On State Internal Financial Control

Law of Georgia

On State Internal Financial Control

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011

Article 1. Objectives and scope of the Law🔗

1. This Law regulates the procedure and principles for introducing the state internal financial control system in the institutions defined by this Law, as well as other matters important for the development, establishment and implementation of the state internal financial control system.

2. On the basis of this Law, the methodology and standards necessary for the existence of the state internal financial control system are determined, as well as the relations between the Ministry of Finance of Georgia and other entities during the introduction of this system, their powers and duties.

3. The Ministry of Finance of Georgia is the authorised body which, through the Harmonisation Centre, facilitates the establishment and development of the state internal financial control system and coordinates and harmonises matters related thereto.

4. The state internal financial control system includes:

a) financial management and control;

b) internal audit;

c) the Harmonisation Centre.

5. The operation of this Law extends to the institutions provided for by paragraphs 1 and 2 of Article 4 of this Law.

6. The operation of Chapter II of this Law extends to all budgetary organisations, irrespective of the obligation to create an internal audit entity in these organisations.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015

Law of Georgia No. 3574 of 19 October 2023 – website, 03.11.2023

Article 2. Definition of terms used in the Law🔗

The terms used in this Law have the following meaning:

a) internal audit subject – a structural subdivision (unit) of an institution or a unit subordinate to the institution, which is authorized to conduct internal audit in accordance with the requirements of this Law;

b) internal auditor – an employee of the internal audit subject who conducts internal audit in the manner established by this Law;

c) internal audit object – an institution and/or a system of an institution and/or a structural subdivision/subdivisions (unit/units) of an institution and/or a unit/units subordinate to the institution, in which internal audit is conducted;

d) institution – an institution provided for by paragraph 1 or 2 of Article 4 of this Law;

e) internal control system – a system of managerial, financial and other types of control mechanisms of an institution, which includes the organizational structure, methods, procedures, as well as the internal audit function, which is established to help the institution achieve its objectives and conduct its activities lawfully, transparently, economically, efficiently and productively, and for the establishment of which the heads of the institution are responsible;

f) financial management and control – a part of the internal control system, which is introduced and implemented by the heads of the institution, and which ensures the lawful, transparent, economic, efficient and productive use of funds in achieving the institution's objectives;

g) internal audit – an independent, objective, assurance and consulting activity aimed at improving the activities of the institution, ensuring the achievement of its objectives and the full performance of its tasks, which, through a systematic, disciplined and organized approach, evaluates and improves the effectiveness of risk management, control and governance processes;

g¹) assurance activity – the performance of an objective analysis of audit evidence of the institution's governance, risk management and control processes for the purpose of preparing an independent assessment;

g²) consulting activity – the provision of advice or recommendations to the object of consultation or the provision of other similar supporting services to it, including conducting training and/or providing facilitation, the content and scope of which are agreed with the said object and which is aimed at improving the institution's governance, risk management and control processes without the internal auditor assuming managerial responsibility;

h) internal audit inspection – a recommendatory inspection, which includes a set of actions, tasks and processes to be carried out in the internal audit object;

i) Harmonization Center – a structural subdivision of the Ministry of Finance of Georgia, which promotes and ensures the introduction, development and functional improvement of the public internal financial control system in institutions and the coordination of these matters;

j) system audit − assessment of the adequacy and effectiveness of the financial management and control system;

k) compliance audit – examination and assessment of the compliance of an institution's activities with policies, plans, procedures, laws and other regulatory acts;

l) performance audit – an objective and reliable assessment of the measures, operations, programmes, organisational arrangement and systems carried out by the internal audit object, for the purpose of establishing their compliance with the principles of economy, productivity and effectiveness and identifying the potential for improvement;

m) financial audit – examination of the accounting and financial reporting of the internal audit object for the purpose of establishing their compliance with the legislation of Georgia and standards;

n) information technology audit − examination and assessment of the adequacy of information technologies and the protection of system security for the purpose of ensuring the confidentiality and integrity of the system and the availability of information;

