Four trusts missed all three financial targets last year, the National Audit Office has revealed.

In his annual report on the NHS summarised accounts, comptroller and auditor general Sir John Bourn says that even after adjusting for 'technical factors', 148 trusts failed one or more financial duty.

The report shows that 88 failed to break even, 133 did not meet the target 6 per cent rate of return on capital, and seven exceeded their external financing limit. Among those which failed to meet the target rate of return, 75 also did not break even.

The report says that by the end of 1996-97, the NHS Executive believed 42 health authorities and 54 trusts to be 'in serious financial difficulties'. Nine months later 28 HAs and 74 trusts had serious problems.

Sir John notes that auditors 'drew attention to the financial health' of 57 HAs or trusts.

He writes: 'Findings from audits of the 1996-97 accounts indicated that the single most important issue arising was the financial standing of NHS organisations.'

But, he adds, accounting and financial controls across the NHS are 'generally sound', and none of the 100 HAs or 429 trusts had their accounts qualified by auditors.

This year, for the first time, the report also covers charitable funds amounting to pounds1.5bn held on trust by NHS organisations.

It says auditors gave qualified opinions on about half the accounts of funds held on trust because 'there were no satisfactory audit procedures that could be adopted to confirm that all voluntary donations were recorded in individual fund accounts.'

NHS Summarised Accounts for England, 1996-97. Report of the Comptroller and Auditor General. The Stationery Office. pounds21.75.