Summary

Managing conflicts of interest: Guidance for public entities.

Every member or official of a public entity has a number of 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 when they are promptly disclosed and well managed.

In this guidance, we explain how to understand conflicts of interest in a public sector context, and how to identify, disclose, and manage them. We do not prescribe a set of rules, but we suggest an approach for dealing with issues when they arise. This guidance represents our view of what constitutes good practice in the public sector.

This guidance will be useful for any member or official who works for a public entity (but we also publish separate detailed guidance about the legal requirements that apply to members of local authorities).

There are several aspects to managing conflicts of interest effectively:

  • Public entities and members and officials need to understand what a "conflict of interest" is, and be aware of the different ways in which one can arise (see Part 2).
  • Public entities should establish policies and procedures to help them and their members and officials to identify and deal with conflicts of interest (see Part 3).
  • Members and officials should identify and disclose a conflict of interest as soon as it arises (see Part 4).
  • In each case, the public entity (or, sometimes, the member or official concerned) needs to consider what action (if any) is necessary to best avoid or mitigate any eff ects of the conflict of interest (see Part 4).

The nature of conflicts of interest

In the public sector, there is a conflict of interest where:

A member's or official's duties or responsibilities to a public entity could be affected by some other interest or duty that the member or official may have.

This is the key test to keep in mind.

The other interest or duty might exist because of:

  • the member's or official's own financial affairs;
  • a relationship or other role that the member or official has; or
  • something the member or official has said or done.

Sometimes a situation may be more accurately termed a "conflict of duty" or "conflict of role", but in this guidance we use the general term "conflict of interest" to cover these situations, too. We also use the term "conflict of interest" to cover circumstances that include or appear to include "bias" or "predetermination".

Just because a member or official has an interest outside their work, it does not necessarily follow that they have a conflict of interest. A conflict of interest only occurs if something arises at work that overlaps with the other interest.

The management of conflicts of interest also involves appearances — what an outside observer might reasonably perceive. Most often, what needs to be managed (and be seen to be managed) is the risk of the adverse public perception that could arise from the overlapping interests.

Sometimes there may be a perception of a conflict of interest where the interests come close but do not actually overlap. It may still be necessary to take some steps to manage these situations. Not taking steps to manage these risks can undermine an entity's reputation.

Relevant rules and expectations

Both the ethical and legal dimensions of conflicts of interest need to be considered when managing conflicts of interest.

There is no prescriptive set of rules specifying what constitutes ethical behaviour for all situations or all public entities, although expectations applying to a particular situation may come from a variety of sources. Decision-making should be guided by the principles of integrity, honesty, transparency, openness, independence, good faith, and service to the public.

Some rules for particular types of public entity (but mainly applying only to members of a governing body) are set out in statute. Also, the common law requires that public decision-making be procedurally fair.

Types of other interest

A conflict of interest can arise in a wide range of circumstances. For instance, the member's or official's other interest could be:

  • holding another public office;
  • being an employee, advisor, director, or partner of another business or organisation;
  • pursuing a business opportunity;
  • being a member of a club, society, or association;
  • having a professional or legal obligation to someone else (such as being a trustee);
  • owning a beneficial interest in a trust;
  • owning or occupying a piece of land;
  • owning shares or some other investment or asset;
  • having received a gift, hospitality, or other benefit from someone;
  • owing a debt to someone;
  • holding or expressing strong political or personal views that may indicate prejudice or predetermination for or against a person or issue; or
  • being a relative or close friend of someone who has one of these interests (or who could otherwise be personally affected by a decision of the public entity).

Policies and procedures

Policies and procedures can provide clear rules for simple and predictable situations, and establish a process for dealing with the more difficult ones. One process many public entities use is to require members or officials to regularly (for example, yearly) complete and submit a declaration listing specified types of personal interests. This is sometimes called an "interests register". An interests register can help public entities identify when a conflict of interest might arise so that steps can be taken to manage it.

However, policies and procedures are not necessarily enough. They cannot anticipate every situation. Moreover, the seriousness of some situations will be a question of degree, and not easily managed by a rule. Policies and procedures need to retain some flexibility so that the public entity can exercise judgement in individual cases. A policy should not state or imply that the specific situations it covers are an exhaustive list.

Dealing with conflicts of interest when they arise

Some situations will need to be the subject of discretionary judgements as and when they arise. There are two aspects to dealing with particular situations:

  • identifying and disclosing the conflict of interest (primarily the responsibility of the member or official concerned); and
  • deciding what action (if any) is necessary to best avoid or mitigate any effects of the conflict of interest (primarily the responsibility of the public entity).

Identifying and disclosing a conflict of interest

The member or official with the conflict of interest is obliged to identify it, and disclose it to the relevant people in a timely and effective manner. It is better to err on the side of openness when deciding whether something should be disclosed.

If a matter in which a member or official has an interest arises at a formal meeting, the member or official should declare to the meeting that they have an interest in the matter before the matter is discussed. In other situations, the matter should be raised and discussed with a relevant person (such as a manager or chairperson) as soon as the potential for a conflict of interest is identified.

Deciding on further action

Simply declaring a conflict of interest may not be enough. The public entity should carefully consider what, if anything, needs to be done to adequately avoid or mitigate the eff ects of the conflict of interest.

Where there is a clear legal requirement or other written rule covering the situation (such as a statutory prohibition on participating in a matter at a meeting), the onus to comply lies with the member or official concerned, and that rule may override any other discretion. However, in all other cases the primary obligation to determine the appropriate next steps (and to direct the affected member or official accordingly) lies with the public entity.

There may be scope for a range of options and the exercise of discretionary judgement. In these cases, the public entity needs to assess carefully:

  • the seriousness of the conflict of interest; and
  • the range of possible mitigation options.

The assessment is not primarily about the risk that misconduct will occur. It is about the seriousness of the connection between the interests, the risk that the public entity's capacity to make decisions lawfully and fairly may be compromised, and the risk that the entity's reputation may be damaged. In making this assessment, the public entity needs to consider how the situation may reasonably appear to an outside observer.

Usually, mitigation means that the member or official withdraws or is excluded from being involved in the public entity's work on the particular matter.

In the interests of openness and fairness (and to minimise the risk of the public entity having to defend itself against an allegation of impropriety), it is always safer to err on the side of caution.

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