o) internal audit report – a report drawn up by an internal auditor as a result of conducting an internal audit, which reflects the results of the internal audit, the process of conducting the internal audit and the findings, their analysis and the recommendations developed on their basis, as well as the arguments of the internal audit object (if such arguments exist);

p) code of ethics for internal auditors – principles which apply to internal auditors and include the basic rules of their conduct;

q) internal audit standards – the internal audit standards developed by the Institute of Internal Auditors (IIA);

r) international standards for internal control − the "Guidelines for Internal Control Standards for the Public Sector" of the International Organization of Supreme Audit Institutions (INTOSAI);

s) risk − the probability of the occurrence of an event which may have a negative impact on the achievement of an institution's goals and the performance of its tasks;

t) economy – minimisation of the cost of resources under conditions of acceptable quality, which implies the timely acquisition of the necessary resources of appropriate quality and quantity at the best price;

u) effectiveness – assessment of the achievement of planned results and set goals, which implies the link between the achieved goals and results and the measures carried out;

v) productivity – achievement of the maximum result with the available resources, which implies, taking into account appropriate quality, quantity and timeliness, the ratio between the resources used and the final product.

Law of Georgia of 26 October 2010 No. 3756 - LHG I, No. 62, 05.11.2010, Art. 395

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011

Law of Georgia of 18 December 2015 No. 4675 - website, 29.12.2015

Law of Georgia of 19 October 2023 No. 3574 – website, 03.11.2023

Article 3. Independence of the internal audit entity and the internal auditor🔗

1. The internal audit entity is accountable to the head of the institution and, in the cases determined by this Law, acts in coordination with the Harmonisation Centre.

2. The internal audit entity is functionally independent from other entities of the institution.

3. The internal audit entity is functionally independent in the process of planning, conducting and reporting of internal audit.

4. The internal auditor is independent in his/her activities and acts in accordance with the legislation of Georgia, internal audit standards, internal audit methodology, the Code of Ethics for internal auditors and other instructions and legal acts. Interference in the internal auditor's activities or any other influence on him/her shall be inadmissible.

5. The head of the institution ensures the functional independence of the internal auditor in the process of planning, conducting and reporting of the audit and monitoring the implementation of the issued recommendations.

6. The head of the institution ensures an appropriate response to the recommendations reflected in the final internal audit report.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015

Article 4. Establishment of internal audit entities in individual institutions🔗

1. Internal audit entities are established in the following institutions:

a) in the ministries of Georgia;

b) in the ministries of the Autonomous Republics of Abkhazia and Adjara;

c) in those legal entities of public law whose list and the strategy for the introduction and development of the internal audit system in them are approved by the Government of Georgia upon the submission of the Ministry of Finance of Georgia;

d) in the city hall of a municipality – on the basis of the regulation of the city hall approved by the council of the relevant municipality.

2. An internal audit entity may be established in a legal entity of public law that is not an institution provided for by subparagraph „c“ of paragraph 1 of this Article, in a legal entity of private law, more than 50 per cent of whose shares or stake is owned by the State, and in a budgetary organisation, by their own decision.

3. An institution provided for by paragraph 1 or 2 of this Article shall notify the Harmonisation Centre of the establishment of an internal audit entity.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015

Law of Georgia No. 1266 of 26 July 2017 – website, 29.07.2017

Law of Georgia No. 6945-rs of 15 July 2020 – website, 28.07.2020

Law of Georgia No. 3574 of 19 October 2023 – website, 03.11.2023

Article 5. Development of the Financial Management and Control System🔗

1. Each institution shall develop its own financial management and control system in accordance with this Law, other legislative and subordinate normative acts of Georgia, and the instruction on the rules and procedures for establishing the financial management and control system developed by the Harmonization Centre and approved by the Government of Georgia.

2. The head at every hierarchical level of an institution shall, within the scope of his/her competence, be responsible for notifying the superior head about the actions carried out in connection with financial management and control.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 6. Objective of Financial Management and Control🔗

1. The financial management and control system is introduced to improve the financial management and decision-making process, to achieve the institution's goals and accomplish its tasks, which is carried out through the following means:

a) compliance of the operations carried out by the institution with the legislation of Georgia, regulatory rules, internal policy, international treaties and agreements of Georgia;

b) complete, exhaustive and reliable reporting on financial and operational information;

c) economical, efficient and productive use of funds and resources;

d) protection of assets, information and other resources from loss, misuse or mismanagement and damage.

