ACT No. VI of 2003 AN ACT to provide for the regulation of the internal audit and financial investigative functions, including the power to carry out effective independent internal audits and financial investigations, providing for the necessary safeguards to ensure the protection of the

I assent.

(L.S.)

G UIDO DE M ARCO

President

25th July, 2003

ACT No. VI of 2003

AN ACT to provide for the regulation of the internal audit and

financial investigative functions, including the power to carry out

effective independent internal audits and financial investigations,

providing for the necessary safeguards to ensure the protection of the

financial interests of Government including the funds it may receive

or be required to manage under Malta’s international obligations.

BE IT ENACTED by the President, by and with the advice and

consent of the House of Representatives, in this present Parliament

assembled, and by the authority of the same, as follows:-

PART I

PRELIMINARY

The short title of this Act is Internal Audit and Financial

Investigations Act, 2003.

(Articles 11 and 21)

Oath of Officers of the Internal Audit and

Investigations Directorate

''I …………………………………………………….., solemnly

swear/affirm that I will honestly and diligently fulfil my duties as an

officer of the Internal Audit and Investigations Directorate in

conformity with the requirements of the Internal Audit and Financial

Investigations Act, and that I will not, except as provided by law, at

any time disclose or make known any matter which comes to my

knowledge by reason of my service as such.

So help me God.

Signature of person taking oath

Sworn and signed before me this .............. day of ....................... of

the year ............... at ............................................................................

Attorney General

Passed by the House of Representatives at Sitting No. 28 of the

21st July, 2003.

A NTON T ABONE

Speaker

R ICHARD J. C AUCHI

Clerk to the House of Representatives

In this Act unless the context otherwise requires -

"auditee" means any entity which is or may be the subject of an

internal audit and, or a financial investigation performed by the

Director as provided for in this Act;

"Board" means the Internal Audit and Investigations Board;

"compliance and assurance functions" means those functions

within a Government department or ministry that ensure that financial

and other related controls, systems, policies and procedures necessary

for the proper functioning of that Government department or ministry

are adhered to;

"conflict of interest" is a situation where any officer of the

Directorate has a private or personal interest to influence, or appear to

influence that which is effectively expected of him in the

performance of his duties;

"Director" means the Director, Internal Audit and Investigations

Directorate and includes, to the extent of the authority given, any

person authorised in that behalf by the Director;

"Directorate" means the Internal Audit and Investigations

Directorate referred to in Part IV of this Act;

"entity" includes both natural and legal persons, including any

body or association of persons, whether corporate or unincorporate;

"financial investigation" means the in-depth examination of all

circumstances relative to irregularities and cases of suspected fraud,

including the corruption of public officers, and, in that regard, the

acquiring of records and, or, information and the carrying out of

related assessments, analysis and recommendations, such "financial

investigation" being limited in scope to the financial implications that

could arise out of such an irregularity or suspected fraud;

"functions" includes powers and duties;

"internal audit" means an independent, objective assurance and

consulting activity designed to add value and improve the operations

of auditees, helping the auditee to accomplish its objectives by

bringing a systematic, disciplined approach to evaluate and improve

the effectiveness of risk management, control, and governance

processes;

"irregularity" means whichever act or omission which

unlawfully diminishes public funds and whatever is not consonant

with the proper management thereof;

"public funds" also includes funds that Government receives,

pays, including funds to local councils, or is required to manage

under Malta’s international obligations, or under any other public

funds arising under any other law;

''public officers'' shall have the same meaning as is assigned to it

in the Constitution of Malta, and includes officials of international

organizations with whom Malta has international obligations, whilst

performing their duties on Maltese territory.

PART II

GENERAL PROVISIONS

The Directorate shall have two separate and distinct

functions: internal audit and financial investigations.

An internal audit in the manner as may be prescribed by

regulations may be carried out in any department of Government or

any entity falling under the supervision of Permanent Secretaries, for

the purpose of assisting them in the effective discharge of their duties.

A financial investigation may be carried out in terms of the

provisions of this Act in any department of Government and in any

other public or private entity which is in any way a beneficiary,

debtor or manager of public funds, for the purpose of protecting

public funds against irregularities and fraud, or otherwise to assess

such public or private entities’ liability to contribute to such funds.

