Part 1: Introduction

Managing conflicts of interest: A guide for the public sector.

Every employee or office holder has several professional and personal interests and roles. Conflicts of interest sometimes cannot be avoided and can arise without anyone being at fault. They need not cause problems as long as they are promptly disclosed and well managed.

In this guide, we describe conflicts of interest in the public sector, and how to identify, disclose, and manage them. We do not lay down rules but instead suggest an approach for dealing with issues when they arise.1 This guide represents our view of what constitutes good practice in the public sector.

This guide will be useful for everyone who works in the public sector. We also publish a separate good practice guide about the legal requirements under the Local Authorities (Members' Interests) Act 1968.2

There are several aspects to managing conflicts of interest effectively:

  • Public organisations and employees and office holders need to understand what a "conflict of interest" is, and be aware of the different ways in which one can arise (see Parts 2 and 3).
  • Employees and office holders should identify and disclose a conflict of interest as soon as it arises (see Part 4).
  • In every instance, the public organisation (or, sometimes, the employee or office holder concerned) needs to consider what action (if any) is necessary to manage the conflict of interest. This might include publicly disclosing significant conflicts of interest in the interests of public transparency (see Part 4).
  • Public organisations should establish policies and procedures to help them and their employees to identify and deal with conflicts of interest (see Part 5).
  • Public organisations need to understand the main legal and ethical considerations that are likely to apply to managing conflicts of interest and the possible consequences of breaching the applicable rules (see Part 6).

Guiding principles

Public business should be conducted with a spirit of:

  • integrity;
  • impartiality;
  • accountability;
  • trustworthiness;
  • respect; and
  • responsiveness.

In our view, these principles should guide any decisions about conflicts of interest.

Our role with conflicts of interest

The Auditor-General does not have an explicit statutory role with regard to conflicts of interest.3

The Auditor-General cannot "rule" on whether someone has a conflict or whether it was lawful for them to participate in a particular matter. Nor can we take enforcement action against someone who might have acted unlawfully or inappropriately because of a conflict of interest. These are matters for the courts.

However, under the Public Audit Act 2001, the Auditor-General is the auditor of all public organisations and, as such, has an interest in supporting them to carry out their activities lawfully and in a way that inspires public confidence. The proper management of conflicts of interest is a fundamental part of maintaining public confidence in the public sector. Therefore, the Auditor-General has a strong interest in supporting good practice.

This guide is one of the ways we aim to support good practice in managing conflicts of interest in the public sector. Other ways we might look at conflicts of interest are:

  • As part of our annual audit work: The Auditor-General appoints auditors to carry out annual audits of public organisations. Under section 15 of the Public Audit Act, auditors can look at an organisation's systems and processes for managing conflicts of interest as part of the annual audit. Auditors also monitor some types of disclosures about conflicts of interest as part of the annual audit.
  • When carrying out an inquiry: The Auditor-General has the power to examine concerns about conflicts of interest as part of an inquiry into a public organisation's use of its resources under section 18 of the Public Audit Act.
  • When carrying out a performance audit: The Auditor-General can examine a public organisation's compliance with any statutory or internal policy requirements about conflicts of interest, in the course of carrying out a performance audit under section 16 of the Public Audit Act.

1: For organisations in the State services, please also see the State Services Commission's Model Standards on Conflicts of Interest. They outline the State Services Commissioner's minimum expectations for staff and organisations in the State services to support effective reporting and management of conflicts of interest.

2: The Local Authorities (Members' Interests) Act 1968 applies to members of city councils, district councils, regional councils, community boards, and a range of other public bodies.

3: Except in the case of the Local Authorities (Members' Interest) Act 1968, where the Auditor-General has statutory functions under the Act.