Law No. 28716 - Internal Control Law of State Entities

Lima, Tuesday, April 18, 2006 LEGAL NORMS El Peruano Page 316871

FAUSTO ALVARADO DODERO First Vice President of the Congress of the Republic

TO THE CONSTITUTIONAL PRESIDENT OF THE REPUBLIC

THEREFORE:

I order it to be published and complied with.

Given in the Government House, in Lima, on the seventeenth day of the month of April of the year two thousand six.

ALEJANDRO TOLEDO Constitutional President of the Republic

PEDRO PABLO KUCZYNSKI GODARD President of the Council of Ministers

06788

LAW No. 28716

THE PRESIDENT OF THE REPUBLIC

WHEREAS:

The Congress of the Republic has enacted the following Law:

THE CONGRESS OF THE REPUBLIC;

Has enacted the following Law:

INTERNAL CONTROL LAW OF STATE ENTITIES

TITLE I GENERAL PROVISIONS

Chapter I Object and Scope of Application

Article 1st.- Object of the Law This Law aims to establish the norms to regulate the elaboration, approval, implementation, operation, improvement, and evaluation of internal control in State entities, with the purpose of safeguarding and strengthening administrative and operational systems with prior, simultaneous, and subsequent control actions and activities against improper acts and practices or corruption, promoting the due and transparent achievement of institutional purposes, objectives, and goals.

When internal control is mentioned herein, it is understood as the governmental internal control referred to in Article 7 of Law No. 27785, Organic Law of the National Control System and of the Comptroller General of the Republic.

Article 2nd.- Scope of Application The norms contained in this Law and those issued by the Comptroller General of the Republic are mandatory for all entities referred to in Article 3 of Law No. 27785, Organic Law of the National Control System and of the Comptroller General of the Republic.

They are applied by the organs and personnel of institutional administration, as well as by the institutional control organ, according to their respective scope of competence.

TITLE II INTERNAL CONTROL SYSTEM

Chapter I Definition and Components

Article 3rd.- Internal Control System The internal control system is defined as the set of actions, activities, plans, policies, norms, records, organization, procedures, and methods, including the attitude of authorities and personnel, organized and instituted in each State entity, for the achievement of the objectives indicated in Article 4 of this Law.

Its components are:

a) The control environment; understood as the organizational environment favorable to the exercise of practices, values, behaviors, and rules appropriate for the functioning of internal control and scrupulous management; b) Risk assessment; whereby factors or events that could adversely affect the fulfillment of institutional purposes, goals, objectives, activities, and operations must be identified, analyzed, and managed; c) Management control activities; these are the control policies and procedures issued by direction, management, and competent executive levels, in relation to functions assigned to personnel, in order to ensure the fulfillment of the entity's objectives; d) Prevention and monitoring activities; referring to actions that must be adopted in the performance of assigned functions, in order to care for and ensure, respectively, their suitability and quality for the achievement of internal control objectives; e) Information and communication systems; through which the recording, processing, integration, and dissemination of information, with accessible and modern databases and computer solutions, effectively serves to provide reliability, transparency, and efficiency to institutional management and internal control processes; f) Follow-up of results; consisting of updated review and verification on the attention and achievements of implemented internal control measures, including the implementation of recommendations formulated in their reports by organs of the National Control System; g) Commitments to improvement; by virtue of which the organs and personnel of institutional administration conduct self-evaluations conducive

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Page 316872 El Peruano LEGAL NORMS Lima, Tuesday, April 18, 2006

to the better development of internal control and report on any deviation or deficiency susceptible to correction, obligating themselves to comply with the provisions or recommendations formulated for the improvement or optimization of their work.

The administration and the institutional control organ form part of the internal control system, in accordance with their respective scopes of competence.

TITLE III INTERNAL CONTROL

Chapter I Implementation and Operation

Article 4th.- Implementation of Internal Control State entities must mandatorily implement internal control systems in their processes, activities, resources, operations, and institutional acts, directing their execution toward the fulfillment of the following objectives:

a) Promote and optimize efficiency, effectiveness, transparency, and economy in the entity's operations, as well as the quality of public services it provides; b) Safeguard and protect State resources and assets against any form of loss, deterioration, misuse, and illegal acts, as well as, in general, against any irregular fact or harmful situation that might affect them; c) Comply with the applicable regulations to the entity and its operations; d) Guarantee the reliability and timeliness of information; e) Foster and promote the practice of institutional values; f) Promote the compliance of public officials or employees to account for the public funds and assets under their charge and/or for a mission or objective assigned and accepted.

