The Department of Health is seeking assurances that NHS Employers is solvent before it will sign a new contract, after serious concerns were raised over its management and finances.

As revealed in HSJ last week, a confidential audit report on NHS Employers’ doomed membership scheme highlighted a string of failures as well as apparent conflicts of interest.

A DH spokesperson told HSJ this week: “As part of due diligence considerations before signing the new contract, the department has asked for assurances about governance and solvency.

“The department is also requiring that an action plan to address the findings in the audit report be embedded in the new contract. The final decision will be taken by ministers.”

The contract to negotiate employment contracts on the DH’s behalf accounts for virtually all of NHS Employers’ income and more than half that of its parent organisation the NHS Confederation.

Earlier this month, the DH agreed to sign a contract on a month-by-month basis for an initial three months. The DH is still in discussions with NHS Employers over whether it can put the £1.8m underspend on its contract towards the £3.4m loss generated by its membership scheme. The scheme would have offered outsourced human resources services to member trusts, with access to the NHS Jobs website. It was scrapped in March after the DH said it was putting NHS Jobs out to tender and because too few trusts had signed up.

The scale of the DH’s concerns about the situation have come to light at the same time as private documents have highlighted the tensions sparked by the membership model.

In the documents, obtained through freedom of information legislation, the DH complains that NHS Employers continued to claim the scheme included access to NHS Jobs after it knew the website was being put out to tender.

A letter from DH director general of workforceClare Chapman to NHS Confederation chief executive Steve Barnett says: “We were extremely unhappy about the way the communications [to trusts] purported to build the offering around a new, improved NHS Jobs when you knew that you did not own this. Despite our concerns, this misinformation has continued.”

The letter, dated 18 December 2009, says financial commitments were made “without consulting DH and indeed against our advice expressed to NHSE”.

Emails show the DH and the NHS Confederation agreed to “avoid any ref [sic] to the procurement issue” when the model was launched at last November’s NHS Employers conference. In an earlier email on 30 October, DH deputy director of pensions policy Tim Sands warned about the “high risk of challenge” to trusts signing up to the three-year membership without going out to competitive tender.

He told Mr Barnett and former NHS Employers director Sian Thomas: “There would be considerable reputational risks to the NHS, potential costs to the trusts concerned and a risk that you would no longer be able to provide the service and would also suffer financial loss.”

A DH spokesman said this week: “The department is very supportive of NHS Employers and the vital role it plays as the employers organisation for the NHS in supporting the development, implementation and communication of government policy, including the stewardship of NHS Jobs.”

NHS Confederation chief executive Steve Barnett said: “The DH has supported the NHS Confederation during a difficult period and acted with integrity and probity.”