Part 1: Introduction

Guidance for members of local authorities about the local authorities (Members' Interests) Act 1968.

What this guide is about

This is a guide to the Local Authorities (Members' Interests) Act 1968 (the Act) for members of the governing bodies of territorial authorities, regional councils, tertiary institutions, and those other public bodies that are covered by the Act.1 Appendix 1 sets out a full list of the organisations covered by the Act.

The Act has two main purposes:

  • ensuring that members are not affected by personal motives when they participate in decisions of their local authority; and
  • preventing members, in contracting situations, from using their position to obtain preferential treatment from the authority.

Part 5 of this guide sets out information on other aspects of the law applying more generally to conflicts of interest.

Terms used in this guide

In this guide:

  • "you" and "member" means a member of an authority as described in paragraph 1.1 and Appendix 1;
  • "local authority" or "authority" means a body subject to the Act;
  • "we", "our", and "us" refer to the Auditor-General and the Office of the Auditor-General;
  • "the Act" means the Local Authorities (Members' Interests) Act 1968; and
  • "common law" refers to law that has been developed by the courts.

Who does this guide apply to?

This guide is intended for members of local authorities. It focuses on the requirements of the Act that apply to members in decision-making at authority meetings and the capacity of members to contract with the authority of which they are a member.

This guide does not discuss other behaviour or situations that, while not unlawful, might be regarded as unethical.

Neither the Act nor this guide applies to staff of local authorities but may be useful to them in providing advice to members.

Other guidance

We have published separate guidance about managing conflicts of interest in the public sector more generally: see our 2007 publication Managing conflicts of interest: Guidance for public entities. That publication discusses a broader range of organisations, situations, and personnel, and considers ethical expectations as well as legal rules. Members of local authorities may also find that guide useful in cases where there is no risk of breaching the Act but where there may still be doubts about whether the situation or behaviour is ethically appropriate in a public sector context.

The law applying to conflicts of interest generally

The Act is a small subset of the law about conflicts of interest that applies to local authority members. The body of law on conflicts of interest has been developed by the courts over a long period of time as part of the law on bias, and applies to local authority members when they are making decisions. In Part 5 of this guide we set out some general comments on the common law applying to conflicts of interest. However, the Auditor-General has no specific role in relation to conflicts of interest generally. We have a specific role only in relation to pecuniary conflicts of interest that are regulated by the Act.

We have no formal decision-making role in relation to non-pecuniary conflicts of interests. Only the courts can determine whether the law has been breached in any particular instance and what the consequence should be. However, we can look into matters of probity involving a member of an authority, which could include examining whether a member failed to declare a conflict of interest.

What the Local Authorities (Members' Interests) Act 1968 applies to

The Act applies to the pecuniary interests of members of local authorities. The Act:

  • controls the making of contracts worth more than $25,000 in a financial year between members and their authority (see Part 2); and
  • prohibits members from participating in matters before the authority in which they have a pecuniary interest, other than an interest in common with the public (see Part 3).

The Act applies to members of city councils, district councils, regional councils, community boards, tertiary institutions, and a range of other public bodies (see Appendix 1).

The Act regulates the actions of individual members of authorities, not the actions of their authorities.

Members, not their authorities, may be prosecuted for breaches of the Act.

The Act also applies to members of committees of those authorities (regardless of whether a committee member is also a member of the authority). It does not apply to council-controlled organisations, port companies, airport companies, or energy companies.

The role of the Auditor-General under the Act

Our role in administering the Act includes:

  • deciding applications for approval of contracts worth more than $25,000 in a financial year;
  • deciding applications for exemptions or declarations from the rule against members discussing and voting where they have a pecuniary interest;
  • providing guidance to local authority members and officers, to help them comply with the Act in particular situations; and
  • investigating and prosecuting alleged offences against the Act.

We do not issue "rulings" about whether a member has a pecuniary interest in a particular matter, nor about whether the Act has been breached. Only the courts can determine those matters.

What is a pecuniary interest?

A pecuniary interest is one that involves money. It can sometimes be difficult to decide whether an interest in a particular matter is pecuniary or some other kind (see "Frequently asked questions" in Part 6).

This guide is not a substitute for the law

This guide discusses 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. Nor is it to be treated as legal advice for specific situations. In difficult situations, we recommend that you refer to the actual wording of the Act or consult your own lawyer.

1: Previous editions of this guide were called A Guide to the Local Authorities (Members' Interests) Act 1968 (1995 and 1998); Financial Conflicts of Interest of Members of Governing Bodies: A Guide to the Local Authorities (Members' Interests) Act 1968 (2001); Conflicts of Interest: A Guide to the Local Authorities (Members' Interests) Act 1968 and Non-pecuniary Conflicts of Interest (2004); and Guidance for members of local authorities about the law on Conflicts of Interest (2007).

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