2. Financial management and control shall be carried out by the heads of the institution in all structural subdivisions (units) of the institution and in all units subordinate to the institution.

3. Financial management and control covers both financial and non-financial processes, operations and actions related to the institution's activities.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 7. Essence of Managerial Accountability🔗

1. The head at every hierarchical level of an institution shall be accountable to the superior head for the action carried out by him/her and for achieving the institution's goals and accomplishing its tasks through lawful, economical, efficient and productive management of funds.

2. In the case of the work of more than one institution and/or structural subdivision (unit) of an institution or a unit subordinate to an institution on one programme or project, the respective heads shall agree in writing on the scope of operation of the managerial accountability of each of them.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 8. Scope of managerial accountability and responsibility🔗

1. The head of the institution, within the scope of his/her competence:

a) identifies, assesses and manages risk;

b) defines the goals and objectives of the institution; to achieve the set goals and accomplish the objectives, develops strategic and action plans and programmes;

c) in accordance with the legislation of Georgia, defines and manages the resources necessary to achieve the goals and accomplish the objectives of the institution;

d) promotes the effective management of human resources and the improvement of their qualifications;

e) promotes the establishment of an effective data protection and management system;

f) to effectively perform the assigned duty, develops and establishes an optimal organisational structure;

g) delegates authority in the process of decision-making, implementation and control;

h) ensures the introduction of procedures for the complete, accurate, timely and regular recording of all operations carried out by the institution;

i) promotes the functioning of the internal audit entity in accordance with the legislation of Georgia;

j) ensures the monitoring of the financial management and control system, and takes appropriate measures to improve the system based on the recommendations of internal auditors and other assessments;

k) implements and promotes the introduction of anti-corruption measure procedures;

l) assesses the results of the state of the financial management and control system;

m) exercises other powers conferred on him/her by the legislation of Georgia.

2. Within the requirements of this Law, the head of the institution shall be responsible for providing the internal audit entity with the appropriate resources and for its continuous functioning.

3. (Removed - 18.12.2015, No. 4675).

Law of Georgia No. 5447 of 9 December 2011 - website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 - website, 29.12.2015.

Article 9. Delegation of authority🔗

1. The head of the institution may delegate the authority defined by this Chapter to a subordinate authorised person.

2. Delegation of authority shall not release the head of the institution from responsibility in the exercise of the authority delegated by him/her.

Law of Georgia No. 5447 of 9 December 2011 - website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 - website, 29.12.2015.

Article 10. Components of financial management and control🔗

1. Financial management and control is based on international standards of internal control and is carried out through the following interrelated components:

a) control environment;

b) risk management;

c) control measures;

d) information and communication;

e) monitoring and evaluation.

2. The head of the institution, taking into account the specifics of the institution's activities, ensures the development, establishment and functioning of the components of financial management and control.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 11. Control environment🔗

For the functioning of the financial management and control system, the heads of institutions ensure the establishment and improvement of the relevant control environment, which includes:

a) personal and professional integrity and ethical values of managers and employees;

b) management processes and methods;

c) definition of the goals and objectives of the activity of the structural subdivision (unit) of the institution;

d) organisational structure, which includes the distribution of responsibilities and powers, as well as the hierarchy of reporting levels;

e) human resources management policy and practice;

f) competence of the employees of the institution.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 12. Risk management🔗

The head of the institution shall be responsible for establishing the risk management system. He/she determines the processes of identification, assessment, control and monitoring of those possible events and situations that affect the achievement of the goals and the performance of the objectives of the institution and/or the structural subdivision (unit) of the institution and/or the unit subordinate to the institution, and includes the implementation of the measures necessary to reduce the risk.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 13. Control measures🔗

1. Control measures are formed to reduce risk to an optimal level, to achieve the institution's goals and to accomplish its tasks, and are based on relevant instructions and procedures.

