INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS ACT

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

CHAPTER 461

INTERNAL AUDIT AND FINANCIAL

INVESTIGATIONS 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.

25th July, 2003

ACT VI of 2003 , as amended by Act IX of 2005 and Legal Notice

427 of 2007 and XXI of 2020 .

PART I

PRELIMINARY

The short title of this Act is the Internal Audit and

Financial Investigations Act.

(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

In this Act unless the context otherwise requires -

"Audit Committee" means the Audit Committee established

under article 7(3) of the Central Bank of Malta Act;

"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;

"Cabinet" means the body to which article 79 of the Constitution

refers;

"Central Bank of Malta" or "the Bank" means the Central Bank

of Malta established by article 3 of the Central Bank of Malta Act;

"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

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

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.

"Secretary to the Cabinet" means the public officer to whom

article 94 of the Constitution refers.

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.

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

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 directly responsible to the Prime

Minister.

(1)

The Board shall be composed of

(a)

the Secretary to the Cabinet as Chairperson;

(b)

the Director;

(c)

the Permanent Secretary in the Ministry of Finance;

(d)

a person of recognised standing in the accounting and, or,

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

shall be appointed by the Cabinet for such a period as it

may determine; and

(e) one other member, who shall be appointed by the Cabinet

for such a period as it may determine

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.

(4) Any communication issued or declaration made by the

Secretary to the Cabinet on behalf of the Cabinet for the purposes of

sub-article (1) shall be taken as a statement of the views or decisions of

the Cabinet, unless the contrary is proved.

The Board shall have the following functions

(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.

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

PART IV

THE INTERNAL AUDIT AND

INVESTIGATIONS DIRECTORATE

The Internal Audit and Investigations Directorate, shall be

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 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

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.

(3) Notwithstanding subarticles (1) and (2), where the auditee

is the Central Bank of Malta, any report of a financial investigation

carried out at the Bank shall be presented to the Chairman of the

Audit Committee of the Bank who shall, within one month of the

receipt of such report, give instructions to the Governor of the Bank

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.

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

(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 two thousand and three hundred and twenty-nine

euro and thirty-seven cents (2,329.37), and shall also be subject to

disciplinary proceedings as provided for in the Public Service

Commission (Disciplinary Procedures) Regulations.

Whenever, and as soon as, the Director firmly establishes

the existence of suspected cases of irregularities and, or suspected

cases of fraud concerning the responsibilities of the auditee under

r e v i e w, t h e D i r e c t o r s h a l l , i f h e i s o f t h e o p i n i o n t h a t t h e

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

Provided that in the case of the Central Bank of Malta,

where the Director is of the opinion that the irregularity is of an

administrative nature, he shall inform the Chairman of the Audit

Committee of the Bank.

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

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

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

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

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 or, as the case

may be, the Chairman of the Audit Committee of the Central Bank

of Malta, 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

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS

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

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

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 two

thousand and three hundred and twenty-nine euro and thirty-seven

cents (2,329.37) 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

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

the Accountancy Professions Act, to conduct reviews of the

Directorate’s 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 for the better giving effect to any of the provisions of

this Act.

INTERNAL AUDIT AND FINANCIAL INVESTIGATIONS