NHS Forth Valley is "not financially sustainable in the short-term" amid a £15 million black hole in its budget for the current year.
A report by Audit Scotland said the troubled health board, which was placed into special measures amid concerns over patient safety, services and leadership, was struggling to deliver the necessary savings due to issues such as spiralling medicines costs and reliance on costly temporary staff.
The Section 22 report, which goes to ministers, added that these financial challenges are "being felt by boards across Scotland".
Stephen Boyle, Auditor General for Scotland, said that NHS Forth Valley had "responded positively" since it came under Scottish Government oversight in November 2022 and "has put appropriate governance arrangements in place".
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However, its chief executive Cathie Cowan - who has been in charge of the board since 2017 - announced her intention to retire in September this year.
Mr Boyle added: “It is critical that sustained progress is made under the new leadership and sufficient resources are in place to drive forward the change needed.”
The watchdog notes that while NHS Forth Valley delivered a "break-even position" with a £229,000 underspend at the end of 2022/23, it now faces a £40.6 million shortfall in 2023/24 with an outstanding residual deficit of £15.6m after all the currently identified savings.
It said: "There is therefore a significant risk that the board is not financially sustainable in the short term.
"There continues to be an unsustainable reliance on non-recurring savings, and this is reflected in the board’s three-year plan, which identifies an increasing level of savings required to break even.
"These financial challenges are not unique to NHS Forth Valley and are being felt by boards across Scotland."
Audit Scotland cited a number of "significant financial challenges" including the effects of inflation on energy costs and contracts; "increases in medicine costs"; ongoing capacity and staffing pressures "including temporary workforce costs to cover sickness absence; and "ongoing Covid-19 legacy expenditure".
In November 2022, NHS Forth Valley was escalated to Stage Four of the NHS Scotland Performance Escalation Framework following a series of damning inspections in April and September and concerns over its performance on a number of services, including A&E waiting times and GP out of hours provision.
Concerns were also raised over "governance, leadership and culture", and clinical supervision of junior doctors.
Inspectors visiting Forth Valley Royal hospital in Larbert had found patients "seated in corridors and other overcrowded areas for prolonged periods of time with fundamental care needs unmet", as well as problems with non-treatment rooms being used as inpatient areas and five beds allocated to four-bed bays.
Inspectors warned that the fire evacuation procedures were at risk from "extreme overcrowding", and flagged concerns over "unsafe practice" around medicines "which could result in serious harm to patients".
Audit Scotland said the board has "made progress in the months since agreeing the Escalation Improvement Plan", but noted that minutes from a July meeting of the Escalation Performance and Resources Committee and the Scottish Government's Assurance Board highlighted some caveats.
These included that it was "not yet clear how overall improvement in leadership and culture will be evidenced"; that it is "unclear whether it will be possible to achieve sustainable improvement in Urgent and Unscheduled Care"; and that the "projected rate of improvement in Psychological Therapies and, especially, CAMHS appears extremely challenging".
NHS Forth Valley has consistently recorded some of the worst A&E waiting times in Scotland.
A recent corporate governance review also pointed to strains in the leadership at NHS Forth Valley, describing "difficulties in maintaining effective professional relationships between all members of the executive team".
The authors of the external review said that a number of the officials interviewed told them that the "required improvements" in performance would not be achieved "without some changes to the membership of that group".
A spokeswoman for NHS Forth Valley said: "The report concludes that NHS Forth Valley is responding positively to escalation, has put appropriate governance arrangements in place and has made progress in the months since agreeing an initial Escalation Improvement Plan.
"It highlights the importance of sustaining this progress and ensuring that sufficient resources are in place to drive forward the change needed.
"The external auditor also reported that NHS Forth Valley continues to have effective budget setting and monitoring arrangements in place as well as appropriate arrangements for the prevention and detection of fraud and error.
"It recognises that although the Board met its financial targets for 2022/23, there remains significant financial sustainability challenges for the future.
"In addition, it recognises that some of the challenges the Board faces are not unique to NHS Forth Valley and are being felt by boards across Scotland."
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