Can a State Auditor Notarize Documents of the Agency They Audit? Conflict-of-Interest Rules in the Philippine Context

Introduction

In the Philippine public sector, state auditors play a critical role in safeguarding public funds and ensuring accountability in government operations. As employees of the Commission on Audit (COA), the constitutional body tasked with examining, auditing, and settling all accounts pertaining to government revenues and expenditures, auditors must maintain the highest standards of independence and impartiality. Notarization, on the other hand, is a notarial act performed by authorized notaries public to authenticate documents, administer oaths, and certify signatures, governed primarily by the 2004 Rules on Notarial Practice as amended.

A key question arises when a state auditor, who may also be a licensed notary public (often the case for lawyers in government service), seeks to notarize documents for the very agency they are auditing. This scenario raises potential conflicts of interest, where personal or professional duties could undermine the auditor's objectivity. This article explores the legal prohibitions, ethical standards, and practical implications under Philippine law, analyzing whether such actions are permissible and the consequences of violations.

Constitutional and Legal Framework Governing State Auditors

The 1987 Philippine Constitution establishes the COA as an independent constitutional commission under Article IX-D. Section 2 mandates the COA to audit all government entities, including national agencies, local governments, and government-owned or controlled corporations (GOCCs). Auditors are expected to perform their duties without fear or favor, free from any influence that could impair their judgment.

Key laws and regulations include:

Presidential Decree No. 1445 (Government Auditing Code of the Philippines): This codifies the principles of government auditing, emphasizing independence. Section 26 requires auditors to avoid any situation that might compromise their objectivity. While it does not explicitly address notarization, it prohibits auditors from engaging in activities that could create a financial or personal interest in the audited entity.
Republic Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees): Section 7(b) prohibits public officials from engaging in private practice of their profession if it conflicts with their official functions. For auditors who are lawyers, notarization is considered part of legal practice. More critically, Section 7(d) bars officials from having any financial or material interest in transactions requiring their approval or intervention. Notarizing a document could be seen as intervening in an agency's official acts, especially if the document relates to financial matters under audit.
COA's Internal Rules and Circulars: The COA has issued various memoranda and guidelines reinforcing auditor independence. For instance, COA Memorandum No. 2002-053 and similar issuances prohibit auditors from providing consulting services or other non-audit functions to audited agencies. Although notarization is not auditing per se, it could be analogous if it authenticates documents that auditors might later review.

Notarial Practice in the Public Sector

Notaries public in the Philippines are regulated by the Supreme Court through the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC), as amended. Government lawyers, including those in the COA, can be commissioned as notaries public under Rule II, Section 1, provided they are members of the Philippine Bar in good standing.

However, restrictions apply:

Rule IV, Section 5: A notary public shall not perform a notarial act if they are a party to the instrument or have a direct or indirect interest in it. For a state auditor, auditing an agency creates an indirect interest, as the auditor's role involves scrutinizing the agency's documents and transactions.
Executive Order No. 292 (Administrative Code of 1987): Book V, Title I, Subtitle B, Chapter 6, allows government employees to engage in limited private practice, but only outside office hours and without conflict. Notarization during office hours or involving audited agencies would violate this.
Integrated Bar of the Philippines (IBP) Guidelines: As lawyers, COA auditors are bound by the Code of Professional Responsibility and Accountability (CPRA), effective 2023. Canon II, Section 2 requires lawyers to avoid conflicts of interest. Representing or assisting an audited agency through notarization could breach this, as it might appear as providing legal services to a "client" under audit.

Analyzing Conflict of Interest

A conflict of interest occurs when an auditor's notarial act could reasonably be perceived as impairing their independence. Consider these dimensions:

Actual vs. Apparent Conflict

Actual Conflict: If an auditor notarizes a contract or affidavit for an agency, and later audits related transactions, they might overlook irregularities to avoid self-incrimination or embarrassment. For example, notarizing a procurement document could make the auditor complicit if fraud is discovered.
Apparent Conflict: Even without malice, the mere act creates a perception of bias. The COA's auditing standards, aligned with International Standards of Supreme Audit Institutions (ISSAI), emphasize that auditors must be free from circumstances that threaten objectivity (ISSAI 40). Notarization could undermine public trust in the audit process.

Specific Scenarios

Financial Documents: Notarizing vouchers, deeds, or financial reports for an audited agency directly conflicts, as these are core audit subjects under PD 1445.
Administrative Documents: Even non-financial items, like employee affidavits, could pose issues if they relate to internal controls or compliance, which auditors evaluate.
Personal Capacity: If the auditor notarizes in a personal capacity outside work, but the document pertains to the agency, the conflict persists due to the auditor's ongoing oversight role.

Comparative Analysis with Other Professions

Similar restrictions apply in other fields. For instance, certified public accountants (CPAs) under the Philippine Accountancy Act (RA 9298) cannot audit entities where they provide bookkeeping services. By analogy, a COA auditor providing notarial services acts as a "service provider" to the agency, violating independence.

Consequences of Violations

Violations can lead to severe repercussions:

Administrative Sanctions: Under RA 6713, Section 11, penalties include fines up to five years' salary, suspension, or dismissal. COA may impose internal discipline, including revocation of notarial commission.
Criminal Liability: If notarization involves falsification (e.g., under Article 171 of the Revised Penal Code), it could result in imprisonment. The Ombudsman may investigate for graft under RA 3019 (Anti-Graft and Corrupt Practices Act), Section 3(e), if it causes undue injury to the government.
Civil Liability: Affected parties could sue for damages if a notarized document leads to losses due to biased auditing.
Professional Discipline: The Supreme Court may disbar or suspend the auditor-lawyer for ethical breaches under the CPRA.

Best Practices and Recommendations

To avoid conflicts:

Auditors should refrain from notarizing any documents related to audited agencies, even indirectly.
Seek COA clearance or ethics committee opinions for borderline cases.
Agencies should use external notaries to maintain separation.
Training on ethics, such as COA's mandatory seminars, reinforces these rules.

In practice, many COA auditors voluntarily limit their notarial practice to personal or unrelated matters to uphold integrity.

Conclusion

In the Philippine context, a state auditor generally cannot notarize documents of the agency they audit without risking a conflict of interest. The Constitution, PD 1445, RA 6713, and notarial rules collectively prioritize independence, prohibiting actions that could compromise audit objectivity. While no single law explicitly bans this specific act, the cumulative effect of ethical and legal standards renders it impermissible. Public officials must err on the side of caution to preserve the integrity of government auditing, ensuring accountability remains untainted. This principle not only protects the auditor but also upholds public confidence in fiscal governance.