The boards of four corporate Commonwealth entities have been found to be getting on top of managing conflicts of interest.
Conflicts of interest issues on the boards of corporate Commonwealth entities (CCE) are the focus of the latest Auditor-General report, which scrutinised four organisations and concluded they were mostly doing okay.
The National Portrait Gallery of Australia, the Australian Sports Commission, Food Standards Australia New Zealand, and Infrastructure Australia were all found to be “largely effective” in the way their boards manage conflicts of interest.
The Department of Finance’s definition of a CCE is a corporate body that has a “separate legal personality from the Commonwealth and can act in its own right” in exercising certain legal rights, such as entering into contracts and owning property.
The Australian National Audit Office (ANAO) took a close look at the four CCEs and, while making a number of recommendations, gave each of them partial ticks for their corporate governance when it came to how they are managing conflicts of interest.
“According to the Australian Public Service Commissioner, the public is entitled to have confidence in the integrity of public officials and to know that the personal interests of public officials do not conflict with their public duties,” the report states.
“Apparent conflicts can be just as damaging to confidence in public administration as real conflicts, so disclosures and effective management of real, apparent and potential conflicts of interest is an important element of the Australian Government’s integrity framework.”
There is a legal duty to declare material interests, and CCE board members may have material personal interests that relate to their role as a member of an accountable authority.
The ANAO said board requirements for specific qualifications, skills and experience pose the risk that domain knowledge and industry familiarity may lead to conflicts of interest.
“This audit was conducted to provide assurance to the Parliament that the boards of the four CCEs are effectively managing conflicts of interest,” its report states.
“The operations of the boards in managing conflicts of interest were largely effective.
“Arrangements for managing conflicts of interest were implemented by the boards in accordance with legislative requirements and documented by some of the boards in policies and procedural guidance.”
The effectiveness of implementing these arrangements, however, was inconsistent across the boards, according to the report.
That resulted in deficiencies in declaring and managing conflicts of interest by the boards and reduced the overall effectiveness of the boards in their management of conflict of interest risks.
The ANAO found that each of the boards had developed largely appropriate arrangements for managing conflicts of interest, with some better than others.
All boards had also implemented arrangements to support the declaration of interests by board members, including following their appointment and during the term of their appointment.
There were some areas of concern.
The board of the NPGA did not have a conflict of interest policy that included managing conflicts of interest related to its board.
The boards of the ASC and FSANZ had not developed conflict-of-interest management plans for board members holding other roles within the Australian Government.
The boards have largely relied on board induction processes to provide training and education in relation to managing conflicts of interest.
The CCE boards were only partly effective in implementing arrangements for managing board conflicts of interest consistent with their own policies.
“There were shortcomings in the operating effectiveness of processes for declaring and managing conflicts of interest across all boards,” the report states.
“This included instances where: declarations of interest were not obtained from newly appointed board members in a timely manner; declarations of interests were not implemented as a standing agenda item at board meetings; and boards’ assessments of declarations of interest were not sufficiently documented to record whether the board had determined declarations to be material personal interests.”
The Auditor-General made four recommendations:
- The National Portrait Gallery of Australia update its conflict of interest policy to document requirements and arrangements for declaring, managing and overseeing conflicts of interest relating to the board.
- The Australian Sports Commission and Food Standards Australia New Zealand assess conflict of interest risks for board members holding other roles within the Australian Government, and develop mitigations that are documented in a management plan.
- The Department of Finance improve training and education arrangements for corporate Commonwealth entities to raise awareness for entities and their board members in understanding how to implement arrangements to meet conflict of interest obligations. This should be undertaken in consultation with portfolio departments.
- The Australian Sports Commission, Food Standards Australia New Zealand, Infrastructure Australia and National Portrait Gallery of Australia implement arrangements to record the board’s assessment of whether a declaration made by a board member is determined to be a material personal interest. Where the interest is determined to be a material personal interest, boards should record the disclosure and consequence in accordance with the Public Governance, Performance and Accountability Rule 2014.
All four CCEs and the Department of Finance agreed to implement the recommendations.
