The great majority of NHS trusts and Primary Care Trusts (PCTs) are managing their money well, the Audit Commission has reported.

In its 2009-10 assessment of how these organizations manage their resources and deliver value for money, the Commission says it finds sustained improvement nationally over a five-year period.

The report also summarises the audit of the 2009-10 accounts for Strategic Health Authorities (SHAs), NHS trusts and PCTs, which shows that: - these NHS organisations returned a surplus of £1.5 billion; - only 10 organisations out of 260 failed to achieve financial balance; - no organisation had its accounts qualified on grounds of truth and fairness; and - there was also no difference overall between draft and final accounts - which is, it says,  "a remarkable achievement."

The Commission does not undertake assessments of NHS foundation trusts - these are conducted by their independent regulator, Monitor.

NHS organizations (excluding foundation trusts) recorded a total revenue surplus of £1.5 billion for 2009-10 compared with £1.74 billion in 2008-9, representing around 2% of total NHS resources, the Commission reports. At year-end, cash balances held by NHS trusts totalled £735 million (£837 million in 2008-9) and PCTs’ cash balances totalled £18 million (£17 million in 2008-9). In addition, the 129 NHS foundation trusts made surpluses before impairments of £356 million in 2009-10.

However, 10 NHS bodies - six NHS trusts and four PCTs - failed to achieve financial balance during 2009-10, compared with seven in 2008-9. The 10 are: Barking, Havering & Redbridge University Hospitals NHS Trust; Enfield PCT; North West London Hospitals NHS Trust; Peterborough PCT; Portsmouth Hospitals NHS Trust; South London Healthcare NHS Trust; Surrey PCT; Sutton and Merton PCT; Trafford Healthcare NHS trust; and West Middlesex University NHS Trust.

All SHA areas made surpluses during the year, ranging from 0.7% at South East Coast SHA to 2.4 % (London SHA) of their total resource limit.

The Commission notes that in 2009-10, just one PCT failed in its statutory duty to keep its capital spending within the set limit for the year. Overall, there was an underspend of £171 million on capital expenditure by NHS bodies during the year, out of a total Department of Health allocation of £3.2 billion.

The overall picture remains one of financial stability, with most NHS trusts in financial balance and PCTs spending within their resource limits, says the report, but it goes on to warn that the average 5.5% increase in PCT allocations announced by the Department for 2010-11 will be the last of its size for some time.

The NHS faces the challenge of achieving £15-20 billion efficiency savings by 2014, improving not only efficiency but - at the same time - the quality of services delivered. “This will need to be achieved in the face of increasing demand for services and at a time of significant reorganisation within the NHS. If high-quality services are to continue to be preserved and developed as funding growth slows down, the challenge will be to ensure that NHS trusts and PCTs plan and successfully implement efficiencies and service modernization,” says the Commission.

2009/10 is the last year in which the agency’s auditors will undertake Auditors' Local Evaluation (ALE) for NHS trusts and Use of Resources (UoR) assessments for PCTs. “Given the financial challenges the NHS will face in the next few years, we now intend to focus auditors' work until 2013 on the financial resilience of trusts, including their ability to achieve cost improvements,” the Commission says.

- The Audit Commission is due to be scrapped as part of the coalition government’s pledged “bonfire of the quangos” – quasi-autonomous non-governmental organizations, further details of which are due to be announced by Cabinet Office Minister Francis Maude today.