NHS trusts should be reimbursed for the money they have lost under the Treasury's resource accounting and budgeting system, the Audit Commission has said.

NHS trusts should be reimbursed for the money they have lost under the Treasury's resource accounting and budgeting system, the Audit Commission has said.

In a wide-ranging review of the NHS's financial management and accounting regime commissioned by health secretary Patricia Hewitt, the commission called on the government to scrap the RAB system for acute trusts.

The report says the system, which 'double counts' trust deficits, should no longer be applied to trusts and calls on the DoH to give back the cash trusts have already lost since 2001.

Under the RAB system, trusts that run up an in-year deficit are penalised by the same amount the following year.

Audit Commission head of health Andy McKeon said the system was incompatible with the NHS financial regime and as such has created the double deficit problem.

'RAB has not always been applied fairly across the NHS [by strategic health authorities] so some trusts have had the system applied to them and some have not,' he added.

Mr McKeon said the commission was not recommending a wholesale bail-out of trusts' cumulative deficits but said that they should be recompensed for the losses they have suffered over the last four years of the RAB regime, 'on the grounds of fairness'.

Mr McKeon acknowledged that giving trusts back a cash lump sum would be costly.

Audit Commission acting chair Sir Michael Lyons said he was unable to identify how much trusts would be reimbursed for their RAB losses as trusts were not required to record those figures on their balance sheets.

The report also sets out plans for a different DoH banking regime and recommends a 'national buffer' to compensate the DoH for the loss of the RAB system.

The 'buffer' or pool of money would be set aside by the DoH and top-sliced from the NHS central budget allocation to cover NHS overspends. It would not be distributed to individual trusts but held centrally to ensure that the DoH could cover any aggregate net deficits.

Mr McKeon also called on the government to help and support trusts to move on to a 'more business-like footing' to prepare them for foundation trust status.

A DoH spokesperson said: 'We welcome the fact that many of the Audit Commission's recommendations are consistent with actions already being taken by the DoH to ensure a sustained return to overall financial balance within the NHS. We will now take some time to reflect in more detail on the recommendations made, and will publish a response later in the year.'