Part 3: Policies and procedures

Management of conflicts of interest in the three Auckland District Health Boards.

3.1
In this Part, we discuss the policies and procedures for identifying, disclosing, and managing conflicts of interest that we reviewed at each of the three Auckland DHBs.

3.2
We make some general findings that apply to all three DHBs, and then discuss matters that relate to each of the DHBs in turn.

General findings for the three Auckland District Health Boards

Policies for staff

3.3
The three Auckland DHBs all have policies and procedures for staff that are specifically about managing conflicts of interest (and some related policies also address conflicts of interest). The policies and procedures have mostly been in place for several years.

3.4
The policies and procedures at each of the three Auckland DHBs differ in detail and form, but their overall approach is fairly similar and in some areas their policy content is identical.

3.5
In general, we were pleased with the content of the DHBs’ policies for staff.

3.6
The conflict of interest policies for staff all exhibit the following positive features:

  • They explain the concept of conflicts of interest, and acknowledge the importance of managing risks and how situations might be perceived by others.
  • They are largely consistent with the relevant legal requirements that apply to DHBs, but are not limited to compliance with legal rules. They also treat conflicts of interest as having an ethical dimension.
  • They describe a broad range of types of conflict of interest that can arise, and are not limited to business or financial interests.
  • They discuss identifying, disclosing, and managing conflicts of interest.
  • They closely focus on particular issues and examples that are especially relevant to the DHB sector (but do not imply that the examples discussed are exhaustive).
  • They do not rely solely on periodic declarations of interests, but impose an ongoing obligation on people to disclose conflicts of interest when they arise.
  • They are not overly rigid, but allow for judgement to be applied in particular cases.
  • They are generally easy to understand, and contain enough detail to provide helpful guidance without being too long.
  • They (or related policies) often impose additional requirements on people closely involved in high-risk areas such as major contracting and funding decisions.

3.7
The policies contain detailed examples and guidance about particular scenarios that can arise for DHB personnel, where a person’s other activities or connections can sometimes give rise to a conflict of interest. They typically cover:

  • doing business with close relatives;
  • interests in organisations with activities similar to the DHB;
  • disclosing confidential information;
  • receiving fees, rewards, hospitality, and gifts;
  • sponsorship, travel, or other funding to attend conferences or meetings;
  • activities on public bodies, or professional or employee organisations;
  • participating in political activities;
  • making public statements;
  • workplace relationships;
  • referring patients to private practice;
  • relationships with pharmaceutical companies, and medical and surgical equipment suppliers;
  • evaluating or endorsing new products;
  • making presentations to decision-making bodies; and
  • acting as a paid adviser to suppliers.

3.8
The policies include examples of what is and is not acceptable behaviour for some of these particular types of conflict of interest. Sometimes, they suggest that the situation is acceptable only if it has been notified to, or approved by, the person’s manager. This is reasonable, because many situations will need to be judged case by case. However, the policies do not always contain much general guidance for managers about how to exercise their judgement in those cases. The policies could be enhanced by including further information or criteria for managers about how to assess the seriousness of a conflict of interest (which in turn will inform what mitigation action, if any, should be taken). Such information need not seek to prescribe particular responses, but could give managers more guidance about the relevant factors to bear in mind when weighing up particular situations.1 This would also help reduce the risk of significant inconsistency between decisions made by different managers, particularly since decisions could be made by a range of different people within each DHB.

Recommendation 1
We recommend that the three Auckland District Health Boards include in their conflicts of interest policies further information or criteria for managers about how to assess the seriousness of a conflict of interest to help managers decide what, if anything, needs to be done about particular conflicts of interest.

3.9
Until recently, there were no comprehensive or widely followed policies or procedures focused specifically on contracting for services (that is, tendering or similar processes for awarding funding contracts to external providers for the delivery of health services).

3.10
Regional contracting guidelines were prepared in 2007, and seem likely to be adopted by all three Auckland DHBs. These guidelines are likely to be based in the Northern DHB Support Agency. They provide detailed guidance for managing all aspects of service contracts. In several places, they discuss conflicts of interest.

