NEWS

NHS trusts must radically improve the standard of their financial management if they are to survive in the 'brave new world' of reformed public services, the head of the public services regulator has warned.

Audit Commission chair James Strachan told last week's annual conference of the Chartered Institute of Public Finance and Accountancy that NHS finance directors must 'raise their game' if the extra funding being ploughed into the NHS between now and 2008 is not to be wasted.

The introduction of 'market lubricants' to the NHS requires organisations to employ far stronger financial management, he said: 'There is a correlation between excellence in service provision and excellence of financial management.

When you introduce private sectortype pressures into the system, the absence of strong financial management becomes very noticeable.' Mr Strachan claimed that although the current state of NHS finance 'is not cause for immense concern, it does require much tighter management if it is to be kept in control'.

There are 'warning bells ringing' in the NHS, he said, with some bodies facing significant deficits - he cited Kensington and Chelsea primary care trust, which ended 2004-05 more than£9m in the red, as an example.

Mr Strachan said foundation trusts in particular can 'quickly get into difficulty if their financial management is not fit for purpose'.

He added: 'In this environment, where you have potentially more confrontational relationships with purchasers and other providers, you need real-time information about costs and how they're comparing with other people's.' Finance directors' work needs to change 'from simply asking 'are we still within budget?', to a more sophisticated tracking of information throughout the year and of whether you are maximising the impact of your work on those you serve', he said.

Acute trusts and PCTs could eventually become involved in mergers and acquisitions, Mr Strachan added. 'How many existing finance departments in NHS trusts are ready for this?' he asked.