2. Control measures shall correspond to the activities of the institution's structural subdivision (unit), and the costs of their implementation shall not exceed the expected benefit.

3. Control measures include:

a) authorization procedures;

b) such distribution of duties that the same person is not responsible for authorization, the performance of an action and control;

c) establishment of a dual signature system, which makes it impossible to assume an obligation and make a payment without the simultaneous signature of the head of the institution and the head of its structural subdivision (unit) or another authorized person;

d) rules for access to assets and to financial and non-financial information;

e) implementation of preliminary and subsequent control;

f) establishment of procedures for the complete, accurate, timely and regular recording of all operations carried out by the institution;

g) assessment of the effectiveness and productivity of operations carried out by the institution, and of the compliance of processes and actions with the legislation of Georgia;

h) supervision;

i) establishment of procedures for effective human resource management;

j) documentation of all operations carried out by the institution, and others.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 14. Information and communication🔗

The head of the institution introduces and develops a reliable, complete and accessible information and communication system which:

a) ensures proper access to up-to-date and reliable information about the institution's activities at all hierarchical levels of the institution;

b) gives every employee of the institution the opportunity to receive complete and accurate information, directions and instructions about their function and responsibility.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 15. Monitoring and evaluation🔗

1. The head of the institution is responsible for the monitoring and evaluation of the financial management and control system, for the purpose of its adequacy, maintaining its functioning and timely updating. Monitoring also ensures the timely and appropriate implementation of the recommendations provided for by the internal audit report.

2. The monitoring and evaluation provided for by paragraph 1 of this article shall be carried out through continuous monitoring and self-assessment, together with the internal audit entity.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 16. Submission of the annual report on the introduction and development of the financial management and control system🔗

The heads of the institutions provided for by subparagraphs "a"–"c" of paragraph 1 of Article 4 of this Law shall submit the annual report on the introduction and development of the financial management and control system to the Ministry of Finance of Georgia by the end of January of the following year.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 17. Basic principles of the performance of the activities of an internal audit entity🔗

An internal audit entity shall perform its activities in compliance with this Law, other legislative and subordinate normative acts of Georgia, internal audit standards, the code of ethics of internal auditors, the regulation of the internal audit entity and the following basic principles:

a) independence;

b) integrity;

c) objectivity;

d) professionalism;

e) confidentiality;

f) legality;

g) transparency.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 18. Powers and objectives of an internal audit entity🔗

1. The powers of an internal audit entity extend to the system of the institution in which it is established.

2. Internal audit assists the institution in achieving its objectives by carrying out the following activities:

a) assessment of the quality of management of the risks facing the institution;

b) assessment of the adequacy and effectiveness of the financial management and control system;

c) assessment of the compliance of the institution's activities with the legislation of Georgia, existing rules and regulatory acts;

d) development of recommendations for the purpose of increasing the economy, efficiency and productivity of the institution's activities;

e) assessment of the reliability, accuracy and completeness of financial and other information;

f) assessment of the adequate protection of the institution's assets, other resources and information;

g) other activities that arise from the specifics of the institution's activities and do not contradict the legislation of Georgia, the objectives of this Law and the principles of independence of an internal auditor.

3. All processes and areas of activity ongoing in the system of the institution may be the subject of study and analysis by an internal audit entity within the scope of its competence.

4. Employees of the internal audit object shall cooperate with internal auditors in the performance of their activities and ensure access to the databases and documents existing in respect of all information related to matters within their competence and/or the performance of actions.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 19. Rights and obligations of the internal auditor🔗

1. The internal auditor shall be entitled, in the process of conducting an internal audit review, to receive all information and documents necessary for him/her and to have access to databases, regardless of their form (electronic version and other). The internal auditor shall also have the right to require the internal audit object to submit a document in the state language, to make copies of the document and other, except for the restrictions established by the legislation of Georgia.

2. The head of the institution and employees shall be obliged, within the scope of their competence, to provide appropriate assistance to the internal auditor in the process of conducting an internal audit review.

