5.1: Conflicts of interest

Local government: Results of the 2003-04 audits.

New guidance on the law about conflicts of interest

The Auditor-General has statutory functions in administering the Local Authorities (Members’ Interests) Act 1968. We have taken a proactive role in recent years in raising awareness of the Act among local authority members and officers.

The main way we assist local authorities to comply with the Act is by publishing a guide that sets out our understanding of the law and our expectations of members. Every 3 years or so, we update the publication. We published a new edition in 2004.

The Act deals only with pecuniary interests. However, in response to an increasing number of queries and requests for guidance on other types of conflict of interest, we have now expanded the scope of our publication. As a result, the 2004 edition contains new material about non-financial conflicts of interest.

Our publication is now called Conflicts of Interest: A Guide to the Local Authorities (Members’ Interests) Act 1968 and Non-pecuniary Conflicts of Interest.1 It discusses pecuniary and non-pecuniary conflicts of interest, and covers both the Local Authorities (Members’ Interests) Act and the common law rule against bias. The guide explains the legal requirements that apply to local authority members at meetings, and offers practical guidance for dealing with particular situations.

Ethical dimensions of conflicts of interest

Our Conflicts of Interest publication focuses on the legal obligations of members of a local authority in their formal decision-making at authority meetings. Yet, managing conflicts of interest in the public sector often involves more than just a consideration of the law.

The term “conflicts of interest” can be used to describe a range of other behaviour that may be regarded as unethical, although not necessarily unlawful. An example could be where a problem arises outside the confines of formal decision-making at a local authority meeting, or where it relates not to a member but to an employee. There may be no doubts over legality, but the situation may nevertheless be questionable. Accordingly, local authorities and their advisers also need to carefully consider how to manage the ethical dimensions of conflicts of interest.

While not concerned specifically with local government, our November 2004 report, Christchurch Polytechnic Institute of Technology’s management of conflicts of interest regarding the Computing Offered On-Line (COOL) programme,2 examines the nature of public sector conflicts of interest in that broader ethical context. It sets out what the Auditor-General considers to be generally accepted expectations when conflicts of interest arise in relation to a person working for a public entity.

We commend this report to local authorities. We expect that they will refer to the guidance outlined in that report (and to the other sources of guidance referred to in it) when making decisions about how to manage conflicts of interest that arise in the course of their business.

1: ISBN 0-478-18121-3.

2: ISBN 0-478-18123-X. See, in particular, Foreword, Part 2, and Appendix 1.

page top