West Yorkshire Ambulance Service is £10 million in debt because of mismanagement of its NHS staff recruitment agency, a damning report revealed today.

The Department of Health-backed agency, called NHS Professionals, was allowed to rapidly and massively expand without proper planning, said the report by District Auditor Terry Carter.

Since it was formed by WYMAS in November 2000, it has swelled to become responsible for two-thirds of all placements by NHSPs throughout the country, with 22,000 nursing staff registered on its books.

It deals with 15,000 requests a week from 36 hospitals to fill vacant shifts for doctors and nurses.

The huge workload has left WYMAS with a £450,000 weekly wages bill which has caused its annual expenditure to balloon from £40 million a year to £135 million.

But a lack of a detailed business plan during a period of vast expansion meant that it has suffered serious cash flow problems because of time lags in paying wages and receiving payments from health trusts, delays and disputes over invoices, and because it was often not charging enough commission to cover costs, Mr Carter's report said.

There is even a question mark whether the ambulance trust has acted within its statutory function by providing the service.

"West Yorkshire Ambulance Service's involvement in NHS Professionals was not properly planned and as a consequence the trust has been left with an ongoing £10 million deficit," said Mr Carter.

"While the NHS Professionals concept is sound and was in fact endorsed by the Audit Commission as a way of tackling the rising cost of agency nurses, in the implementation of the project insufficient attention was paid to proper operational and financial control.

"The trust is starting to take steps towards tackling many of the issues raised in the report. Some improvements in service are already being seen but much action remains to ensure appropriate controls and financial arrangements are implemented."

Among Mr Carter's recommendations are that the trust:

l Strengthens financial controls.

l Ensures money is available to support the service and any future expansion.

l Completes the work underway to develop robust business plans for NHS Professionals.

l Ensures all nurses have up-to-date training and have undergone criminal checks.

Last month, Health Minister John Hutton announced that a Special Health Authority will be established by the end of this year to provide a national management structure for NHS professionals which were formed to help cut the cost of recruiting staff from private agencies.

Today, Steve Griffin, acting chief executive of WYMAS, said the NHS Professionals was launched to meet the needs of the £1 billion a year cost of temporary workers in the NHS but he admitted its rapid expansion had put a strain on IT and systems.

"We have learned lessons from this," he said.

"We perhaps have been over ambitious and we have stretched our resources but we have learned lessons and we are putting those lessons to great effect. We are a much stronger organisation as a result."

Andrew Cratchley, the newly-appointed manager of NHS Professionals WYMAS, said significant progress had been made in developing a business plan and securing the necessary funding to support the scheme.

"This work will continue to ensure that any concerns outstanding are addressed in full."

He added that the formation of the Special Health Authority will "allow WYMAS to focus on its core activity delivering a first class ambulance service to the people of Yorkshire."

Steve Hoyland, spokesman for WYMAS staff who are members of public service union Unison, said he would be seeking assurances that ambulance staff will not be affected by the £10 million deficit.

"It sounds like NHS Professionals was allowed to run before it could walk," he said.

A spokesman for the Royal College of Nursing said: "The Audit report raises a number of important management issues for WYMAS to address.

"Two key issues for nurses are the fact that they should be paid promptly for the work they do and that adequate training should be provided.

"The Royal College of Nursing has supported NHS Professionals since it was launched. However, the service has hit significant problems across the board and it is important that WYMAS now addresses these issues.

"NHS Professionals has the potential to be an important part of the solution to nurse shortages. The priority must be to make sure that we have the nurses to give good patient care."

The report was discussed at an extraordinary board meeting of the WYMAS trust board on Tuesday. It also comes less than a month after a highly-critical report by Commission for Health Improvement which found the trust's own figures for ambulance response times were inaccurate and gave a misleading impression of its performance.