3. The internal auditor shall be obliged to:

a) comply with the regulation of the internal audit entity, internal audit standards, the code of ethics of internal auditors, internal audit methodology and other legal acts regulating internal audit;

b) before conducting the internal audit, submit to the internal audit object the individual plan of the audit review;

c) ensure the protection of personal data, state, official and commercial secrets of the internal audit object in the manner established by the legislation of Georgia and not disclose information that became known to him/her in the course of carrying out his/her activities or in connection therewith, except in the case where it follows from the purpose of the internal audit review and/or is provided for by the relevant legislation;

d) without the consent of the head of the institution, not make public the results of the internal audit review, except for the cases provided for by the legislation of Georgia.

Law of Georgia of 9 December 2011 No. 5447 – website, 22.12.2011.

Law of Georgia of 25 May 2012 No. 6328 – website, 12.06.2012.

Law of Georgia of 18 December 2015 No. 4675 – website, 29.12.2015.

Article 20. Head of the internal audit entity🔗

1. The head of the internal audit entity is entitled, in accordance with the procedure established by Georgian legislation, to determine the type of audit, the scope of action, the frequency of internal audit and the number of internal auditors required for the conduct of internal audit.

2. The head of the internal audit entity directs the activities of the internal audit entity in accordance with this Law and other legislative and subordinate normative acts of Georgia.

3. The head of the internal audit entity:

a) develops and submits to the head of the institution for approval the strategic and annual plans of internal audit;

b) coordinates the activities of internal auditors and distributes their functions in accordance with knowledge and qualification;

c) monitors the implementation of the annual internal audit plan and the application of the internal audit methodology by the internal audit entity;

d) ensures the assessment of the financial management and control system, as well as of the organizational structure and functions of the institution;

e) ensures the promotion of professional development of internal auditors;

f) cooperates with the Harmonization Centre and, upon request, provides it with relevant documentation and information;

g) takes into account the relevant recommendations and instructions issued by the Harmonization Centre within the framework of Georgian legislation;

h) monitors the implementation of the recommendations given to the internal audit object;

i) develops and implements the internal audit quality assurance and improvement programme.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 21. Planning of internal audit🔗

1. The types of internal audit plan are:

a) strategic plan of internal audit;

b) annual plan of internal audit;

c) individual plan of audit inspection.

2. Internal audit planning is carried out on the basis of risk assessment. Its results are reflected in the strategic plan of internal audit, on the basis of which the annual plan of internal audit shall be developed.

3. The strategic plan of internal audit shall be developed by the head of the internal audit entity and approved by the head of the institution. The strategic plan of internal audit derives from the long-term goals of the institution, covers a three-year period and determines the directions of strategic development in the field of internal audit.

4. The annual plan of internal audit shall be developed by the head of the internal audit entity and approved by the head of the institution. The annual plan of internal audit is based on the strategic plan of internal audit and reflects specific internal audit inspections.

5. In order to assess the adequacy, effectiveness and timeliness of the implementation of recommendations, the annual plan of internal audit shall provide for monitoring of the implementation of recommendations.

6. Any change in the strategic and annual plans of internal audit shall be made upon the proposal of the head of the internal audit entity, on the basis of risk assessment.

7. The annual and strategic plans of internal audit shall be approved before the commencement of the planned period.

8. The annual and strategic plans of internal audit, as well as the changes to be made therein, shall be prepared by the head of the internal audit entity and approved by the head of the institution. The annual and strategic plans of the internal audit entities of the institutions provided for by subparagraphs „a“–„c“ of paragraph 1 of Article 4 of this Law and of the private law legal entities and budgetary organizations provided for by paragraph 2 of the same Article (except for those budgetary organizations whose independence is guaranteed by the Constitution of Georgia and other legislative acts) shall be sent to the Harmonization Centre.

9. For each internal audit inspection, the head of the internal audit entity shall develop and approve an individual plan of audit inspection, which determines the field of activity of the internal audit, the tasks, duration, allocation of resources, methods of conducting the internal audit, the scope, the type of audit and others.

Law of Georgia of 9 December 2011 No. 5447 – website, 22 December 2011.

