Holyrood's Audit Committee is to hold an inquiry into the financial and managerial troubles within the Western Isles Health Board, following a report from the Auditor General for Scotland.

Robert Black reported to the committee yesterday that while some improvements had been made, he continued to have significant concerns about the corporate governance arrangements in place at the board.

This was the third consecutive year that he had prepared a report on the accounts of the Western Isles Health Board after it failed to meet targets.

In 2006/07, it recorded a deficit of £880,000, giving a cumulative deficit of £3,364,000.

The latest forecasts are that the board could return an in-year deficit of £300,000 in 2007/08.

Mr Black's report said: "Management capacity may be insufficient to support the measures and initiatives identified as necessary to sustain services. The board had still to show it was able to provide the strong leadership needed to achieve financial recovery."

Hugh Henry, convener of the Audit Committee, said: "The committee is concerned at what is happening with the Western Isles Health Board and has decided to conduct an inquiry into the matters raised by the 2006/07 audit of the board. The committee will be seeking assurances that firm action is being taken to resolve what is clearly an unacceptable situation."

John Angus MacKay, the board's chairman, said: "We will willingly co-operate with this inquiry. An action plan is in place to deal with concerns raised by Audit Scotland."

The inquiry is due to begin early next year.