MAJORITY REPORT 
118 
the Society's State Insurance funds of the amount improperly 
expended, or, at any rate, in the hope of obtaining an adequate 
assurance from the Society that the improper expenditurs in 
question will not be allowed to recur. We were told in evidence 
by a witness representing the Ministry of Health (Kinnear, 
Q. 23,496), that under the present procedure it is possible to 
dispose satisfactorily of the great majority of instances of improper 
expenditure by Societies, but that cases occasionally arise in 
which a Society declines to deal with the matter in the manner 
which the Department thinks proper, or to give any assurance 
that the improper expenditure will not be repeated. We ques- 
tioned the Acting Chief Auditor of the National Insurance Audit 
Department as to the differentiation of treatment accorded to 
Approved Societies and Insurance Committees in the matter of 
improper expenditure, and he sought to justify this differentiation. 
He said : *“ When we disallow and surcharge in the case of Insur- 
ance Committees we have to allege negligence or misconduct on 
the part of the people who are being surcharged. When we 
consider how Approved Society expenditure is actually incurred 
we should find that the secretary of the group is normally a 
man wielding a fairly wide general executive power, in many 
cases merely having his action ratified at a later time. That 
would involve, I think, the almost inevitable surcharging of him 
in practically every case of improper Approved Society expendi- 
ture, and that would be an impossible position.’ (Middleton, 
Q. 23,265.) We cannot admit the logic of this distinction. 
The State Insurance Funds of Approved Societies are 
statutory funds held in trust by the Society for the benefit of its 
members, and may be used only in accordance with the provisions 
of the Act, and we feel that where funds of this character are in 
question the audit provisions are not complete unless they include 
the power of disallowance and surcharge. We were informed 
that it had only been necessary to apply this power to a very 
small number of disallowances in Insurance Committees’ 
accounts, and we anticipate that it will not be otherwise if the 
power is extended to cover Approved Societies. None the less, 
we feel that it will be an effective and necessary weapon, to be 
used in the few extreme cases which cannot be dealt with satis- 
factorily without it and that its existence in the armoury may 
even be beneficial apart from the use that may be made of it. 
244. We, therefore, recommend that the auditors of the National 
Insurance Audit Department should be given the power of dis- 
allowance and surcharge in the case of improper expenditure 
by Approved Societies, and that, as in the case of Insurance 
Committees, this power should be accompanied by power to the 
Minister to remit any surcharge, or to recover any overpayment 
as he may think proper in the circumstances of any particular 
case