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

In March 2007, the High Court set aside a contract for laboratory services in the Auckland region between Lab Tests Auckland Limited and the three Auckland District Health Boards (DHBs) – Auckland DHB, Counties Manukau DHB, and Waitemata DHB. The Court found that one Auckland DHB member had a conflict of interest and that the DHB did not do enough to protect the process of awarding the contract from that conflict of interest. (In September 2008, the Court of Appeal overturned that decision.)

The scope of our audit

After a request from the Minister of Health, we carried out a performance audit to examine how conflicts of interest are dealt with in the three Auckland DHBs. The audit looked in detail at the policies and practices for managing conflict of interest within each of the three DHBs.

Our audit examined whether each DHB:

• was using adequate systems and processes for identifying and disclosing conflicts of interest, having regard to legal and other public sector standards;
• was using adequate systems and processes for managing conflicts of interest, having regard to legal and other public sector standards; and
• adequately supported the prudent management of conflicts of interest in its governance and management structures and arrangements.

Our findings

The three Auckland DHBs had useful policies and procedures in place, but improvements were possible in some areas. In particular, we considered that board and committee members needed to conscientiously follow the statutory requirements about conflicts of interest that apply to them.

We also considered that:

• policies and procedures could be improved by better information or criteria used by managers to assess the seriousness of a conflict of interest;
• more documented examples were needed of how particular conflicts of interest were managed, as a way to help manage future risks;
• specific conflicts of interest needed to be clearly identified at meetings, and any affected members should not participate in that particular matter unless formal waiver procedures were used;
• the DHBs needed to do more to raise awareness of how to manage conflicts of interest under their policies, especially among managers in operational departments; and
• Auckland DHB needed to assign an administrative staff member or team to lead, foster, and co-ordinate the management of conflict of interest issues.

We made seven recommendations focused on the three Auckland DHBs, but we expected that the report might also be helpful to the wider DHB sector.

The response to our findings and recommendations

In accepting and implementing all our recommendations (by changing its policies and processes as appropriate), the Counties Manukau District Health Board considers that all its staff and board members are now acutely aware of the potential for conflicts of interest to arise almost anywhere in the health sector. Consequently, there is increased awareness about the need to disclose any conflicts of interest, and a wider questioning of potential conflicts of interest.

Auckland DHB has raised awareness of managing conflicts of interest with its staff and board members. The board administrator now leads, fosters, and co-ordinates how the DHB manages conflict of interest issues. The DHB encourages open disclosure of potential conflicts of interest through an emphasis on organisational values. Advice is available should questions about conflicts of interest arise. Disclosure of conflicts of interest at board meetings is now a set agenda item. Any disclosures are recorded, along with the agreed action taken.

Instead of devising criteria for assessing the seriousness of a conflict of interest, Waitemata District Health Board has increased rigour by urging its operational managers to discuss conflict of interest matters with suitably experienced staff. As such, this approach realises the intent of our recommendations. Along with other changes, the DHB has altered the way it conducts its board meetings to allow for a clearer distinction between an interest and a conflict of interest.

The Ministry of Health is preparing new guidelines for DHBs to use to manage conflicts of interest. The content and direction of these guidelines is strongly influenced by our performance audit report and our other publications on conflicts of interest.¹ The Ministry of Health expects to release its guidelines in early 2009.

We have received feedback that our 2007 report has been widely read within the health sector. Several public entities requested bulk copies of the report for use by their staff. There was widespread media coverage of our report.

1: For example, Managing conflicts of interest: Guidance for public entities, June 2007.

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