City council Oracle megaproject got a code red – and they went live anyway

Poor security and segregation of duties also worry auditors

Birmingham City Council, a massive local authority in England, went live with new Oracle Fusion ERP software in April last year knowing the system was likely to fail.

Since the introduction of the replacement for an ageing SAP financial management system, the council cannot close its books and file financial reports. The escalating costs of the project — which have risen from £20 million ($24 million) to an estimated £100 million ($121 million) — have contributed to the council effectively becoming bankrupt last month.

According to a 12-page public interest report from auditors Grant Thornton, the Oracle system implementation was rated as "red" before going live and "included a significant number of items requiring a solution."

"The finance system had several adaptations that did not subsequently operate effectively. As such, the system is not able to fully meet the financial reporting needs of the Council including finance, human resources, and schools," the auditor said.

The Oracle implementation "significantly impacted" the council's ability to function, Grant Thornton added, while numerous workarounds and manual interventions were needed to operate the system.

The problems implementing the new ERP system meant the council couldn't create an "outturn position" [financial forecast] for 2022/23 or a set of financial statements for the same year. Neither can it provide an up-to-date financial position for the current year, 2023/24.

"This has impacted on payments to suppliers and also on financial reporting for schools and other organisations that use the Council's financial services," the report said.

Grant Thornton also highlighted concerns over security and governance. The auditors said "some IT security systems were not implemented and there is an inadequate segregation of duties in the system."

From 2019, the council had planned to implement Oracle out-of-the-box and change its processes to fit the system. However, a report earlier this year said council's officers began to change this approach and customize Oracle.

"This shift in emphasis (from adoption to adaptation) has severely impacted upon the council's ability to properly implement the Oracle system."

In its most recent plans, the council said it would work with Oracle Consulting and go back to its "out of the box Oracle vision."

Insiders have told The Register that the functionality provided by the heavily modified SAP system — which began life in 1999 — could not be fulfilled by Oracle out-of-the-box. Either technical or manual adaption was necessary, they said.

Grant Thornton said it was "considering whether all of the basic foundations for the Oracle re-implementation design phase are in place."

"We are also looking at whether the emerging proposals for the Oracle re-implementation have properly considered all the options and whether they have a good enough understanding of the costs/implications," it added.

In a joint statement, the council's leader John Cotton and deputy leader Sharon Thompson said: "The council's political and administrative leadership accept the recommendations from the external auditor, which comprehensively set out the challenges facing the council… They also highlight the need for us to examine how we work more effectively and collaboratively to build a better Birmingham.

"We are determined to harness the resources of the council to work together on preparing an action plan to tackle the significant challenges we face and want to assure our communities, businesses, and staff, that we will take the decisive actions required," the statement said.

Oracle declined to comment. ®

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