Law of Georgia of 18 December 2015 No. 4675 – website, 29 December 2015.

Law of Georgia of 19 October 2023 No. 3574 – website, 3 November 2023.

Article 22. Internal audit review🔗

1. Internal audit review is carried out through the identification, collection, analysis, evaluation and documentation of information.

2. Internal audit review consists of the following stages:

a) audit planning;

b) conduct of the audit;

c) reporting;

d) monitoring of the implementation of the issued recommendations.

3. The types of internal audit review are:

a) system audit;

b) compliance audit;

c) performance audit;

d) financial audit;

e) information technology audit.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 23. Internal audit report🔗

1. As a result of conducting an internal audit, the internal audit entity drafts an internal audit report, which reflects the results of the internal audit, the process of conducting the internal audit and the findings, their analysis and the recommendations developed on their basis.

2. The draft internal audit report shall be sent to the internal audit object, indicating a reasonable time limit, for the purpose of submitting its own opinion and an action plan for the implementation of the recommendations in relation to the matters reflected in the report.

3. If the internal audit object misses the reasonable time limit provided for by paragraph 2 of this Article, the draft internal audit report shall be considered final, and the findings and recommendations reflected therein – agreed.

4. If the internal audit object does not agree with the findings and/or recommendations reflected in the draft internal audit report, it shall indicate in a response letter the argumentation and/or opinions to substantiate its position.

5. The opinion of the internal audit object submitted in relation to the draft internal audit report shall be reflected in the final internal audit report.

6. The internal audit entity shall finalize the internal audit report and shall send it, together with the action plan for the implementation of the recommendations submitted by the internal audit object, to the head of the institution.

7. If the internal audit entity and the internal audit object cannot agree on the recommendations reflected in the final internal audit report, the internal audit entity shall send the unagreed recommendations to the head of the institution for the adoption of an appropriate decision, who shall adopt this decision within a reasonable time.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 23¹. Internal audit quality assurance and improvement programme🔗

1. The internal audit quality assurance and improvement programme provides for the assessment of the effectiveness, productivity and compliance with standards of internal audit activity.

2. The internal audit quality assurance and improvement programme includes internal assessment and external assessment of the quality of internal audit activity.

3. Internal assessment of the quality of internal audit activity implies ongoing monitoring of internal audit activity and/or periodic self-assessment conducted by the internal auditor or an assessment conducted in the institution by the person who has sufficient knowledge of internal audit practice.

4. External assessment of the quality of internal audit activity shall be carried out by an external qualified, independent assessor and/or group of assessors at least once every 5 years.

Law of Georgia of 19 October 2023 No. 3574 – website, 03.11.2023.

Article 24. Annual report of internal audit🔗

1. The head of the internal audit entity prepares the annual report of internal audit, which reflects:

a) information on the internal audit examinations carried out;

b) main findings and recommendations on the financial management and control system existing in the institution;

c) the reasons for non-fulfilment of the annual internal audit plan by the internal audit entity (if any);

d) the relevant actions carried out by the internal audit object to fulfil the recommendations issued by the internal audit entity and information on unfulfilled recommendations;

e) information on any restriction of the internal auditor's activity in the course of internal audit;

f) proposals on the development of internal audit.

2. The annual report of internal audit shall be submitted to the head of the institution by the end of January of the following year. The internal audit entities of the institutions provided for by subparagraphs „a“–„c“ of paragraph 1 of Article 4 of this Law and of the legal entities of private law and budgetary organizations provided for by paragraph 2 of the same Article (except for those budgetary organizations whose independence is guaranteed by the Constitution of Georgia and other legislative acts) shall also submit the annual internal audit reports to the Harmonization Centre by the end of January of the following year.

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011.

Law of Georgia of 18 December 2015 No. 4675 - website, 29.12.2015.

Law of Georgia of 19 October 2023 No. 3574 – website, 03.11.2023.

Article 24¹. Continuous professional development of the internal auditor🔗

1. Proceeding from the objectives of internal audit, the internal auditor shall, by participating in the offered continuous professional development programmes, develop professional capabilities, improve skills and deepen knowledge.

