Conflicts of interest and the council budget

Conflicts of interest and the council budget

With the annual season for formal adoption of next year’s council budget upon us, we are receiving regular enquiries from councils on how best to deal with questions of councillor conflicts of interest.

The definition of General Conflict of Interest in section 127 of the Local Government Act 2020:

“….if an impartial, fair-minded person would consider that the person’s private interests could result in that person acting in a manner that is contrary to their public duty”

has led many councillors to consider whether personal friendships and strong relationships they hold with individuals who stand to gain a benefit from a council budget item ought preclude the councillor in question from participating in budget deliberations and resolutions.

Our view is that mere acquaintances that are conducted regularly on friendly, even first-name terms between a councillor and a prospective/intended recipient of council funding by way of the annual budget would not create a General Conflict of Interest.

However, there will be circumstances where the relationship between the councillor and the other individual or entity is so close or intimate that a reasonable person would doubt the councillor could make an objective decision on the proposed funding uninfluenced by the existence of that relationship.

In those circumstances, we agree that a councillor ought make a conflict of interest declaration.
But should the councillor then be precluded from participating in all that year’s budget decisions and resolutions as a result?

To preclude an individual councillor from participating in budget debate and voting on the broader budget on account of a conflict of interest in relation to one discrete item within the budget is not consistent with the intent of the conflict of interest provisions in the Act.

We doubt in the above circumstances that the legislature intended to disenfranchise a councillor and the ward or community they represent from participating in the very significant budget process involving setting rates and charges, debt management, determining recurring expenditure and capital works items for the forthcoming financial year.

Accordingly, our advice to councils is that it is appropriate when the question of a conflict of interest in relation to a discrete budget item arises, to craft a specific resolution item for formal consideration and voting by councillors.

For example, if Councillor Jones has determined to declare a General Conflict of Interest in relation to the provision in the council budget for $5,000 funding to the ABC Athletics Club, then a separate resolution along the following lines should be prepared for council’s consideration:

“That Council includes in the 2021/2022 annual budget funding of $5,000 for the operations of the ABC Athletics Club”.

Councillor Jones would then declare a General Conflict of Interest in relation to this particular item in the usual fashion immediately prior to the item being considered by councillors and formally remove themselves from the chamber/debate/voting on the particular item.

Subsequently, Councillor Jones could re-join the meeting and participate in the debate and voting in relation to the consolidated council budget.

Such an approach we think adequately addresses the need for both transparency and fairness and the full participation of councillors in the critical process of delivering the annual budget.

~ with Michelle Nguyen, Lawyer

Our Government and Public Sector Lawyers