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Watchdog urges public bodies to recognise risk of conflicts of interest

The National Audit Office has revealed that it has received a significant number of referrals about potential conflicts of interest at public bodies over the last year.

In a report published today the spending watchdog said that the referrals – whether through whistleblowing or otherwise – are frequently in areas of government where services are increasingly commissioned and delivered by parties at arm’s length from departments.

It added that it had gathered a significant amount of intelligence on conflicts in the health and education sectors in particular. Local Enterprise Partnerships were also identified as another area of potential risk.

“Providing services via third parties increases the potential for conflicts of interest as organisations act as both commissioner and provider of related services,” the NAO said.

“A clear approach to managing these conflicts is necessary to counter concerns about lack of transparency and the view that conflicts of interest are influencing decisions. A particular concern alleges that commissioners have been able to buy services from private businesses in which they have a financial or family interest.”

The NAO warned that a failure to recognise a conflict of interest could give the impression that the organisation or individual was not acting in the public interest and could potentially lead to a decision being subject to challenge. “This can damage reputations and undermine confidence in government.”

The watchdog also warned that there was a potential risk of legal challenge to decisions made by public bodies. “If a decision-maker has a conflict of interest then the decision is potentially vulnerable and could be overturned on judicial review,” it noted.

The report, which can be viewed here, covers:

  • Defining conflicts of interest;
  • Recognising the risk of conflicts of interest;
  • Managing conflicts of interest;
  • Our audit approach;
  • Managing conflicts of interest: good practice.

It also gives examples of potential conflicts of interest to illustrate how and where they may arise in the provision of public services.