NHS regulator Monitor is to launch an inquiry into the mental health trust for Norfolk and Suffolk after concerns were raised over its finances.
Monitor said it would look into whether Norfolk and Suffolk NHS Foundation Trust (NSFT) had breached the terms of its licence over its £1.72m deficit.
The inquiry follows a Care Quality Commission (CQC) inspection.
In a letter to the NSFT, seen by the BBC, Laura Mills, deputy regional director of Monitor, said it had been decided to start the investigation due to the “deterioration in the trust’s financial position” and feedback from the CQC inspection in October.
‘Issues have escalated’
Ms Mills says in the second quarter of 2014-15 the trust had a planned deficit of £290,000 but reported a deficit of £1.72m.
The NSFT has been open about its financial position and told the BBC last month it was predicting a £2m deficit by the end of 2014.
Ms Mills also said an external review of the trust’s management structures found a “number of areas that could be improved”.
“Monitor is concerned about how these issues have escalated and whether they could indicate a governance failure and a potential breach of the trust’s licence,” she said.
A spokesman for the Campaign to Save Mental Health Services in Norfolk and Suffolk said: “It is vital that those who depend on mental health services do not pay the price of underfunding of NSFT.
“If mental health had enjoyed the same increase in funding as physical health since 2010, NSFT would have an annual budget £30m higher than it does today.
“Mental health services in Norfolk and Suffolk need money not soundbites.”
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