3.11
Under the guidelines, any person involved in selecting a service provider will be required to disclose any conflicts of interest and managers will need to ensure that the conflicts of interest are addressed. People on an evaluation panel will need to sign an "evaluation panel code of conduct" (which contains additional guidance). Tenderers will also be required to declare any matters that might cause a conflict of interest. In our view, these guidelines will be very helpful.

3.12
We discuss each DHB’s other policies for staff below.

3.13
Overall, in our view, the policies for staff do not require significant change.

Policies for members

3.14
All the DHBs have provisions in their Standing Orders that quoted or paraphrased the statutory rules about members' participation in board or committee meetings.

3.15
We discuss each DHB's policies for members separately.

Procedures for recording interests and conflicts of interest

3.16
DHBs are required by law to record disclosures of conflicts of interest by members in an interests register.

3.17
All of the DHBs operate interests registers for board members. The DHBs collect information about the interests of members of statutory committees, and mostly maintain these in the interests registers.2 However, they do not keep interests registers for non-statutory committees of the board. They ought to do so, because the legal requirement to keep interests registers applies to these committees too.3

3.18
They also operate interests registers for senior staff.

3.19
They use their interests registers to record ongoing interests, not just conflicts of interest, and update them from time to time. Most of the disclosures we saw recorded in the DHBs’ interests registers were of interests, rather than conflicts of interest. (We discuss this distinction further in Parts 4 and 6.)

Auckland District Health Board

Policies for staff

3.20
The Auckland DHB has a conflicts of interest policy that applies to staff, which was adopted in 2005. The content of that policy is virtually identical to the equivalent policy at the Counties Manukau DHB.

3.21
The general definition of a conflict of interest is:

… when it is likely that an employee could be influenced or could be perceived to be influenced by a personal or private interest in any transaction whilst carrying out their responsibilities for the DHB.

3.22
The policy defines "transaction" as in the Act. The policy defines "interest in a transaction" in a way that may give the impression that it is limited to financial matters. In our view, such a focus is too narrow. However, in other places the policy seems to take a broader approach to the concept.

3.23
There is also a more general policy called Standards of conduct, adopted in 2002, which also contains material about conflicts of interest. It can be useful for an entity to have a broad code of conduct in addition to specific policies on particular topics. However, the discussion on conflicts of interest in this policy is different from that in the conflicts of interest policy, and there is no explicit cross-reference to the conflicts of interest policy. This overlap could cause confusion or mislead people into believing that the Standards of conduct policy is the DHB’s sole or main source of guidance about conflicts of interest. Overall, we consider that the guidance in the conflicts of interest policy is the more useful of the two.

3.24
The DHB has four policies dealing with various (and sometimes overlapping) aspects of the area of sponsorship, donations, hospitality, and gifts. Two of them were introduced in early 2007. The policies provide that all such matters are to be recorded and approved by a more senior person.

3.25
The level of approval required depends on the type and value of the matter. Low-value gifts and hospitality (under $100) need to be approved by the person’s manager and recorded in a register held in the person’s department. Larger items require higher-level approvals and need to be reported to a central administrator.

3.26
In 2007, administrative staff started to monitor some sponsorship, especially travel, to ensure that it did not create risks for upcoming major contracts, and had started to ask sponsors to confirm in writing that they did not expect anything in return for their offers.

3.27
The amount of guidance in this area is commendable. However, the amount of detail and potential overlap, particularly spread among four different policy documents, could be too confusing for users. In our view, the policy content might be more effectively consolidated into one or two documents.

3.28
There is a separate policy on procurement. We expected it to mention conflicts of interest at relevant points, or at least contain a cross-reference to the conflicts of interest policy. We were disappointed that it did not.

3.29
We were told that it was common for people involved in a major contract to complete a conflicts of interest declaration form. However, we were not provided with this and it is not a requirement of the procurement policy.

3.30
Overall, there are few cross-references to the conflict of interest policy in related policies.

Policies for members

3.31
As noted in paragraph 3.14, the DHB’s Standing Orders have provisions about conflicts of interest in meetings. However, those provisions could be fuller. For example, they do not explain the statutory definitions given to the terms “transaction” and “interested in a transaction”. It would be helpful to do so, given the broad definitions of those terms.

