Concerns have been raised over the financial situation of the NHS in Wales.

A report published by the Auditor General on Thursday found that the service's defecit has increased by £21 million over the past year.

In 2002/03, the NHS in Wales was in defecit by £37 million, an increase from £16 million the year before.

While the budget for the financial year ending March 2003 was £3.5 billion, an accumulated shortfall of £100 million had been amassed over the same period.

The employment of agency nurses to cover staff shortages has been blamed for the precarious situation - while in 1999-2000, agency staff cost the Welsh NHS £8 million a year, this rose to £18 million by 2003.

"The overall financial state of the NHS in Wales continues to be a matter of concern," said auditor general Sir John Bourn.

"Clearly the reversal of this situation and the restoration of financial balance is a priority.

"The minister and the director of NHS Wales recognise that the defecit culture must be addressed and managed effectively.

"The creation of a single audit body for Wales will provide a more focused accountability regime for NHS Wales and we will closely monitor the measures introduced to restore financial discipline."

More positive news for NHS Wales was the finding from Sir John's report that the amounts paid out for clinical negligence and personal injury has stabilised at around £43 million, while hospitals had improved in their tackling of fraud.