1. This paper consolidates Cabinet decisions on the management of conflicts of interest - including those of all board members on DHB subcommittees - and sets out how this will be reflected in legislation applying to DHBs.

BACKGROUND

2. On 19 June 2000, Cabinet asked officials to report to Cabinet Social Policy and Health Committee as soon as possible on how decisions on managing conflicts of interest will be reflected in legislation [CAB (00) M20/5]. The relevant decisions were that:
   1. no DHB employee elected to a DHB board, or any other DHB board member with a significant material interest in the affairs of the board, shall sit on any subcommittee with a direct responsibility for the area out of which a conflict of interest might arise
   2. DHB employees who are elected to the DHB which employs them will not be required to resign their employment with that DHB
   3. contractors (self-employed contractors, owners/directors/investors of contracted providers and employees of contracted providers) not be restricted from being members of DHBs with which they have a contractual relationship.

3. The Parliamentary Counsel Office (PCO) is currently drafting the content of the New Zealand Public Health and Disability Bill, including the specific provisions on conflicts of interest, reflecting Cabinet decisions.

4. A special Ad Hoc Ministerial Committee is being established to examine the New Zealand Public Health and Disability Bill, and will have an opportunity to also examine the provisions relating to conflicts of interest. The Bill will then progress to the Cabinet Legislation Committee and Cabinet before being introduced. The Bill will then be consulted on during the Select Committee phase.

Cabinet decisions in relation to Board membership to be effected by legislation

5. Previously agreed mechanisms to manage employees' conflicts of interest are summarised in CAB (00) M20/5 (b):
   1. that people declare any conflicts, or potential conflicts, of interest before accepting nomination for election to a DHB Board [CAB(00)M11/1A(30 refers]
   2. that DHB Board members be required to disclose any actual or potential conflict of interest to the Board and not participate in any Board discussion or decision relating to the conflict after the disclosure is made [CAB(00)M11/1A(30 refers]
   3. that employees of the Ministry of Health are required to comply with the Public Service Code of Conduct and they may therefore be required to resign their employment if they achieve DHB Board membership [SPH(00)M13/2].

6. The first two points in the above paragraph will be reflected in legislation, while no statutory provisions are needed for the latter, as the Code is an employee obligation.

7. DHB employees and contractors seeking election to DHB boards will have to declare conflicts before they stand for election. If elected they will have to disclose any actual or potential conflicts, and not participate in Board discussion or decision making relating to the conflict.

Decisions in relation to Board committees to be effected by legislation

8. Cabinet has also decided that no DHB employee elected to a DHB board, or any other DHB Board member with a significant material interest in the affairs of the board, shall sit on any subcommittee with a direct responsibility for the area out of which a conflict of interest might arise [CAB (00) M 20/5 e refers].

9. It is anticipated that this would include a measure to prevent a DHB appointing people to subcommittees whose functions directly relate to the subject areas in which the people have a strong interest. For example, a person employed in a DHB's finance group would face conflicts of interest on a Finance & Audit sub-committee, and would therefore not be appointed.

10. Such a provision would not prevent a DHB employee elected to a board to sit on any Board committee except where material conflicts of interests are likely to arise. This is likely, for example, to make it impracticable for DHB employees working for the hospital to sit on the Hospital Governance Committee which monitors the performance of the hospital. DHB boards will need to consider this when it makes the appointments to the committees.

11. Another way that risks of conflicts of interest within the Board committees will be mitigated is that meetings of the Board and its committees will be open to the public [Cab (00) m15/8 v].

12. DHBs are ultimately responsible for the decisions made by (or under authority of) the Board and will, therefore, need and wish to ensure that conflicts of interest are managed. Boards will be expected to have operational rules in place to manage conflicts (including, for example, how information is used, and maintaining a register of declared conflicts of interest).

CONSULTATION

13. The following agencies were consulted in preparation of this paper: Crown Company Monitoring Advisory Unit, Department of the Prime Minister and Cabinet, Ministry of Pacific Island Affairs, the Treasury, Te Puni Kokiri, and the State Services Commission.

FINANCIAL IMPLICATIONS

14. There are no financial implications.

LEGISLATIVE IMPLICATIONS

15. This paper summarises previous decisions on how conflicts of interests of DHB employees will be managed in the New Zealand Public Health and Disability Bill.

COMPLIANCE COSTS STATEMENT

16. There are no compliance cost implications.

REGULATORY IMPACT STATEMENT

17. As this paper outlines previous decisions, no regulatory impact statement is required.

HUMAN RIGHTS IMPLICATIONS

18. There are no Human Rights Act 1993 implications.

PUBLICITY

19. Publicity on matters related to this paper is managed as part of the wider Health & Disability Sector Change Communications Strategy.

THE COMMITTEE, HAVING BEEN GIVEN POWER TO ACT BY CABINET ON 3 JULY 2000 [CAB (00) M 22/21 REFERS];

SPH (00) M 17/4

PROVISIONS FOR EMPLOYEE CONFLICTS OF INTEREST IN THE NEW ZEALAND PUBLIC HEALTH AND DISABILITY BILL

1. noted that the Parliamentary Counsel Office is drafting the New Zealand Public Health and Disability Bill, and the Bill will include specific provisions to cover how conflicts of interest, including those of employees and contractors, will be managed for District Health Boards (DHBs) to give effect to Cabinet decisions already made [CAB (00) M 11/1A(3) and CAB (00) M 20/5 refer];
2. noted that a special Ad Hoc Ministerial Committee (comprising the Prime Minister, the Minister of Health, the Associate Minister of Finance and the Attorney-General) is being established to examine the New Zealand Public Health and Disability Bill, and that Committee will have an opportunity to also examine the provisions relating to conflicts of interest, before the Bill progresses to the Cabinet Legislation Committee and Cabinet [CAB (00) M 21/12 refers];
3. noted that the following mechanisms to manage conflicts of interest will be in the New Zealand Health and Disability Services Bill:
   1. people must declare any actual or potential conflicts of interest before accepting nomination for election to a DHB Board [CAB (00) M 11/1A(3) refers];
   2. DHB board members must disclose any actual or potential conflicts of interest to the Board and not participate in any Board discussion or decisions relating to the conflict(s) after the disclosure is made [CAB (00) M 11/1A(3) refers];
   3. DHB board members (whether or not employees) will be prevented from being appointed to any subcommittee where conflicts of interest will arise regularly because of a commonality of a committee member's material interests and those of a subcommittee [CAB (00) M 20/5 refers];
   4. meetings of the DHB boards and their committees will be open to the public [CAB (00) M 15/8 refers];

4. noted that DHB employees elected to a DHB board would not be prevented from serving on DHB subcommittees where it is unlikely that conflicts of interest would arise regularly;
5. agreed that, as a matter of good governance, DHB boards will also be required to have operational rules in place to manage conflicts of interest (including, for example, how information is used by committee members, and maintaining a register of declared conflicts of interest).