PART III

THE INTERNAL AUDIT AND INVESTIGATIONS BOARD

There shall be a Board, to be known as the Internal Audit

and Investigations Board, which shall exercise the functions assigned

to it by this Act.

The Board shall be appointed by the Prime Minister for

such period as the Prime Minister may determine, and it shall be

directly responsible to him.

(1)

The Board shall be composed of

(a)

the Secretary to Cabinet as Chairperson;

(b)

the Director;

(c)

the Permanent Secretary in the Ministry of Finance;

(d) a person of a recognised standing in the accounting

and, or, auditing profession, who is not a public officer; and

(e)

one other member

Provided that at least two members shall have expertise in

disciplines related to public sector financial management.

(2) The Board shall meet at least quarterly and shall otherwise

regulate its own procedure.

(3) The decisions of the Board shall be taken by a majority of

votes and the Chairperson shall have both an original and a casting

vote in case of an equality of votes.

The Board shall have the following functions

Functions of the

Board.

(a)

to serve as an independent and objective body to

monitor the public internal financial control function in Malta;

(b)

to oversee the work of the Directorate;

(c)

to safeguard the continued independence of the

Director and officers of the Directorate;

(d) to endorse or otherwise plans, budgets and schedules

as proposed by the Director for the proper administration of the

Directorate;

(e)

to require the Directorate to carry out specific tasks

as provided under this Act, as and when necessary;

(f)

to set policies, procedures and methods for the

proper functioning of public internal audit and for the carrying

out of financial investigations.

PART IV

THE INTERNAL AUDIT AND

INVESTIGATIONS DIRECTORATE

The Internal Audit and Investigations Directorate, shall be The Directorate.

the body charged with exercising and performing the functions

assigned to it under this Act. The Directorate shall be headed by the

Director.

(1)

The officers of the Directorate shall be public Public officers.

officers.

(2) The Director and the other officers of the Directorate shall,

before entering upon their duties, take an oath in the form as set out in

the Schedule to this Act, in the hands of the Attorney General, that

they will faithfully and impartially perform the duties of their office,

and that they will not divulge any information acquired by them

under this Act, except in those circumstances specified in this Act.

In the fulfilment of their functions under this Act, the Independence.

Director and other officers of the Directorate shall not be subject to

any direct or indirect influence or control by the auditee and shall not

themselves influence or control the auditee.

PART V

FUNCTIONS OF THE OFFICERS OF THE DIRECTORATE

The Director shall be responsible for the day-to-day

management of the Directorate.

(1) The Director shall, as soon as may be, after

concluding a financial investigation or an internal audit, transmit a

report thereof to the Permanent Secretary under whose supervision

the auditee falls. The Director may also transmit a copy of such report

to the auditee.

(2) Within one month of receipt of such report, the Permanent

Secretary shall give such instructions to the auditee as may be

necessary to remedy any shortcomings, and shall inform the Director

accordingly.

The Director shall conduct such follow-up reviews as may

be necessary after an internal audit and financial investigation.

If an entity has reason to suspect any irregularity and, or a

suspected case of fraud of public funds, it shall refer the matter

forthwith to the Director, and shall supply to the Director all

information in his possession relating thereto.

(1) Where the Director or the Board considers that there

would be a conflict of interest if the Director himself were to conduct

an internal audit or a financial investigation, the Board may appoint a

senior public officer from amongst the officers of the Directorate to

conduct that investigation in his stead.

(2) It shall be the duty of every officer of the Directorate who

has any form of a conflict of interest in any internal audit or financial

investigation, he is assigned to work upon, whether such conflict is

direct or indirect, to immediately disclose to the Director his interest

and refrain completely from involving himself in that particular case

Provided that any officer of the Directorate who knowingly

acts in contravention of this subarticle shall be guilty of an offence

against this Act and shall, on conviction, be liable to a fine (multa) of

not more than one thousand liri (Lm 1,000), and shall also be subject

to disciplinary proceedings as provided for in the Public Service

Commission (Disciplinary Procedures) Regulations, 1999.

