£100 million and four years later, Birmingham City Council is relaunching broken 'Oracle' finance system

Birmingham City Council is to relaunch its finance, payroll and IT network from scratch - after four years of 'disastrous' failure and a waste of over £100 million. The whole system is being reviewed, redesigned and reimplemented at an additional cost expected to be in the region of £45 million.

It will take another TWO YEARS however before the new-look system is properly working, the council has revealed. In the meantime the council is still not able to easily produce properly audited accounts.

The council and its external auditors can also still have no assurance over whether any fraud was committed after April 2022. That's because a secure audit trail was never switched on, leaving the council at risk of embezzlement and unable to know if it overpaid firms or failed to collect cash it was due.

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The decision to go for a full re-implementation marks the latest chapter in the troubling story of the council's attempt to replace a creaking system for finance, payroll, procurement and HR services with a snazzy new service fit for the 21st century. Originally estimated to cost £19m to buy in with the promise of savings over time, the project has so far cost the council another £86m and rising.

The project's failures have contributed heavily to the council's financial woes and heaped huge pressure on council staff. In a statement backing plans to 'start again', Government commissioner Myron Hrycyk said the Oracle meltdown had been "one of the key focus areas of the intervention and a key factor in the loss of financial control."

Commissioners implored the council to get it right this time, saying it was critical to the council’s short term financial recovery and longer-term sustainability. "Commissioners believe the painful conclusion that a re-implementation of Oracle Fusion is required, and the selection and implementation of standard integrated management systems used elsewhere in the sector is the correct conclusion."

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The first phase of the new project will cost £12.7 million, members of the council's Cabinet heard this week (Tuesday May 14). Oracle Consulting will work 'at cost' to help the council to design and provide a proof-of-concept solution by March 2025.

The council will also seek an Oracle delivery partner to implement the solution by March 2026 and then run it for up to five years. The Oracle Fusion Cloud Enterprise Resource Planning solution encompasses financial, human resource, procurement and payroll management processes across the council.

The original system included services to schools, and when it failed there was huge disruption caused with suppliers going unpaid and heads and governors unable to complete their individual budgets.

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This time around, following reviews with Oracle and consultations with other councils, the system will not host finance and HR services to schools. Instead a new collective system specially for schools will be delivered in time for the start of the school year in September 2025, the Cabinet agreed.

Anger persists over the shocking failures of the original system. It was introduced to a fanfare in 2022 after two years of planning - only to catastrophically fail. Councillors voiced their frustration over the 'broken' system and its role in bringing the council's accounting and audit system to its knees.

Finance director Fiona Greenway had told the council's audit committee last month that Oracle's audit features had never been turned on. "I have never – and I've done this job a lot of years – known anybody not to decide to have an audit trail switched on," she said.

Producing accounts for the financial years 2022/23 and 2023/24 would be difficult "because the audit trail was not switched on until August, September, which means we have at least half a year of transactions with no audit trail and ability to test for fraud in that system. So that's a concern."

Why the programme went so disastrously awry is now the subject of an internal investigation and is also likely to eventually form part of a promised Government-led public inquiry into the council's entire meltdown.

Cllr Ewan Mackey, Conservative group deputy leader, said: "As far back as 2020 we (Conservative members) have been asking questions in Cabinet (about the Oracle system) including one about fraud (risk) that got a fairly belittling response....there is now no way of finding out if fraud had taken place within the Oracle system."

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Cllr Roger Harmer, Lib Dems group leader, told the Cabinet said: "It is important to reflect on the disastrous impact of the Oracle system. The implementation was in April 2022 and we are now being told it should be up and running in April 2026." That is four years of negative impact, sometimes significantly so, on council performance and finances, he added.

"We are now finally tackling this problem properly, but two years on from the initial implementation. It really is a tragedy for this city." Cllr Robert Alden, Conservatives group leader, added: "This is not even back to square one - it is significantly worse than that as we have already spent over £100 million.

"The financial controls meant to protect the council and taxpayers were completely obliterated in this rollout, and leaving the council unable to say if fraud has occurred."