Five Common Conflicts of Interest in Government and How to Prevent Them

John Pelissero (@1pel) is a political scientist and senior scholar for government ethics at the Markkula Center for Applied Ethics at Santa Clara University. Views are his own.

Most elected public officials and top appointed managers in governments follow an ethical approach to their government service. They seek to serve the public interest and do so in ways that are fair, consistent with government integrity, protect individual rights, and advance the common good of society.

But all too frequently, we learn of ethical lapses in which public officials—both elected and appointed—become entangled in conflicts of interest, both actual and perceived. Conflicts of interest are circumstances in which public officials have a conflict between their private or financial interests and their duty to serve the public interest. Most states and municipal governments have adopted some rules on conflicts of interests for their public officials.

Here are five of the most common conflicts of interest in government and how officials can avoid and prevent even the appearance of acting to benefit their personal and financial interests, at the cost of the public’s interest.

Common conflicts of interest:

1. Hiring for government jobs and nepotism Public officials often oversee large budgets and manage employee positions that are funded through tax-payer dollars. Both elected and appointed officials have a fiduciary responsibility to see that the budgets and positions are managed in the most effective and efficient fashion. Neither budgets nor jobs should ever be used to benefit a public official’s private interests, such as awarding jobs to or spending budgets on family members. This is often known as nepotism and it has no place in the public sector.

Too often, we learn of situations in which a public official’s spouse, domestic partner, child, parent, or sibling is hired into a government position at the direction of or through the influence of the public official. That is nepotism. Most governments will prohibit this, but many do not address this practice in their policies. Some governments will allow for nepotism in limited circumstances, but have to ensure that officials are not supervising family members. If a family member is the most qualified individual for that position, then governments should have a human resources policy in effect that requires a transfer within the government or a plan for supervision to be assigned to someone other than the public official to whom they are related.

Hiring family members or a romantic partner into a government position is ethically wrong. It is unethical if it violates a law or policy, as well as when it is legal but can be viewed by the public as an inappropriate use of an official’s powers or public dollars to provide a financial benefit to a close family member or romantic partner. Public officials must avoid even the appearance of a conflict of interest and demonstrate to the public that they do not treat taxpayer-funded budgets and positions as personal rewards.

2. Financial interests Another common conflict of interest is a situation in which a public official will benefit financially from a transaction with the government. Public officials generally have a disqualifying conflict of interest if a government decision will have a financial impact on their personal, family, or business financial interests.

California’s Fair Political Practices Commission (FPPC), created by the Political Reform Act of 1974, lists five categories of financial interest that would disqualify a public official from participating in a government decision. These include: (1) decisions that would impact a business entity in which one is invested or holds a position as an owner, officer, or employee; (2) decisions by government involving real property in which the public official has ownership, investment, or leases; (3) decisions regarding individuals or entities from which the public official derives income or would derive income in the future; (4) being the recipient of gifts from individuals or entities who have business before the government; and (5) a public official’s personal finances or those of a family member being impacted by a government decision. These are the major conflicts of interest that stem from financial interests.

If public officials participate in government decisions that impact or appear to impact their financial interests, they have an ethical obligation to abstain, recuse or delegate such decisions. Too often, public officials violate policies on disqualifying financial interests by participating in a decision. Similarly, they may create the appearance that their participation was to benefit their personal financial interests, perhaps ignoring the more compelling public interest in a decision. This is unethical because it is unfair, deceptive, or a misuse of public authority.

3. Contracting with government. It is a common aspect of government operations to seek goods or services from individuals, businesses, nonprofit organizations, and other entities to help achieve the mission of the government. Governments often will engage in formal contracts with outside parties (those not employed by the government) to carry out a public purpose. There are many examples of government services contracts from construction projects to refuse collection to service delivery, as well as contracts for goods that may include materials, food, or medicines. Every contract with government should fulfill a public purpose and serve the wider interests of the population.

A conflict of interest can arise if a public official has a private interest in the entity with which the government plans to execute a contract. This could involve a contract with an entity in which the public official would obtain a benefit because they are an officer, owner, manager, or employee of the entity or they have a family member in such a role. These situations demand that the public official be disqualified from participation in the contract award or recuse or abstain from any formal action that would benefit the entity in which they have a private or financial interest. Again, appearances of involvement in an action are as unethical as formally acting on such.

