Published: 22/04/2002, Volume II4, No. 5902 Page 8 9

Over 60 per cent of local delivery plans could fail because a lack of financial management ability in the NHS has meant that trusts are unable to plan accurately, an Audit Commission report has warned.

The report, Achieving First Class Financial Management in the NHS, published on Tuesday, found that 64 per cent of the acute and primary care trusts that took part in the study were considered to be insufficiently financially stable to support the three years of service delivery outlined in LDPs.

Over 40 per cent of acute trusts and PCTs were found to be in what was described as a 'fairly weak financial position' and over 20 per cent to be in a 'weak position'. Over 30 per cent of mental health, specialist and ambulance trusts were all found to be in a 'fairly weak' financial position.

More specialist trusts than any other kind were found to be in a 'strong' or 'fairly strong' financial position.

Audit Commission managing director of health Andy McKeon and the report's author, Emma Knowles, said the increased number of commissioners, in the shape of PCTs that are not big enough to manage significant financial issues, was having a detrimental effect on financial planning.

'The old level of financial management has been spread thinly and this needs to be addressed, ' said Mr McKeon.

Mr McKeon added that the stretching of resources made it inevitable that not all LDP targets could be met.

'These are unrealistic expectations in terms of the amount of financial planning that has gone into them. Plans will have to change, although those things that are the highest priority will get implemented, ' he explained.

He said he was confident that PCT commitments would be met, but was unsure exactly what the impact of the poor financial planning would be.

He also said that the financial expertise of clinical staff and non-executive directors needs to be addressed.

'Organisations with good financial management have clinical staff who are aware of the financial impact of their actions, ' said Ms Knowles. 'Act now to face the challenges ahead.'

Surrey and Sussex strategic health authority finance director Barry Elliott echoed fears that PCTs were not structured in a way that enabled them to do everything that is expected of them.

'These issues are very real. I do not think they have sufficient resources in terms of quality or quantity. The demands on the NHS have changed so fundamentally and this translates into additional pressure on finance staff, who are often new and relatively inexperienced. A lot have struggled to meet all the cost pressures and deliver service improvements. These are significant financial pressures and it begins to expose a degree of risk.'

Mr McKeon estimated that it could take up to three years before the necessary levels of financial expertise are in place.

But NHS Confederation policy director Nigel Edwards pointed out the challenges of implementing measures such as the GP contract and payment by results should have been dealt with in three years' time and that PCTs should not be expected to run on a shoestring.

'PCTs face a huge financial agenda and they are already dealing with stretched resources, ' he said.