5.1: Conflicts of interest
New guidance on the law about conflicts of interest
5.101
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.
5.102
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.
5.103
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.
5.104
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
5.105
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.
5.106
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.
5.107
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.
5.108
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.
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