Whenever, and as soon as, the Director firmly establishes Suspected cases

the existence of suspected cases of irregularities and, or suspected of

fraud.

cases of fraud concerning the responsibilities of the auditee under

review, the Director shall, if he is of the opinion that the irregularity,

if proved, would constitute a criminal offence, immediately inform

the Attorney General; otherwise, if the Director is of the opinion that

the irregularity is of an administrative nature, he shall inform the

Permanent Secretary of the auditee.

The Director shall, not later than the first three months of Annual report.

each year, compile and transmit to the Board an Annual Report

dealing generally with the activities of the Directorate during the

previous year and containing such information relating to the

activities of the Directorate as the Board may from time to time

require. The Board shall determine the distribution of such a report as

and when required.

(1) Except as may be expressly provided by any law, the Power of entry.

Director shall, for the purpose of carrying out his functions under this

Act, have the power -

(a)

to enter and inspect any premises of an auditee in

order to conduct an internal audit and, where he has reason to

suspect that irregularities and, or fraud, have occurred or are

occurring, to enter any premises of an auditee for the purpose of

conducting a financial investigation

Provided that, if access is required to any premises

occupied in whole or in part for the purpose of habitation, such

access shall require the prior issue of a warrant signed by a

Magistrate

Provided further that entry shall take place during

daytime;

(b) to require the auditee to produce any books, records,

files, accounts, documents or information including any

computer data in any form and or part thereof, including

contracts, bills, vouchers and receipts relating to them, and if

deemed necessary by the Director, for the latter to retain such

documents in the original, and to ensure that copies or extracts

are made thereof without paying any fee therefor

notwithstanding any law or regulations to the contrary.

(2) Without prejudice to subarticle (1)(b), and for the purpose

of his functions under this Act, the Director may rely on any of the

records kept or made by any audit or investigative unit of any entity

including the person or unit discharging the compliance and

assurance functions within the Government department or ministry

concerned.

When conducting an internal audit or a financial

investigation concerning funds managed by Malta in terms of its

international obligations, the Director may be assisted by

representatives of the international organisation concerned, who may

participate jointly with the Director in the audit or investigation, as

the case may be, and for such purpose such representatives shall be

considered to be under the same obligations as officers of the

Directorate and shall, before entering upon their duties, take the oath

specified in the Schedule to this Act.

(1) All information furnished by an auditee during the

course of any internal audit or financial investigation shall at all times

be treated as confidential and shall be solely used by the Directorate

for the purpose of carrying out the internal audit and, or financial

investigation.

(2) The Director shall treat internal audit reports and reports of

financial investigations as strictly confidential and shall, except for

the purpose of any criminal investigation or prosecution, only

disclose their contents to the Permanent Secretary and, if necessary,

to the Board, or to the Auditor General.

(3) Without prejudice to the rights of the Auditor General

under any law, no information obtained in any way under this Act

shall be disclosed except

(a) for the purposes of the financial investigation and

the prosecution of a criminal offence;

(b) to officers of the Directorate in the course of their

duties under this Act; and

(c) in matters which under this Act arise out of Malta’s

international obligations, to the relevant foreign audit and

control authorities.

PART VI

MISCELLANEOUS

For the purposes of article 9(a), the Board shall appoint a

Co-ordinating Committee, to be chaired by the Director, in order to

co-ordinate the activities of, and to facilitate the exchange of

information between, different entities charged with the protection

and safeguarding of public funds; the terms of reference of the Co-

ordinating Committee shall be determined by the Board.

Any person who wilfully obstructs the Director in the Offences and

performance of his functions under this Act, or who fails, when penalties.

requested, to grant access to any premises or to produce any records

to the Director, or who fails to comply with the provisions of article

16, shall, without prejudice to any other liability under any other law,

be guilty of an offence against this Act and shall, on conviction, be

liable to a fine (multa) of not more than one thousand liri (Lm 1,000)

or to imprisonment for a term of not more than three months, or to

both such fine and imprisonment.

(1) The Board shall, once every three years, appoint Review.

auditors or firms of auditors, duly certified under the provisions of the

Accountancy Professions Act, to conduct reviews of the Directorate’s Cap. 281.

operations.

(2) The auditors or firms of auditors appointed under

subarticle (1) shall be independent of the Director and the work of the

Directorate and, on completion of the review, shall submit a written

report to the Board.

The Prime Minister may from time to time make Regulations.

regulations for the better giving effect to any of the provisions of this

Act.