2.3 Requests for inquiries

2.301
During 2005/06, we continued to receive a steady stream of correspondence from members of the public requesting the Auditor-General to investigate the activities or decisions of their local authorities. The Auditor-General has a mandate to inquire into a public entity’s use of its resources, at his discretion.

2.302
We do not begin a formal inquiry for every request that we receive, but we do consider each request to decide the most appropriate manner in which to proceed. It might be that the correspondent does not raise issues of enough concern to our Office, or we might not be the most appropriate authority to consider the issues. On the other hand, we might decide to take the matter further and formally investigate the local authority’s actions.

2.303
In making this decision, we will often make preliminary enquiries of the auditor and the local authority to ensure that we have enough understanding of the background to the issues raised. As a result of this preliminary work, we will be in a better position to understand the main issues and the extent to which further investigation is required by us or, perhaps, the appointed auditor for the entity.

2.304
In the local government area, many of the issues that are raised with us relate to consultation and decision-making processes. We are carrying out some specific work in this area, and discuss this further in article 6.4. Other common themes include conflicts of interest, management of contracts, and accountability arrangements.

Conflicts of interest

2.305
Alleged conflicts of interest are a recurring theme in the correspondence that we receive about local authorities. Our interest (and limitations on our role) in this area differs depending on the nature of the alleged conflict.

2.306
One theme that often appears in ratepayer correspondence is an alleged conflict of interest – usually a suggestion that a member of the local authority has a conflict of interest as a result of their other roles or involvement in the community or their previously expressed views. A conflict of interest exists where a member’s duties or responsibilities to their local authority could be (or could be perceived as being) affected by some other separate interest or duty that they may have.

2.307
We recently published an updated edition of our general guidance for members of local authorities about both pecuniary and non-pecuniary conflicts of interest.¹ Our role in this area depends on whether the alleged interest is pecuniary (that is, financial) or not. (We have also prepared guidance material for the broader public sector – see article 5.1.)

2.308
Pecuniary conflicts of interest are governed by the Local Authorities (Members’ Interests) Act 1968. We have a role in administering that Act that includes the ability to investigate and prosecute alleged offences. There is some discussion of this role in Part 5.

2.309
Many of the complaints we receive about local authorities concern non-pecuniary conflicts of interest. Our role in this area is quite different, as we do not have a role in enforcing any rules about conflicts of interest. We do not generally publicly issue an opinion on whether we consider a particular member is biased (or has some other type of conflict of interest) in any specific case. In particular, we cannot direct a member not to participate in a matter, we cannot prevent a local authority from making a decision about a matter, nor can we require a local authority to overturn a decision that it has already made.

2.310
We will sometimes look into matters of probity under our general inquiries role, but we choose these carefully. We do not take an active role in reviewing all individual behaviour that might amount to a non-pecuniary conflict of interest. We would only review such matters in especially significant cases.

2.311
Moreover, we are not usually able to form a view about members’ oral statements or demeanour in meetings or in private conversations, where it is not easy to prove precisely what may have occurred or how the behaviour would reasonably be perceived.

2.312
A member who disregards a conflict of interest risks having to defend themselves against a complaint to the local authority, political and media criticism, or even legal action. If a person challenges a local authority’s decision by way of judicial review proceedings, the High Court could invalidate the decision because of bias on the part of a member of the local authority.

2.313
We encourage members to take a cautious approach to conflicts of interest. Nevertheless, it is for the members concerned to exercise their own judgement as to whether they think they should withdraw from participation in any given matter. Ultimately, only the courts can determine whether the law has been breached in any particular instance.

2.314
An example of a request for an inquiry received in this area concerned the central plains water scheme in Canterbury. This was a proposed water scheme that involved the Central Plains Water Trust, which was established by Christchurch City Council and Selwyn District Council. Although we declined to carry out an inquiry into allegations that members of the Trust had conflicts of interest, we released our general comments about the issue on our website.²

2.315
We refer to this matter specifically as we received several requests for the Auditor- General to carry out an inquiry into this scheme, and the letter we released publicly illustrates our approach to the area of non-pecuniary conflicts of interest.

1: Guidance for members of local authorities about the law on conflicts of Interest, ISBN 0-478-18180-9 (June 2007).

2: See www.oag.govt.nz/whats-new/2006/central-plains-water-scheme.