Ineffective management and poor board-level leadership are blamed for the serious financial problems of a small number of National Health Service organisations in a report today from the Audit Commission. It has reviewed what happened in those organisations which have been the subject in recent years of public interest reports published by auditors.The report, “Learning the Lessons from Financial Failure in the NHS” says that in the last financial year 25 public interest reports were issued in NHS bodies that incurred a total deficit of 174 million pounds in the previous year. It identifies common themes that lead to financial failure and sets out a series of indicators that will help NHS organisations identify and avoid financial failure in future.
The factors include ineffective management or inadequate board level leadership, and in some cases both. The report also highlights a lack of robust budget-setting and weaknesses in the information available to the organisation in financial monitoring, forecasting and financial reporting. There is, the report says, a lack of engagement by clinicians in the core management processes of some organisations and a reliance on short-term fixes to solve recurrent problems, leading to problems in future years. Finally the report says some significant projects have distracted senior management from the day-to-day operation of their organisations.
Sir Michael Lyons, the Commission’s acting chairman, said financial failure was rare but serious. “To varying degrees, combinations of weak governance, poor management and a lack of engagement by clinicians have contributed to financial failures in a small number of NHS bodies,” he said and added, “It is crucial that boards and management get the basics right because financial failure is often a reflection of wider organisational failure.”
Sir Michael said there were lessons to be learned and the report identified a series of indicators to help NHS organisations take action to avoid financial failure. The warning indicators cover financial, governmental and environmental factors and the report suggests these are used by boards to monitor their own performance and by strategic health authorities and the Department of Health to identify organisations at risk of financial failure.
The Commission says today’s report is not designed to be a commentary on the current management or performance of the organisations that have been reviewed, but is an historical analysis. Many of the bodies are on the road to recovery but the report’s recommendations are important for individual organisations and for the wider operation of the NHS. The findings will contribute to the Commission’s review of the financial management and accounting regime in the NHS, about which it will report to the Health Secretary at the end of this month.