3.32
The statutory rules about participation in meetings are covered in training sessions for new members.

3.33
However, there are no relevant policies or written guidance dealing with conflicts of interest aimed specifically at members. The Standards of conduct policy and one of the gift policies state that their coverage included members, but the content focuses exclusively on staff. It was also not clear to us how members were made aware of those policies. In our view, it would be helpful to have a policy or other written guidance material about conflicts of interest that is aimed specifically at members, because the issues for members may be different (see also paragraphs 3.46-3.47).

Recommendation 2
We recommend that the Auckland District Health Board adopt a policy on conflicts of interest specifically to assist members.

3.34
There is a policy providing specific guidance for DHB employees who are also board members. This is a useful policy to have.

Procedures for recording interests and conflicts of interest

3.35
There is an interests register for senior staff that applies to the senior management team. It records interests of those staff. It was not clear to us how often it was updated. In our view, it would be better if relevant staff were reminded at least once a year to update their details. We also saw some examples of disclosures of conflicts of interest by staff.

3.36
The interests register for board members was updated from time to time. It contained interests, rather than conflicts of interest. The register did not have the same high profile at board meetings of the Auckland DHB as at the other two DHBs. For example, it did not appear to be routinely circulated to members for checking and amending. We saw little evidence of disclosures of interests or conflicts of interest being recorded in the minutes.

3.37
Information about the interests of members of statutory committees was collected, but it was not generally collated or maintained in an easily accessible form, so in our view does not constitute a register. A register is a readily available list, catalogue, or other formal record.

3.38
Board members’ interests were also disclosed in the DHB’s annual report. Although this is not strictly required, it helps to promote transparency.

Counties Manukau District Health Board

Policies for staff

3.39
The Counties Manukau DHB has a conflicts of interest policy that applies to staff, which was adopted in 2005. The contents of that policy are virtually identical to the equivalent policy at the Auckland DHB (see paragraphs 3.21-3.22).

3.40
The DHB told us it was likely to conduct a full review of its policy once we had completed our audit.

3.41
There is a separate policy on donations, gifts, and sponsorship. In general, most such matters need to be referred to a more senior person who determines whether they can be accepted. More valuable gifts must be recorded in writing, in a gifts register.

3.42
Most purchasing of equipment and consumables for the Counties Manukau DHB and the Waitemata DHB is managed by their subsidiary, HealthAlliance. HealthAlliance has a procurement policy, which covers conflicts of interest and gifts, and general probity expectations. HealthAlliance also has a policy on gifts, sponsorship, and entertainment. Staff (including DHB staff) and contractors involved in a review of such matters were routinely required to complete a form declaring any relevant interests or gifts or hospitality.

3.43
At the time of our audit, HealthAlliance was revising its procurement policy and form. In addition, it was preparing similar procurement policies for the Counties Manukau DHB and the Waitemata DHB. This will be an improvement, because it was not previously clear whether HealthAlliance’s requirements formally applied to contracts managed directly by the DHBs.

Policies for members

3.44
As noted in paragraph 3.14, the DHB’s Standing Orders have provisions about conflicts of interest in meetings. However, those provisions could be fuller. For example, they do not explain the statutory definitions given to the terms "transaction" and "interested in a transaction". It would be helpful to do so, given the particularly broad definitions of those terms.

3.45
In recent years, the board has been provided with various general guidance papers about a range of governance matters, including conflicts of interest (such as, most recently, a one-page quick reference guide to the statutory requirements).

3.46
However, there are no general policies for members that deal with all aspects of conflicts of interest. We consider that such a policy would be helpful. It need not be as detailed as the policy for staff, because the governance nature of members’ roles is such that their involvement is largely limited to participating in formal meetings. Members are not generally involved in day-to-day operations in the range of different ways that staff can be.

3.47
However, simply referring to the statutory provisions may not be enough. In our view, members could also benefit from guidance about such matters as bias and predetermination, the need to consider perceptions of conflicts of interest, behaviour outside meetings (such as attempting to lobby staff for personal benefit), managing their other work when it might overlap with DHB matters, confidential information, and gifts and hospitality.

Recommendation 3
We recommend that the Counties Manukau District Health Board adopt a policy on conflicts of interest specifically to assist members.

Procedures for recording interests and conflicts of interest

3.48
An interests register for senior staff was set up in early 2007, and the DHB told us it intended to update it quarterly. It applies to the senior management team, but the DHB was considering whether to apply it to some other senior personnel.

