In this paper we review the financial reporting incentives associated with the requirement to breakeven for English NHS Trusts. We also investigate the distribution of reported income and estimate discretionary accruals thereby contributing to the limited literature on earnings management in not-for-profit hospitals. We find that Trust managers use discretion over accruals to report income within the target range around zero. The results are robust to recent challenges to earnings management explanations arising from the use of distributional and aggregate accruals methodologies. Our findings indicate that a precise and challenging financial breakeven target based on current cost residual income is associated with wide-spread use of discretionary accruals to an extent that weakens the accountability of NHS Trusts.