A leaked report into England's highest trust deficit has concluded that danger signals pointing to the trust's impending financial crisis were 'not hidden'from its management board.

Greenwich Healthcare trust's audited deficit for last year stands at£7. 9m. It called in accountancy firm KPMG at the start of this year to investigate how a projected deficit of£6. 3m emerged.

The trust board told KPMG that they had not been made aware of the full extent of the cash shortage.

But the review of the financial position at the London trust seen by HSJ concludes that the March budget that year 'clearly flagged risks to the board'.

It said that the board and its sub-committees 'should be more prudent and sceptical and that they should not put undue reliance on any one director'.

Local MP for Erith and Thamesmead John Austin called on the trust to sack its entire board in the light of the report's findings.

He said a new trust with a fresh board should be put in place when the new private finance initiative Queen Elizabeth hospital opened in Woolwich next year, replacing the current Greenwich site.

He is urging health secretary Alan Milburn to write off the deficit so that the new hospital 'should not be saddled with the debts of the past'.

KPMG stated that the overspend was due to depreciation 'which was later accounted for in a different way', income treated as real when it was not certain and ambitious savings targets without detailed implementation plans.

Referring to the PFI project, KPMG said 'certain PFI transactions were in the books up to November 1999 and were therefore within the scope of its review, 'but it had not assessed the scheme. . . or its potential impact on the trust's financial position'.

In June 1999 trust chief executive David Astley left to become chief executive of East Kent Hospitals trust and was replaced by Alan Perkins.

Mr Perkins was unable to tell HSJ how much cash was allocated to the PFI project during 1999 or whether the payments had contributed towards the deficit.

KPMG urged the trust to assess its financial performance as a whole 'and the input of the finance department in particular'.

The report said Bexley and Greenwich HA 'should consider whether it can do more to compare its records and projections with those of the trusts in its area', and communicate formally with trust boards where it detects any cause for concern.

It warned London regional office to consider 'more positive action' to address trusts considered to be under financial risk.

A trust spokeswoman stood firm against future resignations, saying that the problems had been 'already acknowledged', culminating in trust chair Richard Baglin's resignation earlier this summer.

She said there had been 'other major changes' in key board positions and that a recovery plan was 'evolving' and was being monitored for potential effects on patient care by Greenwich community health council.

Greenwich CHC chief officer Celia Davies said the trust's financial problems indicated 'something fundamentally wrong' with the local health economy.

She queried whether 'the resourcing going to Greenwich has been meeting the requirements of a deprived population?'

An HA spokesman said the recovery plan would be published shortly.

He added: 'Our view is that once the trust has demonstrated that it can operate effectively we can then judge if there is a case for Greenwich being an under-funded borough. '