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Information for candidates considering standing for elections

Important information for candidates who have a contract with their local authority, community board, or licensing trust.

Are you considering standing for election to a Local Authority, Community Board, Local Board, or Licensing Trust?

Do you have a financial interest in a contract or subcontract with that authority – either personally, through your spouse or partner, or as a result of a business interest?

Do payments under any of those contracts amount to more than $25,000 (including GST) in any financial year?

If so, there are some important legal rules you need to know about.  These rules might prevent you from standing for election - or, if you are elected, might disqualify you from office. 

The rules apply whether you contract personally with the authority or through a business, such as a partnership or company.  They also apply to any contracts between the authority and your spouse or partner, or any other contract in which you have a financial interest. 

The rules don’t stop you continuing to do business with the authority.  However, if you go on to be elected, they limit the value of contracts you can enter into, unless the contract fits specified exceptions or is approved by the Auditor-General. 

This document explains what the rules are and, if they affect you, what you need to do about it.

Introduction

The rules about financial interests of elected members are set out in the Local Authorities (Members’ Interests) Act 1968.

The Act applies to local authorities, community boards, local boards, licensing trusts, and a range of other organisations that have a public purpose.  To keep things simple, we’ll call all these organisations ‘authorities’.

The purpose of the rules is to ensure you do not take advantage of your position as an elected member for personal gain.

There are two basic rules in the Act – the contracting rule, and the discussing and voting rule.  Both rules apply if you are elected to office.  As a candidate for election, the rule you need to be aware of now is the contracting rule.

The contracting rule

If:

  • you are ‘concerned or interested’ in a contract or subcontract with the authority at the time of the election; and
  • the amount the authority is required to pay under that contract is more than $25,000 in any financial year,

you are not eligible to stand for election to that authority, unless the contract fits one of the specified exceptions in the Act.

Does the contracting rule apply to you?

To work out if the contracting rule applies to you, you need to ask three basic questions:

  1. Am I ‘concerned or interested’ in a contract (or contracts) with the authority?
  2. Is the value of the contract more than $25,000 in any financial year?
  3. Do any of the exceptions to the contracting rule apply?

Am I concerned or interested in any contracts with the authority?

You are considered to be ‘concerned or interested’ in a contract if:

  • you or your spouse/partner receive payments from the authority under the contract; or
  • you or your spouse/partner have an ownership interest in a business (e.g. a company or partnership) that receives payments from the authority under the contract; or
  • you stand to benefit financially in some other way under the contract.

The rule covers subcontracts as well as head contracts. That means it applies to you if you provide goods or services to the authority under subcontract to another party.

The definition of ‘contract’ in the Act is quite broad.  It includes informal and oral contracts, and any relationship with the authority that is intended to constitute a contract, even if the contract is not enforceable.

Is the value of the contract more than $25,000 in any financial year?

By ‘value of the contract’, we mean the value of the payments the authority is required to make under the contract.

The $25,000 limit:

  • applies to the total payments under the contract - not just the amount of the profit you expect to make or the portion of the payments you might personally receive;
  • is the limit for each financial year.  If you have more than one contract with the authority in a financial year, the $25,000 limit applies to the combined total of payments under those contracts;
  • includes GST.

Do any of the exceptions to the contracting rule apply?

As a candidate for election, the contracting rule does not apply if:

  • All of your obligations under the contract have been completed before the election, and the amount the authority has to pay has already been fixed.  (It doesn’t matter whether the payments have actually been made);

OR

  • All your obligations under the contract have not been completed before the election, but:
    • the contract is for a term of 12 months or less; or
    • the amount the authority has to pay has already been fixed, apart from any amendments or additions allowed for in the contract.  (Again, it doesn’t matter whether or not the payments have actually been made); or
    • you relinquish the contract (with the authority’s consent) within a month of becoming a member and before you start to act as a member.

The contracting rule also does not apply to certain types of contract, for example, if the contract involves a loan or lease to the authority.

Where to from here?

If you’re not sure if the rule applies to you, or if you think the rule does apply, but you still want to stand for election without having to relinquish the contract if you are elected, you will need more detailed information, and possibly legal advice.

Check out our guidelines
We suggest you start with our guide to the Local Authorities (Members’ Interests) Act which you can download from our website at http://www.oag.govt.nz/2010/lamia. The guide explains the contracting rule in more detail. Paragraphs 2.49 to 2.54 explain how the rule applies to candidates for election. Call or e-mail us if you would like a hard copy.

Contact us
If you can’t find the answer to your question in our guide, you are welcome to call or e-mail us.  If you call, ask to speak to someone about the Local Authorities (Members’ Interests) Act and its application to candidates for election. 

Please note we cannot provide legal advice or ‘rulings’ on the application of the Act.  If your circumstances are particularly complicated or you want personal assurance about how the Act applies to you, you may need to get your own legal advice.  However, we are happy to provide general guidance, and to help you figure out whether legal advice is necessary.

If you are elected

If you are elected, the contracting rule continues to apply, but with some differences that you will need to become familiar with.

There are also rules that apply if you have a financial interest in any matter that the authority is going to discuss or vote on.

Many authorities provide training on these rules to newly elected members. You can also find a detailed explanation of the rules in our guide to the Act.

Contact us

Phone: (04) 917 1500
E-mail: lamia@oag.govt.nz
For a copy of our guide: http://www.oag.govt.nz/2010/lamia
For a copy of the Act: www.legislation.govt.nz
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