A damning report into Croydon's health services has revealed widespread failures, poor management and substandard processes that lead to a £27m NHS black hole being missed.

A review of Croydon Primary Care Trust’s finances from 2010/11 by the newly established South West London NHS Trust in July last year discovered instead of a reported £5.4m surplus, the PCT was actually in £22.4m debt - a £27.8m oversight.

The inaccurate accounts were signed off by internal auditors, the Audit Commission and by the PCT’s board.

NHS London commission an independent report by Ernst & Young, published on Tuesday June 19, listing a catalogue of mistakes including accusing a senior finance employee of making "significant and unwarranted adjustments" to balance sheets statements and ledgers.

The employee is reported to have left in May 2011, two months before the discrepancy was discovered.

Paul Baumann, NHS London finance director, said no-one had lost their jobs over the incident and the money had not been taken, but was spent on healthcare.

He said: "Our judgement is this is not a case where we felt it helpful to take such action.

"While the situation is regrettable, it is important to note that there have been no adverse effects on patient care as a result of the accounting error. The review found no evidence of personal gain whatsoever."

He said only a sample of the PCT’s accounts had been audited due to its strong history of good management leading to the oversight but denied complacency.

The report found the PCT’s transition to becoming part of the South West London NHS Cluster in February 2011 contributed to the error.

Mr Baumann said: "It is important that we learn lessons from it and that those lessons are taken up not just in our existing NHS organisations but also in the new emerging NHS commissioning structures."

The shortfall has been made up from a contingency fund set aside ahead of the creation of the South West London cluster but significant efficiency must be found.

£16.4m of efficiencies were found by the cluster during 2011/12 and a further £25m must be made this year.

Sian Bates, NHS South West London chairman said: "New financial systems, processes and teams are already in place in Croydon: this will not be able to happen again."

A spokesman from the Audit Commission said: "We agree with Ernst & Young’s main conclusion that the issues with Croydon’s 2010/11 accounts were down to failures in financial management and governance within the PCT.

"The opinion was issued by the auditor based on the information received from the PCT. The auditor’s testing of PCT spending was consistent with the audit approach and professional standards.

"However, in our view the auditor could have done more testing in some areas."