2. The institution shall facilitate the internal auditor's participation in continuous professional development activities.

3. The continuous professional development of a certified internal auditor shall be confirmed by the Harmonisation Centre in accordance with the subordinate normative act of the Minister of Finance of Georgia provided for by paragraph 6 of Article 24² of this Law.

Law of Georgia of 19 October 2023 No. 3574 – website, 03.11.2023.

Article 24². Internal auditors' certification programme🔗

1. The internal auditors' certification programme includes the passing of a certification examination by the certification candidate and the confirmation of practical work experience in the field of internal audit.

2. The Harmonisation Centre shall develop a training course preparing for the certification of internal auditors.

3. A certification candidate shall be entitled to take the certification examination without completing the training course preparing for the certification of internal auditors.

4. The right to participate in the internal auditors' certification programme shall be enjoyed by internal auditors of the institutions provided for by paragraphs 1 and 2 of Article 4 of this Law and by candidates wishing to be employed in the position of internal auditor.

5. A public sector internal auditor's certificate shall be valid for an indefinite term, if the internal auditor maintains his/her qualification through continuous professional development and his/her activity complies with the Code of Ethics of Internal Auditors.

6. The regulation of the public sector internal auditors' certification programme shall be approved by a subordinate normative act of the Minister of Finance of Georgia.

Law of Georgia of 19 October 2023 No. 3574 – website, 03.11.2023.

Article 25. Cooperation of the internal audit entity with other agencies🔗

1. The internal audit entity shall cooperate with the State Audit Office, shall, upon request, provide it with the relevant information and/or documentation, and shall conduct its relations with it in accordance with the international standards of internal control.

2. The internal audit entity, except for the internal audit entity of the Ministry of Defence of Georgia, when performing an information technology audit, shall cooperate with the Legal Entity of Public Law operating in the area of governance of the Ministry of Justice of Georgia − the Digital Governance Agency − and shall provide it with the report of the said audit within 1 month of its preparation.

3. Cooperation of the internal audit entity with the State Audit Office and other agencies shall be carried out in accordance with the legislation of Georgia.

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011.

Law of Georgia of 22 June 2012 No. 6550 - website, 29.06.2012.

Law of Georgia of 18 December 2015 No. 4675 - website, 29.12.2015.

Law of Georgia of 12 June 2020 No. 6303 – website, 26.06.2020.

Article 26. Conflict of interest🔗

1. An internal auditor shall not have the right to perform other functions in the institution, except for the functions defined by this Law and the legal acts deriving from it.

2. An internal auditor shall not participate in an internal audit inspection if one of the following cases of conflict of interest is identified:

a) the internal auditor worked at the internal audit object during the period under inspection;

b) the first and second order heirs of the internal auditor have held, or during the period under inspection held, managerial positions at the internal audit object during the last one year;

c) another case of conflict of interest, which is assessed by the head of the internal audit entity.

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Article 27. Harmonisation Centre🔗

1. The Harmonisation Centre shall ensure the assessment, coordination and harmonisation of both the internal audit and the financial management and control system. The Harmonisation Centre shall be accountable to the Minister of Finance of Georgia.

2. The Harmonisation Centre shall ensure:

a) the development and updating of the strategy for the development of the state internal financial control system, which includes an analysis of the deficiencies of the elements of the state internal financial control system, an assessment of development and an action plan;

b) the development of practical manuals and guidelines for the purpose of developing the regulations of internal audit entities;

c) the development of the Code of Ethics for internal auditors, and its subsequent updating and improvement;

d) the creation of appropriate standards and methodology for the establishment of the internal audit and financial management and control system, and their subsequent updating and improvement;

e) the establishment of relations and cooperation with international organisations and harmonisation centres of other states in the areas of internal audit, as well as of the financial management and control system;

f) the periodic planning of training/practical seminars and trainings for the employees of internal audit entities and for the persons responsible for financial management and control, their facilitation and the coordination of their activities;

g) the development of instructions for internal audit entities, including on the determination of the minimum human resources to be assigned in an internal audit entity and the qualification requirements therefor, the rules on conflicts of interest of internal auditors, the quality assurance of internal audit and the reporting requirements of internal audit;

h) the assessment and monitoring of compliance with the legislation, methodological documents and other guiding instructions regulating internal audit, as well as financial management and control;

i) the organisation of regular meetings and discussions on the strategy and methodology of internal audit, as well as of financial management and control, and on matters of their implementation in the public sector;

j) the preparation of a consolidated annual report on the development of the state internal financial control system and its submission to the Minister of Finance of Georgia by 31 March of each year, who, in turn, shall submit this report to the Government of Georgia;

k) the implementation of a certification programme for internal auditors.