3.49
The interests register for board members is distributed to members with the agenda papers for each meeting. Also, "disclosure of interests" is a standard agenda item at the beginning of each meeting. In our view, these are useful steps, because they enable the register to have a high profile among members. The register was regularly updated by members, as their personal circumstances changed. Disclosures were generally offered orally. The disclosures were also recorded in the minutes. Disclosures were of interests, rather than conflicts of interest.

3.50
There are similar registers for the statutory committees. They were regularly updated, but we noted that in some cases they were incomplete.

3.51
Board members’ interests were not disclosed in the DHB’s annual report. Although this is not strictly required, it would help to promote transparency. In our view the DHB should consider doing so.

Waitemata District Health Board

Policies for staff

3.52
The Waitemata DHB has a conflicts of interest policy that applies to staff, which was adopted in 2003. The general definition is that employees:

… must avoid:

  • activity
  • interests
  • relationships
    with any person or entity outside Waitemata DHB which would create, or might appear to others to create, a conflict with the interests of Waitemata DHB.

3.53
The conflicts of interest policy includes matters relating to gifts and hospitality, so there is no separate policy on that subject. Gifts (except those of "minimal value") must not be accepted without the prior approval of the chief executive.

3.54
At the time of our audit, the policy was being revised, and the DHB was consulting internally on a draft new policy. The draft new policy is a significant rewrite of the current policy, and will provide fuller and more detailed guidance in some areas (although, in our view, the current policy is satisfactory for the time being). In part, it appears to draw on material from the other DHBs. The draft new policy formalises the interests register for senior staff, which existed previously but was not acknowledged in the policy. Gifts or benefits worth more than $50 must be discussed with the person’s manager before they are accepted. Overall, we consider that this policy is likely to be a very useful document, once finalised.

3.55
Several related policies discuss conflicts of interest (or contain cross-references to the conflicts of interest policy). These are policies on delegations, additional employment, fraud, discipline and dismissal, and recruitment. This indicated to us that the concept of conflicts of interest is well integrated throughout the DHB’s policies.

3.56
The discussion in paragraphs 3.42-3.43 on policies about purchasing equipment and other supplies at the Counties Manukau DHB also applies to the Waitemata DHB.

Policies for members

3.57
For members, a policy called Guidelines and protocols for board and committee members (which incorporates a code of conduct) was adopted in 2005. This policy contains material on conflicts of interest. The guidance is a helpful summary of the statutory provisions for members, and also discusses the need to be alert for a "perception" of conflict of interest. The policy advises that “normal practice” with conflicts of interest is to leave the room. The policy contains warnings about using one’s position for personal gain, and covers gifts. It also contains guidance about confidential information, about members doing other paid work for the DHB, and about consultation processes (including the need for members to keep an open mind).

3.58
We consider that this general guidance policy for members is useful.

Procedures for recording interests and conflicts of interest

3.59
There is an interests register for senior staff. As well as covering the senior management team, it includes information about a wide range of other senior staff who have a key role in major contracts or appointments. At the time of our audit, it was up to date. However, it had been updated irregularly during the last few years. In our view, it would be better if relevant staff were reminded at least once a year to update their details.

3.60
The most recent version of the interests register for board members is published in the board's agenda papers for each monthly meeting. Also, "disclosure of interests" is a standard agenda item at the beginning of each meeting. In our view, these are useful steps, because they enable the register to have a high profile among members. The register was regularly updated by members, as their personal circumstances changed.

3.61
Disclosures were generally made in writing. The document routinely circulated among members contained a summary of their interests, but full records were kept of each individual disclosure. Disclosures were also recorded in the minutes. When a disclosure was of a conflict of interest in a particular situation, the action taken to manage the situation (that is, that the member abstained from participating or left the meeting) was usually also recorded.

3.62
There are similar registers for the statutory committees.

3.63
Board members' interests were also disclosed in the DHB’s annual report. Although this is not strictly required, it helps to promote transparency.

1: See our guidance in paragraphs 4.14-4.40 in our publication Managing conflicts of interest: Guidance for public entities, and in particular paragraph 4.23.

2: See paragraph 3.37 for our comments about the Auckland DHB.

3: See clause 38(8) of Schedule 3 of the Act.

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