4. Accepting gifts. Many governments set reasonable limitations on the ability of public officials to accept gifts while in office. This is to prevent an individual or entity from using a gift of any sort to influence the decision of a public official or providing a financial benefit to the recipient of the gift. Most policies involving gifts may permit small dollar value gifts to be accepted, while larger ones are prohibited. And in many instances, all gifts received are required to be disclosed on conflict of interest forms by public officials. Gifts may be a way of expressing appreciation for something that the public official has done, but the acceptance of gifts can appear to be an unethical transaction that facilitated a governmental action that would be favorable to the gift provider. Again, appearances matter in demonstrating ethical behavior.
5. Influencing a government decision. A broad category of conflicts of interest pertain to participation in a decision by government in which the public official (or a family member or domestic partner) stands to benefit personally or financially. Decisions would include broad policy or legislative actions or routine decision-making in government. If the decision benefits or appears to benefit the public official, there is a conflict of interest present. In such situations, the official is either disqualified from participating, or should recuse, abstain or delegate the decision to an official who does not possess an apparent conflict of interest. The use of public authority to influence or approve a government decision that would benefit an official is unethical and can lead to an erosion of trust in the government and its officials.

Governments often wrestle with the question of what is the most effective way to prevent the occurrence of actions by public officials that constitute conflicts of interest. Here are five practices that are likely to reduce or prevent troublesome conflicts of interest in the public sector.

1. Training in ethical awareness. The most significant and impactful way to address the problem of conflicts of interest among public officials is training in ethical awareness. It is possible that one’s education in college or training for a public sector position included formal training in ethics. But to ensure that all public officials—elected and appointed—can demonstrate a minimal level of ethical awareness it is advisable to mandate training in applied ethics for all who serve in government. This should include not only knowledge of the required laws and policies on conflicts of interest, but also education on the impact of creating the appearance of a conflict of interest while performing official public duties. Ethical awareness develops over time as individuals develop their moral muscles through ethical thinking about important issues.
2. Clear and consistent policies. It is incumbent upon public bodies that policies are developed and implemented that cover ethical standards of conduct, including clear and consistent policies on what constitutes a conflict of interest. Governments should never assume that its employees and elected officials will know how to recognize a conflict of interest and avoid actions that are known or perceived to be inconsistent with official duties to serve the public interest. State laws on ethics and conflicts of interest will often be a good starting point for development of additional policies that will clearly communicate the ethical pitfalls of a conflict of interest.
3. Disclosure requirements. Most state governments have annual disclosure requirements in place for a variety of potential conflicts of interest. Every government should tailor local policies to mirror best practices in disclosure of conflicts of interest about which the public has a right to know. If appropriate, disclosure requirements should extend to the lowest level within the organization and may be required to be filed more frequently, such as quarterly or semi-annually to increase transparency of recent transactions that may constitute a conflict of interest.
4. Disqualification, Recusal, and Delegation. Understanding that conflicts of interest may arise even when public officials attempt to avoid acting on a conflict of interest, governments should outline the conditions under which a public official must not participate in a policy action. Some governments will specify conditions under which an official is disqualified from participating in a governmental decision. In other instances, the official must recognize the compelling circumstances that warrant recusal from or delegation of an action. Legislative and judicial officials often must consider recusing themselves from participation in legislative actions or judicial decisions because of the former or current interests that are in conflict with a fair decision. Executive officials may also need to recuse themselves but a decision may still need to be made by someone within the administrative unit in order for a public action to take place. In such cases, the executive should delegate the decision to another employee in the unit that does not have a conflict of interest and can render a fair decision.
5. Sunshine practices. In many situations, the promotion of ethical behavior in government can be enhanced by the adoption of “sunshine laws” or policies that openly share information about what government and its officials are doing. Sunshine practices are examples of important ethical virtues that include transparency, honesty, and truthfulness. One example of a sunshine practice is the adoption of disclosure requirements for conflicts of interest. This type of policy brings greater transparency to the work of government and its officials. Disclosure forms and filings by public officials should be readily available to the public and may be posted to government websites. Sunshine practices may also specify the conditions under which an official is disqualified from making a decision and the mandate for public dissemination of official actions by government officials about which the public has a right to know.

Governments and their public officials—both elected and appointed—should possess ethical awareness acquired through training and education that grows one’s moral muscles. Being aware of the common pitfalls of conflicts of interest and common-sense approaches to prevent these are important to maintaining a culture of ethics in all government organizations.