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Health Promotion Agency - Katherine Rich - possible conflicts of interest

14 May 2015

The Auditor-General received requests from members of public to investigate possible conflicts of interest for Katherine Rich, Chief Executive of New Zealand Food and Grocery Council. Our response to Dr Lee Mathias, Chair of  Health Promotion Agency is set out below.

File ref: 13300

Dr Lee Mathias
Chair, Health Promotion Agency
PO Box 2142
Wellington 6140

Dear Dr Mathias

HEALTH PROMOTION AGENCY – KATHERINE RICH – POSSIBLE CONFLICTS OF INTEREST

We are writing to you about a matter that has been raised with us by members of the public.

As you know, Katherine Rich has been a member of the board of the Health Promotion Agency (HPA) since July 2012. The HPA is a Crown entity. Mrs Rich is also chief executive of a private sector organisation, the New Zealand Food & Grocery Council (FGC). The FGC promotes the interests of various manufacturers and suppliers of products sold by the grocery trade.

We have received complaints about whether Mrs Rich’s two roles have led to her different interests coming into conflict.

We have considered the issues raised, obtained and reviewed relevant documentation, and spoken with the chair and chief executive of the HPA. We have not found it necessary to interview Mrs Rich.

We are satisfied that there are no matters we need to investigate further. We have not identified problems with the management of conflicts of interest by the HPA.

Particular legal conflict of interest rules that apply to board members of the HPA are set out in the Crown Entities Act 2004, in ss 62-72. In particular, s 62(3)(ca) notes that a person does not have conflict of interest merely because they have “past or current involvement in the relevant sector, industry, or practice.”

In our view, there is a need for rigour and specificity in identifying or analysing whether two different interests conflict. It is not easy to assess a conflict of interest in the abstract. A conflict of interest does not arise simply from a person’s general background, or from their personal or professional involvement in a sector or industry. Rather, it is necessary to point to a specific connection between the person’s other interest and a particular matter or decision coming before the public entity.

Accordingly, conflicts of interest are best assessed case-by-case. Their assessment requires careful judgement, and is often a matter of fact and degree. It will depend on the particular circumstances of what is being considered or decided. Most typically, any issue is able to be sufficiently dealt with by the person declaring their interest and withdrawing from participation in the relevant decision. As such, it ought to be rare that a conflict of interest is so pervasive and all-encompassing that a person cannot remain a member of the governing body at all.

Here, we consider it would be too simplistic to assume that the aims and activities of the HPA and FGC are incontrovertibly opposed and utterly incompatible, such that a person who was associated with one organisation was impossibly compromised from any association with the other. Similarly, it would be too vague and indirect to conclude that it is impermissible for Mrs Rich to participate in any matter relating to a broad general subject-matter, such as alcohol or tobacco. For a problem to arise, there would have to be some particular substantive act or decision of the HPA board that clearly affected, or was affected by, something arising out of Mrs Rich’s FGC role.

The HPA is a relatively new organisation. Much of the board's focus to date has been on organisational and systems matters arising out of its establishment. It has not been heavily involved in the substance of operational matters that might give rise to the sorts of conflicts of interest contemplated here. Often the board does have general discussions or briefings about a broad topic, but the board has not so far had a significant role to play in deliberating on or making decisions about advancing particular matters of policy substance.

For example, the contents of submissions, advice, or promotional campaigns are not typically determined by the board. That work is generally regarded as expert technical work, undertaken by staff.

We identified one public consultation process matter in which both the HPA and the FGC had made formal submissions. However, in that instance the HPA’s submission was not even seen by, let alone approved by, the board, and so there was no point at which it might have been necessary for a board member’s conflict of interest to be declared and managed.

The HPA board is led by an experienced chair, who is alert to the need to identify and manage conflicts of interest in respect of all board members. It is certainly possible that particular instances of conflicts of interest might arise from time to time for individual board members in the future. They will need to be identified and managed as and when they arise.

From our review of the HPA’s board minutes, we have not identified any particular matters before, or decisions by, the HPA board that might raise serious concerns about its management of conflicts of interest, whether in respect of Mrs Rich or other members.

We also looked at the process of Mrs Rich’s appointment to the HPA board. We have not identified any issues there that require comment or further investigation. Mrs Rich’s outside interests were appropriately declared by her, and were documented in officials’ reports and drawn to the Minister’s attention. They would have been taken into account by officials and by the Minister. Her interests were also appropriately recorded on the board’s interests register. Our Office does not have a role in ruling on whether a person should or should not be a member of the board of a Crown entity. That is a matter for the Minister’s judgement.

The people who wrote to us also mentioned allegations in Nicky Hager’s 2014 book Dirty Politics about things Mrs Rich is said to have done in her private capacity. However, those are not matters we would investigate. They do not relate to Mrs Rich’s conduct on the HPA.

Accordingly, we do not propose to take this matter further. We will report our views to the people who wrote to us. Also, given the interest in the matter, we will publish this letter on our website.

Yours sincerely

Edrick Child
Acting Assistant Auditor-General, Legal

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