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Service Agreement Information Kit for Funded Organisations

3.5 Conflict of interest

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What is a conflict of interest under the Service Agreement?

Under the Service Agreement, a conflict of interest means a situation or the risk of a situation, where an officer, board member, employee, member, volunteer, subcontractor, representative or agent of the organisation has:

  • duties or interests arising as a result of holding a position, possessing property, engaging in a business or occupation or from contractual obligations, and
  • those duties or interests are in conflict with or might appear to be in conflict with their duties and interests under the service agreement.

What are examples of actual and potential conflicts of interest?

Examples of actual conflicts of interest include:

  • a board member or committee member’s own business is given a contract related to the services funded and no competitive selection process was undertaken
  • a board member or committee’s family member has been prioritised to receive services funded, above other clients and the prioritisation decision was made by the board member
  • the chief executive officer’s (CEO) friend or family member is employed to deliver a funded service at the request of the CEO without the job being appropriately advertised or a formal selection process undertaken. 

Examples of situations where there may be a potential conflict of interest include:

  • the CEO  being on a selection panel for a job where a relative has applied
  • a board member or committee member has a child receiving services funded under the Service Agreement and discussions are occurring about prioritisation of services that may impact on the services delivered to the board member’s child
  • a board member's or committee member’s own business has applied for a contract to provide a service related to the funded program.

Management and disclosure of conflict of interest 

It important for organisations to have in place procedures and processes to identify, disclose and manage conflict of interest to:

  • demonstrate to the community that it is performing its role in a fair, unbiased manner
  • reduce the opportunities for unethical behaviour that may have legal consequences and/or may damage an organisation’s reputation.

Failure to respond to actual or potential conflict of interests can damage the reputation and community confidence in an organisation. It may also have legal ramifications for an organisation.

Under clause 5.1(c) of the Service Agreement, organisations are to have a written conflict of interest policy in place that ensures timely disclosure of any actual or potential conflict of interest by all of the Organisation's board, members and employees, agents, volunteers and subcontractors.

Most organisations will already have in place conflict of interest policies due to their own governance requirements. The Associations Incorporation Reform Act 2013 and the Corporations Act 2001 sets out requirements for disclosure and management of conflicts of interest.

In establishing conflict of interest procedures, an organisation should consider its own individual circumstances, including for example how its board operates. Some general considerations include having in place:

  • Processes to support board members, employees and other organisation representatives to recognise conflicts of interest. To identify a potential or actual conflict of interest the following questions may be asked by representatives of the organisation when making decisions:
  • Do I have any personal or private interests in a matter that may conflict or be perceived to conflict with my duties in the organisation?
  • Could there be a benefit for me, my family or friends into the future if I involve myself in a matter?
  • How will my involvement be viewed by others? 
  • Does my involvement in the decision being made appear fair and reasonable?
  • Procedures to enable timely disclosure of conflicts of interests. A process for registering and recording conflict of interests could be put in place, for example, introducing on an annual basis a process for board members to declare any private interests that may have implications. 
  • Rules that require a representative of an organisation to restrict their involvement in matters where a conflict of interest is likely to arise, for example removing themselves from decisions or votes on related matters.
  • Procurement and employment processes that are appropriate, transparent and fair.

If an organisation would like further information on the management and disclosure of conflict of interest, a number of resources are available from the:

Organisations may also contact their peak bodies for further information and resources.

What needs to occur under the Service Agreement if there is a potential or actual conflict of interest in place?

When entering into a new Service Agreement, an organisation is to agree that to the best of its knowledge there are no actual or potential conflicts of interest, and that no conflict of interest is likely to arise during the term of the Service Agreement. Where an organisation has existing processes in place to manage conflict of interest, this requirement should be relatively easy to meet.

During the period of the Service Agreement, where an organisation becomes aware of matters that give rise to an actual or potential conflict of interest relating to services being funded, the organisation is to inform the department and note the strategies in place to manage the conflict of interest.

The department acknowledges that organisations are likely to have well established procedures to manage conflict of interest and are often subject to a range of other existing governance-related regulation. Consequently, it is unlikely that the department will require an organisation to take any further steps.

In some circumstances, the department may require an organisation to take particular steps to manage a conflict of interest. Where this is the case, these requirements must be reasonable and will be provided to the organisation in writing.