It corresponds to the Head and to the officials responsible for the directive and executive organs of the entity, the approval of the provisions and actions necessary for the implementation of such systems and that these are timely, reasonable, integrated, and congruent with the competencies and attributions of the respective entities.

Article 5th.- Operation of Internal Control The operation of internal control is continuous, dynamic, and reaches the entirety of the organization and institutional activities, developing in a prior, simultaneous, or subsequent manner according to what is established in Article 7 of Law No. 27785, Organic Law of the National Control System and of the Comptroller General of the Republic.

Its mechanisms and results are subject to permanent review and analysis by institutional administration with the aim of guaranteeing the agility, reliability, update, and improvement of internal control, corresponding to the Head of the entity the supervision of its operation, under responsibility.

Chapter II Obligations and Responsibilities

Article 6th.- Obligations of the Head and Officials It is the obligation of the Head and officials of the entity, relative to the implementation and operation of internal control:

a) Ensure the adequate fulfillment of the functions and activities of the entity and the responsible organ, subject to applicable legal and technical regulations. b) Organize, maintain, and improve the system and internal control measures, verifying the effectiveness and timeliness of application, in harmony with its objectives, as well as conducting self-evaluation of internal control, in order to promote the maintenance and continuous improvement of internal control. c) Demonstrate and maintain probity and ethical values in the performance of their positions, promoting these throughout the organization. d) Document and disseminate internally the policies, norms, and procedures of management and internal control, referring, among other aspects, to:

i. The competence and responsibility of the functional levels in charge of authorizing and approving the acts and operations of the entity. ii. The protection and conservation of institutional assets and resources. iii. The execution and justification of expenses, investments, contracts, and all types of economic outflow in general. iv. The establishment of corresponding records regarding the transactions and operations of the entity, as well as their reconciliation. v. The systems for processing, use, and control of information, documentation, and institutional communications.

e) Immediately dispose of pertinent corrective actions in the face of any evidence of deviations or irregularities. f) Timely implement the recommendations and provisions issued by the entity itself (self-evaluation report), organs of the National Control System, and other corresponding oversight bodies. g) Issue specific norms applicable to their entity, according to its nature, structure, and functions, for the application and/or regulation of internal control in the main areas of its administrative or operational activity, promoting the necessary resources and support for its effective functioning.

Article 7th.- Responsibility of the National Control System It is the responsibility of the Comptroller General of the Republic, the Institutional Control Organs, and the designated and contracted Audit Societies, the evaluation of internal control in State entities, in accordance with the technical regulations of the National Control System. Its results impact the critical areas of the organization and functioning of the entity, and serve as a basis for the planning and execution of corresponding control actions.

Article 8th.- Responsibility Non-observance of this Law generates functional administrative responsibility and gives rise to the imposition of sanctions according to applicable regulations, without prejudice to civil or criminal responsibility as applicable.

Article 9th.- Action of the Institutional Control Organ The Institutional Control Organ, according to its competence:

a. Performs preventive control without binding character, with the purpose of optimizing the supervision and improvement of internal control processes, practices, and instruments, without this generating pre-judgment or opinion that compromises the exercise of its function, via subsequent control. b. Acts ex officio, when in the acts and operations of the entity, reasonable indications of illegality, omission, or non-compliance are observed, informing the Head of the entity so that it adopts pertinent corrective measures. c. Verifies compliance with legal provisions and internal regulations applicable to the entity, by the organizational units and personnel thereof.

Article 10th.- Normative Competence of the Comptroller General of the Republic The Comptroller General of the Republic, in accordance with what is established in Article 14 of Law No. 27785, dictates technical control regulations that guide the effective implementation and operation of internal control in State entities, as well as its respective evaluation.

Such norms constitute guidelines, criteria, methods, and provisions for the application and/or regulation of internal control in the main areas of its administrative or operational activity of entities, including those relative to financial management, logistics, personnel,

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Lima, Tuesday, April 18, 2006 LEGAL NORMS El Peruano Page 316873

works, computerized systems, and ethical values, among others.

From said regulatory framework, the heads of entities are obligated to issue specific norms applicable to their entity, according to its nature, structure, and functions, which must be concordant with the technical control regulations issued by the Comptroller General of the Republic.

Article 11th.- Report to the Congress of the Republic The Comptroller General of the Republic includes the results of the evaluation carried out by the National Control System on internal control in State entities, in the annual report on its management presented to the Congress of the Republic, as provided in letter k) of Article 32 of Law No. 27785.

Likewise, it sends a report referred to the recommended and implemented actions regarding this matter to the Oversight and Comptroller Commission of the Congress of the Republic, on a semi-annual basis.

