24 June 2005
All NHS bodies have been challenged to reassess their financial management arrangements after government auditors this week criticised slipping standards.
The National Audit Office and the Audit Commission joined forces to declare the state of financial management in the NHS 'disappointing', with overspending a growing problem despite record levels of investment.
According to a report issued by the two organisations, the Department of Health estimates that in 2004/05 the entire NHS is likely to have overspent by £140m, while the number of individual organisations with significant deficits of £5m or more continues to increase.
This marks a continuation of an already worsening trend, in which the number of NHS organisations 'failing to achieve financial balance' increased from 12% to 18% between 2002/03 and 2003/04.
Click here to view the full figures from the report (this will open up a new browser window)
Although the June 24 report does not 'name and shame' the struggling NHS organisations, Audit Commission chair James Strachan singled out some poor performers, including Mid-Yorkshire NHS Trust, which has a deficit of £20m and Surrey & Sussex Healthcare NHS Trust and its deficit of £28m, according to as yet unaudited figures.
The Surrey & Sussex trust said it was working on a plan to achieve substantial savings. Interim chief executive Anthony McKeever told Public Finance: 'I believe that we can turn this trust around by changing the way we do things. Our focus will be on providing high-quality patient care but… we can do things better in all areas.'
Strachan called on finance managers to get a grip on the new challenges presented by payment by results, the Patient Choice programme and new staff contracts.
Acknowledging that the £140m deficit was 'minuscule' compared with the total NHS spend of £70bn, he added: 'The relevant fact is there is a deterioration of NHS bodies' financial management and some of it quite marked.
'The challenges ahead are particularly significant and are not going to go away. Warning bells are ringing and it is perfectly possible to hear those bells and do something about it. Financial managers in the NHS need to raise their game.'
Strachan said the Audit Commission would work with NHS bodies to help to improve their performance.
'For the first time, our auditors will now score PCT and NHS trust financial management arrangements and show clearly what needs to be done to secure improvements,' he said.
Auditor general Sir John Bourn added that the financial problems had been exacerbated by a complex mix of the different kinds of organisations that made up the health service.
'This very complexity produces uncertainty, the level of uncertainty produces a mindset of "Whatever we do we do, we'll never get it really good". This combination of complexities leads to disappointing results,' he said.
The report recommends more education and training for board members so they are better able to understand and challenge the financial information they are presented with, as well as better forecasting and the prompt delivery of final accounts.
The report prompted Health Secretary Patricia Hewitt into swift action. She is to write to the chairs of all struggling trusts to check on their progress.
'The study shows that the vast majority of NHS bodies are managing the extra resources well but it also very clearly indicates that, in a minority of organisations, leadership and financial discipline are weak. This needs to be tackled head-on and with a sense of urgency,' she said.
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