Part 1: Introduction

Local Authorities (Members’ Interests) Act 1968: A guide for members of local authorities on managing financial conflicts of interest.

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In this Part, we discuss:

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This is a guide to the Local Authorities (Members' Interests) Act 1968 (the Act). It is intended for members of territorial authorities, regional councils, community boards, and local boards.

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This guide will also be relevant for elected or appointed officials in several other public bodies that are covered by the Act. These include cemetery trusts, administering bodies, and licensing trusts. To check whether the Act applies to you, see Appendix 1.

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Officers and staff of local authorities are not subject to the Act. However, they might find this guide useful when providing advice to members on how to comply and applying for contract approvals (these applications must be made by the local authority, not the member).

Summary of the Local Authorities (Members' Interests) Act 1968

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The purpose of the Act is to ensure that elected members of local authorities, and anyone else to whom the Act applies, are not able to take advantage of their official position for personal financial gain.

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The Act has two main rules:

  • Members cannot benefit from contracts with the local authority if payments made under those contracts are more than $25,000 in any financial year.1 We refer to this as the contracting rule.
  • Members cannot participate in matters before their local authority in which they have a financial interest, other than an interest in common with the public.2 We refer to this as the non-participation rule.

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The contracting rule applies to candidates for election as well as elected members, but it applies in a different way. In Part 2, we explain the application of the contracting rule to those who have already been elected or appointed. If you are not yet an elected member but are thinking of standing for election, or are being considered for appointment, you should read Part 3.

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In Part 4, we explain how the non-participation rule applies.

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The Act also provides some exceptions and exemptions to these rules. For example, local authorities can apply to the Auditor-General for approval of a contract, and members can apply to the Auditor-General for approval to participate in decision-making that might otherwise be prohibited by the Act. This is covered in Parts 2 and 4.

Does the Local Authorities (Members' Interests) Act 1968 apply to you?

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The Act applies to members of city councils, district councils, regional councils, community boards, local boards, and a range of other public bodies (see Appendix 1). The Act uses the term "local authority" to cover all these public bodies.3 We do the same in this guide.

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The Act also applies to members of committees of those local authorities (regardless of whether a committee member is also a member of the local authority).4 In this guide, we refer to all people to whom the Act applies as "members".

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The Act does not apply to:

  • officers and staff of local authorities; or
  • council-controlled organisations, port companies, airport companies, energy companies, or tertiary education institutions.5

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The Act regulates the actions of individual members of local authorities, not their local authorities. Members, not their local authorities, can be prosecuted for breaches of the Act.

Why you should read this guide

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It is important for members to have a good understanding of how the rules in the Act work. Failure to comply with the rules can result in serious consequences, including criminal conviction and immediate loss of office.

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We encourage you to read this guide carefully, take advantage of any training on the Act offered by your local authority, and ask for advice from staff if you have any questions or concerns about how the Act applies to you. In complex situations, you might need to seek legal advice.

The Auditor-General's role

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The Auditor-General has certain statutory functions under the Act.

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These statutory functions include:

  • deciding whether to approve contracts worth more than $25,000 in a financial year;
  • deciding whether to grant exemptions or declarations allowing members to discuss and vote where they have a financial interest; and
  • investigating and prosecuting alleged offences against the Act.

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If we are asked to investigate a potential breach of the Act, we will make findings and reach a view on whether the Act has been breached. If we do conclude that the Act has been breached, we will make a decision on whether the individual should be prosecuted. However, we do not issue legal "rulings". Only the courts can determine whether the Act has, as a matter of law, been breached. See Part 5 for more information on how we investigate and decide whether to prosecute possible breaches of the Act.

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We can provide guidance to members and officers of local authorities to help them comply with the Act in particular situations. However, we cannot give legal advice. In more complex situations, we might recommend that you seek legal advice about whether you are at risk of breaching the Act.

Some points about this guide

This guide applies only to financial interests

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This guide is about financial conflicts of interest and the specific rules that apply to the management of potential financial conflicts by members.

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The Act is only a small subset of a much larger body of law, ethics, and good practice that regulates bias and conflicts of interest in the public sector. There are other types of conflicts of interest and rules about bias in decision-making that are not covered by the Act or this guide that might affect you as a public official.

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Examples include conflicts of interest arising through personal relationships, conflicts arising because you hold roles in more than one organisation, and "predetermination".6

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If you read this guide and decide that you are not at risk of breaching the Act because you do not have a financial conflict of interest, you still need to think about whether you have some other sort of conflict of interest that might need to be managed. See our separate good practice guide – Managing conflicts of interest: A guide for the public sector.

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You should refer to that guide in cases where there is no risk of breaching the Act (because your interest is not a financial one), but where there might still be doubts about whether the situation you are in might breach common law rules on conflicts of interest or is ethically appropriate in a public sector context.7 You might find it helpful to also refer to our Quick guide to managing conflicts of interest (PDF), which is available on our website.

This guide is not a substitute for the law

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This guide outlines the main provisions of the Act and suggests some ways to approach questions that could arise for you. However, it is not a formal or definitive statement of the law. It should not be treated as legal advice for specific situations.

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In difficult situations, or if in doubt, we recommend that you refer to the actual wording of the Act, get advice from staff at your local authority, or seek legal advice, either from your local authority or your lawyer.

1: Section 3(1) of the Act.

2: Section 6(1) of the Act.

3: See section 2(1) and Schedule 1 of the Act.

4: Sections 3 and 6 of the Act refer to committees of a local authority as well as the authority itself.

5: See section 176E of the Education Act 1989, which says a council of an institution is not a local authority for the purposes of the Local Authorities (Members' Interests) Act 1968.

6: Predetermination is any situation where you are making a decision about something, and there is a risk that people will think you made up your mind before you considered all of the evidence. Suggestions of predetermination usually arise because of something you have previously said or done. For more about predetermination, see our good practice guide Managing conflicts of interest: A guide for the public sector at oag.parliament.nz.

7: Common law refers to law that has been developed by the courts.