3. (Removed – 18.12.2015, No. 4675).

4. (Removed – 18.12.2015, No. 4675).

Law of Georgia No. 5447 of 9 December 2011 – website, 22.12.2011.

Law of Georgia No. 4675 of 18 December 2015 – website, 29.12.2015.

Article 27¹. Working groups reviewing issues of internal audit and development of the institution's financial management and control system🔗

The Minister of Finance of Georgia is entitled, in order to ensure involvement and communication, to carry out a needs analysis and for other purposes, to create working groups reviewing issues of internal audit and development of the institution's financial management and control system. The composition and rules of activity of these groups shall be determined by the Minister of Finance of Georgia.

Law of Georgia of 18 December 2015 No. 4675 - website, 29.12.2015.

Article 28. (removed)🔗

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011.

Article 29. (removed)🔗

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011.

Article 30. (removed)🔗

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011.

Article 31. (removed)🔗

Law of Georgia of 9 December 2011 No. 5447 - website, 22.12.2011.

Article 32. Transitional Provisions🔗

1. The Government of Georgia shall, within 4 months from the entry into force of this Law, approve the internal audit standards and methodology, the code of ethics of internal auditors and the guiding principles.

2. (Removed).

3. (Removed).

3¹. (Removed – 18.12.2015, No. 4675).

4. (Removed – 18.12.2015, No. 4675).

5. (Removed – 18.12.2015, No. 4675).

6. The Legal Entity of Public Law provided for by subparagraph „c“ of paragraph 1 of Article 4 of this Law shall, before the establishment of an internal audit entity, be entitled to apply with a request for the performance of internal audit to the internal audit entity existing under the state controlling body, which, in agreement with the head of the institution and the council, shall ensure the performance of internal audit in that Legal Entity of Public Law.

7. The performance of the system, performance and information technology audits provided for by subparagraphs „a“, „c“ and „e“ of paragraph 3 of Article 22 of this Law shall commence from 1 January 2013.

8. Legal acts to be issued/adopted on the basis of and in accordance with this Law shall be issued/adopted by the respective persons/bodies determined by this Law, and if such persons/bodies are not determined by this Law – shall be issued by the Minister of Finance of Georgia.

9. The establishment of the financial management and control system provided for by Chapter II of this Law shall be ensured by the institutions determined by this Law after the Harmonisation Centre develops and the Government of Georgia approves the instruction provided for by paragraph 1 of Article 5 of this Law.

10. For the purpose of verifying and detecting the existence of an official misconduct and/or an act inconsistent with the objectives of the institution, the official inquiry measures shall be carried out by the respective structural subdivision/unit of the institution. Its authority, rules of activity, objectives and tasks shall be determined by the statute of the respective institution and shall be separated from the internal audit function.

Law of Georgia of 6 July 2010 No. 3375 – LHG I, No. 40, 20.07.2010, Art. 252

Law of Georgia of 26 October 2010 No. 3756 – LHG I, No. 62, 05.11.2010, Art. 395

Law of Georgia of 9 December 2011 No. 5447 – website, 22.12.2011

Law of Georgia of 4 October 2013 No. 1446 – website, 28.10.2013

Law of Georgia of 13 December 2013 No. 1795 – website, 28.12.2013

Law of Georgia of 18 December 2015 No. 4675 – website, 29.12.2015

Article 33. Final Provision🔗

This Law shall enter into force upon publication.

President of Georgia

M. Saakashvili

Tbilisi,

26 March 2010.

No. 2839–Is