The Wales Audit Office has issued a warning about the state of NHS finances.

In a report published on Wednesday, auditor general for Wales Jeremy Colman said that short term financial pressures were preventing the NHS from resolving longer term deficits.

He also warned that the situation is likely to get worse this financial year.

Most NHS trusts were forecasting in December that they would not break even in 2005/06, with expectations of a £26m overspend.

And Health Commission Wales was forecasting a further deficit of almost £10m.

More positively, local health boards were projecting that they would broadly meet their 2005/2006 requirements, with an overall net surplus of £4m.

"While the exercise of financial control has improved, there is a worrying downward trend in the financial position of the NHS in Wales," said Colman.

"Recovery plans must be realistic with effective reporting procedures.

"It must be quite clear where responsibilities for action lie and who is accountable for delivery.

"Most of all, the underlying reasons for the deficit must be addressed."

Responding to the report, Plaid Cymru health spokesman Helen Mary Jones said it revealed "the terrible state of the NHS in Wales".

"With the finances of the NHS in Wales in such a perilous state, and the fact that so many jobs in the NHS in England have already been lost, we're concerned that the future of the NHS does not look good in Labour's hands," she added.

"The auditor general has warned of the downward trend of finances in Wales, Rhodri Morgan must get a grip on this problem immediately before it is too late."

And Welsh Conservatives' health spokesman Jonathan Morgan said: "Jeremy Colman's report underpins what we have been saying for a long time - that short term financial pressures are preventing the NHS from resolving its deficit position.

"The Welsh Assembly Government has already admitted that the accumulative deficit is in the region of £76m.

"We have forecast that this will reach £100m before the next assembly elections unless the government and the NHS resolve these growing debts.

"It is clear that insufficient money is reaching the frontline and short term ministerial initiatives are diverting money away from the coal face.

"Financial pressures caused by a series of medical contract changes have also led to the NHS being placed in an unsustainable position.

"The Assembly Government must publish a financial strategy which aims to reduce the accumulative debt of the NHS by 50 per cent within five years.

"There is no reason to suggest that the Assembly Government should not be able to reduce the deficits in order to allow the NHS to spend more time treating patients and less time juggling its figures."