14 July 2006
Managers who had 'lost their grip' were blamed this week by the Audit Commission for the financial crisis in NHS organisations which significantly overspent last year.
The commission rejected claims that trusts and strategic health authorities were 'under-funded' or subject to unique pressures.
'There was nothing special about these organisations, other than that there had been a classic failure on the part of senior management within them and very frequently on the part of boards to get the basics of financial management right,' said the watchdog's chief executive Steve Bundred.
The Commission's report - Learning the lessons from financial failure in the NHS - analyses the 25 public interest reports issued by external auditors against NHS trusts and SHAs with the worst deficits last year.
It finds that although organisations frequently blamed their predicaments on under-funding or on one-off events such as a large building project or merger, the root of their problems was weak senior managers whose buck-passing meant they failed to take responsibility for the situation themselves.
'Instead of taking ownership of the problem and dealing with it they said: “Oh, it's somebody else's fault and there's nothing we can do”,' said Bundred. The commission singled out finance directors – who often took it upon themselves to find 'creative financial solutions' to overspending problems - for specific criticism.
'Many finance directors… accept this challenge willingly, taking some professional pride in engineering a financial fix,' the report says. It adds: 'This behaviour, sometimes described as talent at “playing the system”… commonly lies behind an organisation's deterioration into financial failure, with a succession of short-term financial fixes eventually failing to disguise the fact that the NHS trust or [primary care trust] is living beyond its means.'
Such 'fixes' included moving money from the capital to the revenue account, selling assets, securing non-recurrent funding and an 'absolute' dependence on brokerage and support from the SHA and Department of Health.
Management failings were also exacerbated by a lack of skills and capacity at the non-executive board level whose role in challenging executives was 'visibly absent.'
'Most' management teams in the 25 organisations had now left the NHS, said the commission. But it recommend that the Appointments Commission reviewed the current lengthy procedures for ousting ineffective non-executive directors.
The report acknowledged that some trusts had been 'surprised' at the publication of a PIR against them, but found that 'in almost every instance' the appointed auditors had correctly issued clear warnings of impending problems. However, the report urges auditors to put their concerns in the public domain sooner, rather rely on boards to react adequately to private warnings.
But the commission did find that the DoH and a number of SHAs had been aware of the financial difficulties of some organisations at an early stage and yet declined to intervene until much later.
'Intervention and support at that stage might have helped to rectify the position, rather than coming in towards the backend of the process,' said head of health audit, Andy McKeon.
Many of the organisations covered in the report reacted angrily, complaining that it was now over a year out of date. 'This isn't helpful because it just drags up old mud,' said a spokeswoman from South West SHA. 'It refers to a previous administration and things have improved since then.'
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