A cautionary tale to managing conflicts of interest in the APS

WRITTEN BY John Wilson & Kieran Pender

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Much concern has been expressed of late about conflicts of interest in the public sector consulting, following controversy at some of Australia’s major consulting firms.

These concerns are a reminder conflicts of interest must be managed carefully – given the risks of failing to do so.

Those risks are particularly acute in the public sector, where public confidence in the integrity of decision-making is critical, making a primer on managing conflicts in the APS timely.

The APS code of conduct, at section 13 of the Public Service Act 1999, provides that federal public servants must “(a) take reasonable steps to avoid any conflict of interest (real or apparent) in connection with the employee’s APS employment” and “(b) disclose details of any material personal interest of the employee in connection with the employee’s APS employment”.

Failure to comply with these provisions could see a public servant face disciplinary action.

The code of conduct is supplemented by the Australian Public Service Commission’s guidelines, and relevant departmental policies and procedures.

An actual conflict of interest arises where there is a conflict between a public servant’s official duties and their personal interests, which may influence the employee in performing those duties.

Say a decision-maker is reviewing grant applications under a federal program, and the decision-maker has a part shareholding in or sits on the board of one of the organisations applying for a grant. That would be an actual conflict of interest; it would be improper for the decision-maker to make decisions relating to the grant, given the personal interest.

Actual conflicts of interest are serious; in some cases they could amount to corruption. But apparent conflicts of interest – whereby it appears a public servant’s personal interests may influence the performance of their role – can be just as damaging to public perceptions of integrity in the APS.

To avoid these risks, the code requires public servants to avoid the risk where that can be done – say by the grants decision-maker recusing themselves from the review process.

Sometimes the conflict may be less direct and avoiding it more difficult, due to the nature of the conflict or the employee’s role. “Where this is the case,” the APSC advises, “the code requires employees to disclose details of any material personal interest of the employee in connection with their employment.”

Not everyone’s personal interest is material. A junior employee at Treasury does not need to disclose that their second cousin’s boyfriend’s father is the Treasurer. But if a departmental deputy secretary’s wife was the portfolio minister, that would likely require disclosure.

Personal interests are only material where there is a “real or sensible possibility of conflict”, says the APSC, not “simply a remote or theoretical possibility of conflict.” The test is one of reasonable perception – could it reasonably be said that there is a connection between an employee’s personal interest and their official duties?

It might be a declarable personal interest if a public servant working on financial market regulation holds a significant shareholding in a listed bank directly impacted by such regulation. It may not be material if the employee holds shares in an exchange-traded fund, which in turn holds shares in the bank.

Conflict of interest issues also frequently arise in relation to secondary employment, on which we have written previously, and where public servants should tread with some care.

The above article was written for and published in the Canberra Times.

For all employment related queries or concerns, please contact our Employment Law & Investigations team at BAL Lawyers.

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