A Midland hospital trust is facing seious financial trouble, with fears debts could reach £ 36 million within three years, the Audit Commission warned today.

The Royal Wolverhampton Hospitals NHS Trust reported a £9 million deficit in the past year, with the figure expected to rise by more than £32 million in 2007/2008.

The trust will need support of £20.2 million within the next year if it is to tackle its considerable cashflow difficulties.

Guis Miah, director of PricewaterhouseCoopers and author of the report, said: "The trust's financial position is very serious. Its financial recovery plan relies upon a number of assumptions.

"Even if all those assumptions proved correct, the trust would still not break even by


"It needs to engage with the Birmingham and Black Country Strategic Health Authority and the Department of Health to ensure it is involved in the development of national solutions to deep seated financial problems."

According to the report, the trust relied on one-off funding to balance its books between 1999 and 2004, even though it was advised not to do so by the appointed auditor at the time.

When this funding was not made available in 2003 to 2004, it reported a deficit of £7.6 million and a further £9 million in 2004 to 2005.

A financial recovery plan drawn up by the trust estimated it will save £16.1 million by 2008.

But the commission fears this amount may not be reached as a recovery plan includes high-risk schemes.

Out of the sum, £3.5 million is expected to come from the redesign of services, but so far no detailed plans exist for them.

And even if the trust reaches the target of £16.1 million, it will still be short of the £19.6 million actually needed to balance its annual income and expenditure.

Peter Sawyer, financial director of the trust, said: "The new board of directors at the Royal Wolverhampton Hospitals NHS Trust welcomes the Public Interest Report issued by its external auditors.

"The new board is already taking action to take forward the recommendations contained in the report and will be entering into further discussions with the Strategic Health Authority over a number of funding issues."

Recommendations outlined in the report advise the trust to communicate with its stakeholders to find additional savings.

It also said the trust needed to get formal confirmation from the Strategic Health Authority that its short-term cash requirements would be met.