Part 1: Introduction

Background

1.1
On 22 May 2014, the Ashburton District Council (the Council) met to decide whether to designate certain land for the Second Urban Bridge Project (the Project). The Project is to build a second bridge across the Ashburton River to provide an alternative access route for traffic joining state highway 1. Although construction of the bridge is not intended to begin until 2026, designating the relevant land now enables the Council to restrict what can be done with that land and to start buying some of it.

1.2
At the meeting, the Council had to decide whether to accept the recommendation of independent commissioners to confirm a “Notice of Requirement” for the designation of the land needed for the Project. The Council was divided 50/50, which meant that the Mayor was called on to use his casting vote. The Mayor voted to accept the commissioners’ recommendation.

1.3
After the meeting, a member of the public wrote to us with questions about how conflicts of interest had been managed at this and earlier meetings. He told us that Councillor Urquhart might have had a financial conflict of interest, because he owns a house adjacent to the designated area, and might have had a predetermined view on the matter. He noted that at a meeting in November 2013, Councillor Urquhart had declared an interest and withdrawn from the discussion of the Project. The correspondent also told us that two other councillors had relatives with property interests in the designated area. One had participated in the November meeting but withdrawn from the May meeting. The other had participated in both meetings.

Why we decided to investigate

1.4
We decided to investigate these concerns for two main reasons.

1.5
First, elected members who participate in a decision in which they have a financial interest commit an offence under the Local Authorities (Members’ Interests) Act 1968. The Auditor-General is the prosecuting authority under that Act and so we needed to investigate the allegation that Councillor Urquhart took part in a decision in which he had a financial interest.

1.6
Second, there seemed to be significant confusion and concern about why different councillors with apparently similar interests had reached different conclusions about whether they should participate. They had also made different decisions at different meetings.

1.7
The Auditor-General does not have a formal role in regulating non-financial conflicts of interests. However, we do from time to time assess how well public entities are managing conflicts of interest of all kinds as part of our consideration of whether the entity has appropriate and effective governance arrangements. We decided that we should establish exactly what the various interests were and how each councillor had managed them, to provide some clarity for the community.

Types of conflicts of interest questions involved

1.8
Members of local authorities have to consider two broad categories of conflicts of interest – financial and non-financial. Different legal rules apply in each case.

1.9
A financial conflict of interest arises when an elected member stands to gain or lose financially by a decision the local authority is making. The Local Authorities (Members’ Interests) Act 1968 (the Act) regulates financial conflicts of interest and creates a general rule that an elected member cannot participate in a decision in which they have a financial interest. The Auditor-General administers the Act.

1.10
Non-financial conflicts of interest arise when an elected member might be regarded as biased for some reason other than a financial one. The common law regulates these interests. The main situations that we encounter are:

• An elected member who has a relationship with a person or organisation that might be affected by the local authority’s decision (for example, the decision might affect an immediate family member).
• An elected member who has a role with another organisation that might be affected by the local authority’s decision (for example, a councillor is on the governing body of a trust or company that will be affected by the local authority’s decision).
• An elected member’s actions or comments suggest that they have already made up their minds on the issue the local authority has to decide, before they have considered all the relevant information and had the discussion (predetermination).¹

1.11
The different types of interests and the different rules that apply can create confusion and uncertainty – for elected members, for council staff trying to advise them, and for the public watching how their council is operating. The Appendix summarises the different types of interests and the risks they create for individual members and local authorities.

1.12
This situation in Ashburton District Council involves the full range of conflict of interest questions, as Figure 1 shows.

Figure 1
Summary of Councillors’ interests and participation in decisions on the Project

How we carried out this investigation

1.13
The Council provided us with the background papers about the Project as well as the correspondence and Council papers relating to the issues we were investigating. We then travelled to Ashburton and met with each of the three elected members as well as relevant Council staff.

1.14
Based on the information we had gathered, we prepared a draft report and sought comment on all or part of it from the individuals affected by it. We revised the draft report in the light of the comments we received and then finalised it for publication.

1: Strictly speaking, predetermination is not a conflict of interest but is a separate form of bias. However, it is often included in conflicts of interest in discussions about managing the risks of bias in the public sector.

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