COA orders LTO, foreign contractor to address audit findings by February 28

Philstar.com

February 22, 2025 | 9:52am

MANILA, Philippines — The Commission on Audit (COA) has warned 70 current and former Land Transportation Office (LTO) officials and German IT contractor Dermalog Identification System GMBH of a possible P1.27 billion payment disallowance for the Land Transportation Management System (LTMS) project if audit discrepancies are not resolved this month.

On Nov. 29, 2024, the COA suspended the audit on questionable items in the LTMS project covering the period from 2019 to 2022 after the LTO failed to submit its response to the audit observation memorandum (AOM) on the project’s various deficiencies involving non-compliance with applicable laws, rules and regulations; non-conformance with the contract requirements; and incomplete submission of relevant supporting documents. 

Previously, follow-up letters were sent by the COA on May 21 and November 26 last year requesting for the LTO’s complete compliance with the audit findings.

But after not receiving any reply from the LTO regarding the issues and observations noted in the AOM, the COA decided to issue the notice of suspension with a warning that “items suspended in audit which are not settled within 90 days from receipt hereof shall become a disallowance” resulting from deficiencies in some P1.27 billion worth of transactions between the LTO and Dermalog.

The 90-day period will lapse on February 28.

Disallowance is defined by the COA as “disapproval in audit of a transaction, whether in whole or in part.” Some of the questionable items in the AOM that require justification include the non-compliance of Dermalog in providing three redundant internet lines with a bandwidth of 200 Mbps each for the LTO Data Center.

The COA revealed that Dermalog only provided 80 Mbps for each bandwidth, which made the LTMS vulnerable to service disruptions. In fact, the LTMS suffered a nationwide glitch in October 2024 due to an internet cable cut that cost the LTO millions in foregone revenues and burdened the transacting public. 

The state auditing body discovered non-compliant features in the Driver’s Licensing System, including its failure to provide interoperability in government information and communications technology, and its inability to publish generated reports on the LTO portal.

Non-compliance was also observed in other core applications of the LTMS such as the Revenue Collection System, the Motor Vehicle Inspection and Registration System, and the Law Enforcement and Traffic Adjudication System. 

The COA disclosed in its 2023 audit report that the LTMS remains to be fully unutilized due to 41 highly severe system issues as well as 49 enhancements needed to ensure smooth driver’s license application and motor vehicle registration. 

Limitations of the LTMS and the need to minimize public inconvenience prompted the LTO to release several memos in 2023 allowing the operations of both the LTMS from Dermalog and the LTO-IT System developed by Stradcom Corporation for areas with no internet service and where the required bandwidth of LTMS is unavailable.

The LTO-IT System is also being used in the Bangsamoro region where the LTMS is not yet ready, and in LTO sites where the LTMS lacks functionalities. 

One of those identified by the COA to comply with the submission of the required documents was former LTO chief Edgar Galvante, who signed the deadline extension orders in favor of Dermalog which were also flagged by the COA in its previous audit reports.