TRANSITORY, COMPLEMENTARY, AND FINAL PROVISIONS

FIRST.- Within a period not exceeding one hundred and eighty calendar days counted from the publication of this Law, the Comptroller General of the Republic will dictate the technical control norms referred to in Article 10 of the Law.

The "Technical Norms of Internal Control for the Public Sector", approved by Comptroller Resolution No. 072-98-CG modified by Comptroller Resolution No. 123-2000-CG, are applicable during the period indicated in the previous paragraph.

SECOND.- State shareholding companies, as well as the entities referred to in letter g) of Article 3 of Law No. 27785, must apply in the main areas of their administrative activity, the provisions of this Law, regarding the resources and assets of the State, subject to their perception or administration.

THIRD.- The following constitute basic definitions for the purposes of this Law:

Institutional Administration: Constituent of the internal control system, under whose denomination, the set of directive, executive, operational, and administrative organs of the entity is understood, including the Head thereof.

Self-evaluations: Activity developed by the organs and personnel of institutional administration themselves, to evaluate and analyze activities and operations subject to their functional competence.

Internal Control: Fundamental concept of administration and control, applicable in State entities to describe the actions that their heads and officials must adopt to preserve, evaluate, and monitor operations and the quality of services.

State Entities: All institutions of the Executive, Legislative, and Judicial Powers, regional and local governments, Constitutionally Autonomous Bodies, decentralized public entities, and companies forming part of the State's business activity in which the State has total or majority shareholding participation, referred to in letters a), b), c), d), e), and f) of Article 3 of Law No. 27785.

Officials: Any member of the institutional administration with attributions to give orders and make decisions or who executes activities established by the entity with a higher level of functional responsibility.

Institutional Control Organ: Specialized organizational unit responsible for carrying out governmental control in the entity, in accordance with what is stated in Articles 7 and 17 of Law No. 27785.

Head of the Entity: The highest institutional hierarchical authority, of a unilateral or collegiate character.

Communicate to the Mr. President of the Republic for its promulgation.

In Lima, on the twenty-seventh day of the month of March of the year two thousand six.

MARCIAL AYAIPOMA ALVARADO President of the Congress of the Republic

FAUSTO ALVARADO DODERO First Vice President of the Congress of the Republic

TO THE CONSTITUTIONAL PRESIDENT OF THE REPUBLIC

THEREFORE:

I order it to be published and complied with.

Given in the Government House, in Lima, on the seventeenth day of the month of April of the year two thousand six.

ALEJANDRO TOLEDO Constitutional President of the Republic

PEDRO PABLO KUCZYNSKI GODARD President of the Council of Ministers

06788

LAW No. 28717

THE PRESIDENT OF THE REPUBLIC

WHEREAS:

The Congress of the Republic has enacted the following Law:

THE CONGRESS OF THE REPUBLIC; Has enacted the following Law:

LAW THAT MODIFIES ARTICLE 2 OF LAW No. 28171, MODIFIED BY LAW No. 28536, ON THE CONSTITUTION OF THE SPECIAL COMMISSION IN CHARGE OF REVIEWING AND ORDERING THE LEGAL REGULATION IN FORCE IN PENSION MATTER

Article 1st.- Modification of Article 2 of Law No. 28536 Article 2 of Law No. 28536 is modified, in the following terms:

"Article 2nd.- Constitution: The Special Commission is integrated by:

a) Two congressmen of the Republic, one of whom will preside; elected by the Plenary of Congress, upon proposal of the Social Security Commission; b) A representative of the Ministry of Economy and Finance; c) A representative of the Ministry of Justice; d) A representative of the Ministry of Labor and Employment Promotion; e) A representative of the Pension Normalization Office – ONP; f) A representative of the Superintendence of Banks, Insurance, and Pension Fund Administrators; g) A representative of the Military Police Pension Fund; h) Two representatives of pensioners, who are the same that form the Board of Directors of the Consolidated Reserve Fund for Pensions referred to in Article 3 of Law No. 27617, regulated by Supreme Decree No. 154-2002-EF."

Article 2nd.- Elaboration of Compendiums of Norms of Pension Regimes In the event that due to material or legal impossibility the Special Commission cannot elaborate one or more "Draft Unified Ordered Texts of the Pension Regimes" existing in the country, said Commission is empowered to elaborate the corresponding "Compendiums of Norms of the Pension Regimes" existing in the country.

For this effect, the Commission is empowered to coordinate with various sectors, institutions, or persons who might have interest in making known their opinions or suggestions.