But Auditor-general Lyn Provost says the former Serious Fraud Office boss and Queenstown Lakes Mayor Vanessa van Uden ''could have done some things better''.
Ms Provost's report, released yesterday, found the pair should have taken legal advice to clarify the likely effect of the conflict on Mr Feeley's ability to meet his statutory responsibilities as a chief executive.
Mr Feeley is attending a conference in Korea and could not not be reached for comment.
Ms van Uden refused a request for an interview but in an emailed response said the council did not seek legal advice because it was told by the Office of the Auditor-general (OAG) late last year that its disclosure of the conflict was appropriate.
The Auditor-general's office announced the inquiry on May 29 after being contacted by members of the public.
It looked at how the council and Mr Feeley handled a special housing area application by his family's Rafa Trust for a 20-section subdivision on the southern edge of Arrowtown.
Ms Provost said Mr Feeley did not ''influence or contribute to any substantive aspects'' of the council's special housing area process.
''Appropriate mitigation steps'' were taken to manage the conflict after it was declared, and the council, Mr Feeley and senior council staff ''acted responsibly and endeavoured to manage the conflict appropriately''.
But Mr Feeley and Ms van Uden ''could have done some things better'', she said.
They should have considered the likely effect of the conflict on Mr Feeley's ability to meet his responsibilities under the Local Government Act.
''He has not been able to advise the council about special housing areas and has not been able to provide leadership to council staff in this area.''
Senior local authority employees should carefully consider the effect of choosing to pursue a private interest where it created a conflict with their ability to perform their job.
''A conflict between a private interest and public duty can look wrong in the public's mind, even if properly managed.''
''The employee's manager - for a chief executive, the Mayor - should also think through the implications and be comfortable with the plan to manage those implications.''
Mr Feeley told the ODT in May he was ''frustrated and disappointed'' by the inquiry. He had raised the conflict with the OAG in November ''and their legal advisers said that 'you are doing all the right things and we are comfortable with the approach'.''
Ms van Uden said some ''matters of process'' had been addressed at the council, but would not say what they were and how they had been addressed.
When asked if she wished the Rafa Trust's application had not been made, she said the trust was ''entitled'' to do so.
The inquiry had been useful in giving the issue a ''good airing''.
The Rafa Trust subdivision now seems unlikely to proceed - at least as a special housing area.
Ms van Uden told the Mountain Scene last month the council would not revisit any of the seven SHA proposals it rejected for further scrutiny in June.
Timeline
October 23, 2014: Queenstown Lakes District Council signs housing accord with Government.
Late November, 2014: Council chief executive Adam Feeley tells Mayor Vanessa van Uden his family intends to make special housing area (SHA) application. The mayor advises the Auditor-general's office about the conflict.
December 2014: Mr Feeley's family trust, the Rafa Trust, lodges SHA application for a 20-section subdivision on southern edge of Arrowtown.
May 29: Auditor-general's office announces inquiry into the council's handling of the conflict of interest after being contacted by members of public.
June 3: Rafa Trust application rejected by council for next stage of its SHA consideration process.
October 16: Auditor-general releases report.
