Poor management of locum doctors is putting patients at risk and wasting millions of pounds, says the Audit Commission.

Trusts in England and Wales spend£214m a year on temporary cover for medical staff,£110m of it on locum agencies, it says.

But its report found that trusts often fail to carry out simple checks on temporary doctors, and financial controls over payments to locum agencies 'often do not meet basic standards'.

References were checked in fewer than 40 per cent of locum episodes the report examined. And in 'about half the trusts in England and Wales' locums might not be given basic information about patients or the department before starting work.

Report author Nick Mapstone said: 'Reducing the need for locums is the key to minimising the risk as well as the cost.'

Poor financial controls included agencies being paid without timesheets. Many trusts were using short-term locums 'unnecessarily' to cover leave, 'even where full prospective cover by permanent staff has been negotiated and agreed'.

Mr Mapstone said: 'Larger hospitals could save up to£100,000 a year' on an average bill of between£750,000 and£1m.

The report calls on trusts to establish the right number and skill-mix of permanent staff. It says trusts should use standard NHS Supplies agency contracts and put work out to tender.

The report recommends that all trusts should appoint 'a senior doctor to take an overall lead and managerial accountability for the quality of locums employed'. This would normally be the medical director, Mr Mapstone said.

National, as well as local, action is needed. A 'high-level working party' should design an accreditation system to help long-term locums keep their skills up to date.

The report was welcomed at a hospital that had to pay£49,000 in damages after a locum removed a patient's penis without permission. Stephen Eames, chief executive of Mount Vernon and Watford Hospitals trust in Middlesex, said: 'If we can reduce costs and improve the quality of service that is great. But we have to have adequate staff in the first place.'

NHS Confederation director of human resources Andrew Foster also welcomed the report, but said he would be 'wary' of loading extra work on to medical directors 'who have a huge amount to do already'.

But locums attacked the report. Locum Doctors Association chair Shehnaz Somjee said: 'The report advises trusts to squeeze locums' pay as much as possible.' She plans to write to the Audit Commission, challenging its findings.

Cover Story: the use of locum doctors in NHS trusts. Audit Commission, 0800-502030.£20.