Conflicts of interest: clearing up the confusion

Governance requirements for schools across Australia continue to increase year after year, with management of conflicts of interest being a new governance hot spot for school administrators.

The requirement for schools to properly handle 'conflicts of interest' is a core governance discipline where schools can look to the legal and commercial sector for guidance.Common questions that arise are: do board members have different conflict obligations to general staff? and How many conflict of interest policies do I need?

• Corporations law (mainly the Corporations Act 2001 (Cth) (Corporations Act)); and
• school registration standards.

article on the relationship between related party transactions and conflicts of interest in the NSW non-government school context.For school governors, who often serve in a voluntary capacity in addition to other roles, it is important to be aware of the potential for conflicts of interest to arise between their personal and business affairs and the affairs of the school.

Schools that are incorporated under the Corporations Act have a statutory obligation to ensure that their board members and officers discharge their duties in the best interests of their school and for a 'proper purpose'.In meeting this requirement, board members must avoid putting themselves in a position of conflict and declare any conflict that arises. We have previously written an article on how school boards should manage conflicts of interest.To avoid breaching the law, a school must put in place a proper conflicts of interest policy as part of their governance framework.Other steps include:

• ensuring all board members are trained and properly understand their conflict of interest obligations;
• requiring board members to disclose any material personal interests that could interfere, or be perceived to interfere with their independent judgment;
• having any perceived or actual conflicts of interest recorded in a Conflict of Interests Register; and
• having properly documented procedures that outline how school board meetings should be conducted if a conflict of interest arises.

Although not stipulated under the Corporations Act, schools should have a conflicts of interest policy in order to faciliate their directors' understanding of, and compliance with, their obligations under that Act.Registration standardsIn addition to obligations under the Corporations Act, the non-government school registration standards of many of the States and Territories prescribe certain requirements for dealing with conflicts of interest. Western Australia, Queensland and New South Wales all require non-government schools to have a conflict of interest policy in place.In the Registered and Accredited Individual Non-government Schools (NSW) Manual, members of the governing body and other 'responsible persons' are responsible for having in place and implementing policies and procedures in relation to dealing with a conflict of interest with specific reference to 'an overarching statement defining conflict of interest within the context of the school's governance structure'. There are also NSW-specific requirements in relation to the governance structure that must be adopted.

How conflicts of interest apply to school staff

The obligation to avoid a conflict of interest is a common term included in most employment contracts. Typical employment contract obligations include:

• the duty of fidelity and good faith to act in the best interests of the school;
• the duty to not engage in other employment which would compete or conflict with the school; and
• the duty to avoid any potential conflicts of interest and to notify the school if any conflicts arise.

• ensuring all the employment contracts explicitly state that staff must avoid any potential conflicts of interest and to notify the school if any conflicts arise;
• training all staff on how to manage any potential conflicts of interest;
• setting a clear expectation with respect to the acceptance of gifts, other inducements or favourable treatment; and
• providing a clear and unambiguous conflicts notification process for staff.