An inquiry has begun into how a primary care trust's deficit spiralled out of control, forcing the sudden departure of its chief executive and chair.
The omission, reported to the board's meeting on 17 May, has left the PCT with a£14.5m deficit. This was£9m more than had previously been reported.
Trust chair Terry Bamford immediately resigned. He will leave as soon as a successor is appointed. The PCT also announced that chief executive Paul Haigh will move to a new post at North West London strategic health authority on 6 June.
At the meeting the board also considered an external review commissioned by the PCT in the light of a projected£5m deficit, with an underlying overspend of£4m. This was carried out by its auditors, PricewaterhouseCoopers, but it too failed to uncover the£8m in unpaid invoices.
However, the PricewaterhouseCoopers report strongly criticised board members' financial management, saying: '[They] have not devoted sufficient time and challenge to financial reports that have clear financial consequences.'
Financial and performance information had been separated, it found, while reports and explanations of budgetary risks and variances lacked clarity. This hindered the board's effectiveness. The board had endorsed a recovery plan in February that should have seen the books balanced by 2007.
But PricewaterhouseCoopers warned this was at risk. The report said: 'The financial culture of the PCT needs to change if the recovery plan is to be achieved.'
In a statement Mr Bamford said: 'When things go seriously wrong, those at the top of the organisation have to accept responsibility for this failure. The serious challenges facing the PCT require new leadership to rebuild confidence and credibility with our partners.'
In a statement he said: 'It is disappointing that our internal financial systems, the audit of the 2003-2004 accounts and the finance review by PricewaterhouseCoopers failed to identify the scale of the problem of unpaid invoices.'
The PCT issued a statement saying: 'We are currently in discussion with the auditors and the Audit Commission about the factors leading to the increased deficit.'
An Audit Commission spokesperson said: 'We are aware of the financial position at the PCT and the auditor is continuing with his investigations.'
Appointments chief brands trust boards a 'disaster'
By Helen Mooney
The chief executive of the NHS Appointments Commission has launched a stinging attack on trusts' committee culture, which he branded a 'disaster'.
Roger Moore told delegates at an HSJ corporate governance conference that trust boards needed to cut down on the number of committees if they hoped to be efficient organisations.
'Too many committees are actually a disaster; they shed responsibility from the board,' he said.
'There is a strong suggestion that the audit committee should be the only committee and it should cover remuneration and take over risk management and clinical governance.'
Mr Moore said the type of committees he detested most were those that existed to enable 'non-executive teams to keep a handle on what is going on, compensating for a lack of trust and organisation'.
'Lots of boards do not have a clue as to what is going to happen next; there are too many strands,' he said. 'Organisations can't govern in this way... trust boards need to bring the strands together in an integrated way up front.'
Mr Moore said primary care trust boards would have to be 'quite ruthless' if they are to succeed under payment by results and 'ensure enough muscle to counteract the flat-out commercial approach to life [of foundation trusts]'.
Paul Stanton, director of the board development team, part of the NHS Clinical Governance Support Team, warned that the scale of demands placed on board members was 'disproportionate to capacity not capability'.
He told delegates that 'tribalism' was alive and well in the NHS and that there needed to be much greater devolution to the front line.
Birmingham and Solihull Mental Health trust chair Dr Jonathan Shapiro cautioned that non-executive directors were either not being used appropriately or being under-used.
He said that non-executives had a key role to play in holding trusts to account but they should be willing to risk removal by standing up to policies they believed would harm their organisations in a way that managers would not because of the potential risks to their careers.
'We can and should be the fuse in the circuit but I am not sure that this is happening,' he said.