agency fail to address within this month P1.272 billion worth of payment discrepancies with a German-based information technology (IT) provider. 

A notice of disallowance is issued for “irregular/unnecessary/excessive and extravagant” transactions, as well as those considered illegal and unconscionable. 

The issue pertains to discrepancies in the payment of P1.272 billion of LTO to Dermalog for the agency’s P8.2 billion Road Transportation Information Technology Infrastructure Project — Component A, or the Land Transportation Management System (LTMS) from 2019 to 2022.

The IT project is a web-based core system that aims to replace the LTO’s old IT system (Stradcom), including the establishment and operationalization of an exclusive on-premise private cloud, network operations center, and technical support and help desk centers.

In a letter sent to the LTO in November last year, the CoA said it has to suspend the audit pending the agency’s response to its audit observation memo that flagged, among others, non-compliance with laws and regulations, contract violation, and incomplete submission of relevant supporting documents.

At least 70 LTO officials have been held responsible for the non-compliance, along with Dermalog.

“The audit team has yet to receive the complete compliance and/or justifications from the [LTO] on these noted observations/issues on the aforesaid AOM,” the CoA told LTO, noting that follow-ups were even made on May and November last year yet still no response from the agency.

State auditors warned that “Items suspended in audit, which are not settled within 90 days from receipt hereof shall become a disallowance.”

The auditing body also instructed the LTO and Dermalog to justify their failure to provide three redundant internet lines, each with a bandwidth of 200 Mbps, for the LTO Data Center. 

Audit records showed that Dermalog only provided 80 Mbps for each bandwidth or 60 percent below what it offered in the technical proposal.

This lack of redundancy, CoA said, left the LTMS vulnerable to service disruptions, such as the fiber cut in October, which brought LTO transactions to a halt and resulted in considerable revenue losses.

The CoA also flagged the non-compliant features of the Driver’s Licensing System, including its failure to provide interoperability in government information and communications technology inability to publish generated reports on the LTO Portal, as well as non-compliance in other core applications of the LTMS, such as revenue collection system, motor vehicle inspection and registration system, and law enforcement and traffic adjudication system.