Auditor-General's overview

This report looks at how three elected members of Ashburton District Council managed conflict of interest questions recently. The questions arose in the context of the decisions the Council had to make on its project to build a second bridge across the Ashburton River in 2026.

We needed to carry out an investigation, because one of the interests raised a question under the Local Authorities (Members’ Interests) Act 1968, which I administer. We took a broad approach to the investigation and looked at all of the interests that were involved, because we decided that the local community deserved a clear explanation about the nature of the different interests and the choices that the councillors had made.

In brief, we have concluded that:

• The Council’s decision to designate land for the bridge project did not have a certain or significant enough effect on the value of Councillor Urquhart’s adjacent property, for him to be regarded as having a financial interest in the decision that would trigger the application of the rule against participation in the Act.
• Councillors Urquhart, Nelson, and Wilson all made reasonable choices on whether to participate in the Council’s decisions, given that they each had relatives with properties that would or might be affected by the designation decision.
• Councillor Urquhart’s decision to participate in the Council’s decision on whether to designate the land, despite the risk that he would be regarded as predetermined, was a choice that he was entitled to make. The final decision on whether to take part rests with the individual councillor and there is considerable room for judgement.

This investigation, and the different conflict of interest questions that the three councillors had to consider, provide a good illustration of the types of issues that arise in local authorities throughout the country every week. We regularly receive calls and emails from elected members and staff struggling to make the “right” decision about how to handle potential conflicts of interests.

Our experience is that conflicts of interest questions are more likely to be grey than black and white. Deciding whether there is one and – if so – how to manage it, is rarely clear or straightforward. An elected member with a potential conflict of interest needs to weigh a complex mix of competing concerns. Unless there is a clear financial interest, in the end they will need to make their own decision on whether it is appropriate to take part in a decision.

In small communities, elected members will have many connections through family and friends with many of the matters coming to the Council for decision. People with strong community connections and attachment are likely to stand and be elected to govern their local authority. The result is that potential conflicts of interest in small communities are inevitable, frequent, and difficult to manage.

Many people, including this Office, have commented in recent years that the Local Authorities (Members’ Interests) Act governing financial interests is outdated and can be difficult to apply to modern local government decision-making. It also imposes criminal sanctions that can seem disproportionately severe for the behaviour in question.

My office will continue to administer the Act regulating financial interests so long as it remains in force, and to provide general guidance on questions about non-financial interests where we can.

For non-financial conflicts of interests:

• The “rules” on identifying and managing conflicts come solely from the common law, which cannot provide clear or definitive guidance about the many different situations that arise.
• Working out whether a conflict of interest is significant enough to require a councillor to withdraw because of a relationship they have can be difficult, particularly in small communities where “everybody knows everybody”.
• The concept of predetermination is particularly challenging for local authorities because they are elected decision-making bodies. Elected members who have campaigned on a particular platform might be torn between their desire to represent the people who voted for them and the need to consider the council’s risk of judicial review if they do.

There are no obvious or simple solutions to these challenges. Legislative change might provide some assistance, but no legislation will ever provide the answer to every situation.

In practice, the local government sector will continue to have to work through these questions, when they arise, in a careful, principled, and transparent way. I emphasise transparency, because I regard it as vital for maintaining the trust of the public. It enables the community to see and debate how these challenges are being managed.

I would like to thank the individual elected members and the staff from Ashburton District Council who helped us with our investigation.

Lyn Provost
Controller and Auditor-General

14 October 2014