Managing Conflicts of Interest in the Public Sector

Determining whether a person has a ‘Conflict of Interest’ on face value, may appear to be a relatively simple task. However, the more you explore the boundaries of a “conflict” and the nature of an individual’s so called “interest”; the task can become a lot more complex. A key component of this complexity is the subjective nature of the task – to what degree might an association become a conflict? Does non-pecuniary association need to be given the same weighting as a pecuniary association?  Who should make the determination?

However, don’t worry – help is at hand. In April 2019 the Independent Commission Against Corruption (ICAC) released a set of guidelines titled Managing Conflicts of Interest in the Public Sector (Guidelines). The Guidelines outline ways in which individuals undertaking public official roles should identify, disclose, and action a conflict of interest. The Guidelines are a welcome supplement to the Toolkit[1] (previously issued by the ICAC in 2004) which up till now has served as a key reference point for individuals/organisations undertaking roles within the public sector. The new Guidelines complement the Toolkit by shifting the emphasis as to who is best placed (not the individual with the association) for determining whether a conflict exists, further defining the definition for a conflict, and, outlining additional strategies to address conflicts, once identified.

A key enhancement in the Guidelines to previous guidance issued is the introduction of the “reasonable person” test, which is an objective test to be used by focusing on the specific situation and not a person’s opinion. The reasonable person is a “hypothetical, fair-minded and informed observer”[2].  Effectively the Guidelines steers away from the subjective ‘actual, perceived or potential’ approach with the introduction of the reasonable person test.

The Guidelines have simplified the fundamental elements of how to identify whether a conflict of interest exists in the first instance through a four-question process: –

  1. Does the official have a personal interest?
  2. Does the official have a public duty?
  3. Is there a connection between the personal interest and the public duty?
  4. Could a reasonable person perceive that the personal interest might be favoured?[3]

This approach provides officials with clear and succinct procedures for determining whether an official’s connection between their personal interest and public duty would be perceived as a conflict of interest in the eyes of a reasonable person.

The Guidelines also introduce a Control Framework, developed to assist officials in the management of conflicts of interest. Some elements of the Control Framework are: –

  • Establishing a conflict of interest policy that clearly explains practices and procedures, requirements for all relevant groups and other entities, training and ease of access to the policy through the relevant intranet;
  • Identifying high risk units and branches and providing best practice guidelines with a focus on limiting the consequences of an undisclosed/mismanagement conflict of interest;
  • Avoiding unnecessary conflicts of interest with examples of good practice and social situations to be avoided that have the potential to lead to a conflict of interest;
  • Encouraging officials to disclose personal interests and conflicts of interest and outlines the typical methods for making and recording disclosures;
  • Advice to managers on their general responsibilities and encourage them to be proactive in looking for conflicts of interest

Another notable addition in the Guidelines is the approach to management of conflicts articulated in the Toolkit. The approach referred to known as the 6 R’s; (register, restrict, recruit, remove, resign and relinquish). The Guidelines have introduced additional options including: –

  • Take no further action (e.g. no further action required if the matter is determined to be low risk)
  • Change the official’s relevant activities (e.g. reduce or amend the level of participation of the individual in the process)
  • Change the official’s personal interest (e.g. refrain the individual from communicating with an associate during a procurement process)
  • Change the system or process (e.g. through enhanced recordkeeping, additional monitoring, and increased assurance activities).

The Guidelines encourage officials to consider adopting a mix of the options, in lieu of consideration of each option in isolation, thus promoting a more comprehensive approach to the management of conflicts.

The Guidelines further state that “while controls of this nature may not directly prevent an official from favouring a personal interest, they increase the likelihood that any improper conduct will leave a trail and be detected.[4]

In summary the Guidelines are an informative addition to the previously released Toolkit and are a must read for those required to consider the impact of personnel associations (pecuniary and non-pecuniary) when undertaking a public official role.

 

_______________________________________________

[1] Independent Commission Against Corruption and Crime Misconduct Commission. (2004). Managing Conflicts of Interest in the Public Sector Toolkit.

[2] Independent Commission Against Corruption. (2019). Managing Conflicts of Interest in the Public Sector.

[3] Independent Commission Against Corruption. (2019). Managing Conflicts of Interest in the Public Sector.

[4] Independent Commission Against Corruption. (2019). Managing Conflicts of Interest in the Public Sector.