1 
1.0 
MAJORITY REPORT. 
i 
INQUIRY INTO ADMINISTRATION, 
242. We come now to the question of conferring on the 
Central Departments power to deal with cases of defective 
administration on the part of Approved Societies where the defects 
alleged are not of such a grave character as to amount to general 
maladministration and could not, therefore, be appropriately 
dealt with under the provisions relating to withdrawal of 
approval. In these circumstances we consider that the Depart- 
ment should be empowered at any time to hold an inquiry into 
the methods of administration of a Society where there is a 
prima facie reason for believing that the administration is deficient 
in any respect. If, as the result of such an inquiry it is 
established that the standard of administration of the Society is 
unsatisfactory, the Minister should be authorised to require the 
Society to introduce such reforms as may be necessary, and if, 
after due warning has been given to the Society, reforni is not 
effected, the Minister should be empowered to order such 
a reduction as he may think fit in the amount which 
the Society may be allowed to appropriate towards the cost of 
its administration. Inasmuch as the normal administration 
allowance is fixed in relation to a proper standard of adminis- 
tration, we consider it to be entirely proper that the rate should 
be reduced where the administration falls short of that standard. 
We further recommend that if, notwithstanding the imposition 
of the suggested penalty in the form of a reduction of the 
administration allowance, a Society still refuses or is unable to 
bring its administration up to a proper standard of efficiency, the 
case should be treated as one of maladministration justifying 
recourse to the procedure for withdrawal of approval. 
CONTROL OF EXPENDITURE. 
243. The next point in which we consider that the powers of 
the Central Departments require to be strengthened is to be 
found in the method of dealing with improper expenditure by 
Approved Societies. All expenditure by Societies and Insurance 
Committees out of National Health Insurance funds is subject 
to audit by auditors appointed by the Treasury. There is, how- 
ever, this important distinction, that whereas in the case of 
Insurance Committees the auditor has power to disallow and 
surcharge any item of expenditure which he considers to be 
liproper, or not in accordance with the provisions of the Act 
and Regulations, he is not vested with this power in relation to 
the audit of Approved Societies’ accounts and can only deal with 
cases of improper expenditure by way of a reservation in his 
report on those accounts. Any such reservation is brought 
to the notice of the Central Department who communicate 
on the metter with the Society concerned in order to secure, if 
such a course is reasonable or practicable, the repayment into the