Part 3: Policies and procedures

Managing conflicts of interest: Guidance for public entities.

Public entities should establish policies and procedures as a tool for helping them and their members and officials identify and deal with conflicts of interest.

Managing conflicts of interest can never be as simple as creating and enforcing a set of rules. Nevertheless, robust policies and procedures within a public entity are a useful starting point.

Policies and procedures can provide clear rules for simple and predictable situations, and establish a process for dealing with the more difficult ones. They help reaffirm the public entity's commitment to the key principles associated with managing conflicts of interest, and encourage organisational transparency.

Focus on the public entity's particular circumstances

In preparing its policies and procedures, a public entity should take into account the nature of its own particular structure, functions and activities, and any applicable statutory requirements. It should consider what its operations are, what fields it operates in, and what sorts of problems or risks might typically arise. For example, does the public entity do a lot of:

  • contracting;
  • allocating grants;
  • public consultation; or
  • quasi-judicial or regulatory decision-making?

The public entity may need to think carefully about who a policy should apply to. Some parts of the policy may be relevant only for board members or for employees. Some parts may not need to apply to all staff. It may also be prudent to require certain types of contractors or consultants to comply with the policy, even though they are not employees.

Some situations will be foreseeable, and the answer straightforward. For those situations, clear rules could be established in a policy. For example (but depending on the nature of the entity's operations), a public entity might prohibit members and officials from:

  • being involved in a decision to appoint or employ a relative;
  • conducting business on behalf of the entity with a relative's company;
  • owning shares in (or working for) particular types of organisation that have dealings with (or that are in competition with) the public entity;
  • deliberating on a public consultation process where the member or official has made a personal submission (or from making submissions at all, in areas that directly relate to the entity's work);
  • accepting gifts in connection with their official role; or
  • influencing or participating in a decision to award grants or contracts where the member or official is connected to a person or organisation that submitted an application or tender.

Periodic declarations of interests

One method many public entities use is to require members or officials to regularly (for example, yearly) complete and submit a declaration listing specified personal interests. This is sometimes called an "interests register".1 If managed in this way, these declarations are not of conflicts of interest, because only the interests are recorded.2

This method enables relevant managers to be aware of most relevant ongoing interests, and acts as a reminder to members and officials of the need to be alert for conflicts of interest. The register, if reviewed and updated regularly, helps people to monitor situations that could give rise to a conflict of interest, and to identify conflicts of interest at an early stage. Placing interests on record is consistent with the principle of transparency.

An interests register can help public entities identify when a conflict of interest might arise so that steps can be taken to manage it. However, such a register is no more than a tool to help members, officials, and public entities in their eff orts to identify and manage conflicts of interest before they create problems. An interests register is not a substitute for disclosing and dealing with specific conflicts of interest as and when they arise. Public entities need to ensure that members and officials understand their ongoing obligations.

What to cover in policies and procedures

Policies and procedures could:3

  • state principles or values that emphasise the entity's commitment to addressing conflicts of interest, and the importance of people within the entity being alert for such situations;
  • establish rules for the most important and obvious actions that people must or must not take (see paragraph 3.6);
  • establish a mechanism (such as an interests register) for recording those types of ongoing interests that can commonly give rise to a conflict of interest, and a procedure for putting this into effect and updating it on a regular basis (see paragraphs 3.7-3.9);
  • set out a process for identifying and disclosing instances of conflicts of interest as and when they arise (including a clear explanation of how a member or official should disclose a conflict of interest, and to whom);
  • set out a process for managing conflicts of interest that arise (including who makes decisions, and perhaps detailing the principles, criteria, or options that will be considered);
  • provide avenues for training and advice;
  • provide a mechanism for handling complaints or breaches of the policy; and
  • specify the potential consequences of non-compliance.

However, policies and procedures are not enough in themselves. They cannot be expected to anticipate every situation. Moreover, the seriousness of some situations will be a question of degree, and not amenable to a rule. Accordingly, policies and procedures may need to retain some flexibility for the exercise of judgement in individual cases. A policy should not state or suggest that the specific situations it covers are an exhaustive list.

1: See, for example, the interests registers required for Ministers and members of Parliament by the Cabinet Manual and the Standing Orders of the House of Representatives respectively.

2: Although, the register might also be used to contain disclosures of conflicts of interest, and records of the mitigation action decided upon. Keeping all such records together in one place may help the entity to comply with requirements to disclose related party transactions in its financial statements – see accounting and auditing standards SSAP-22 and AS-510.

3: Some of the publications listed in Appendix 1 contain more detailed guidance on preparing and implementing policies and procedures. See, in particular, Managing Conflicts of Interest in the Public Sector: Toolkit by the Independent Commission Against Corruption and the Crime and Misconduct Commission, and the Organisation for Economic Co-operation and Development's Guidelines for Managing Conflict of Interest in the Public Service.

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