How mega city council's failure to act on Oracle rollout crashed its financial controls

Missing assessments, hidden caveats, and overoptimism all contributed to fateful decision, auditors find

"Huge. There could be major problems transacting leading to late payment or collection of debt. The accounts could be wrong."

Anyone reading such a statement about the impacts of a vital computer system going live might think twice before pressing the button. The problem for Europe's largest local authority is that the right people did not read it or act on it.

On April 11, 2022, Birmingham City Council went live with a new Oracle ERP system set to manage its £3 billion ($3.8 billion) taxpayer funding and multibillion-pound spending. Within weeks, it was aware that the replacement for its aging SAP system was posting errors in cash transactions and by autumn of 2023, Birmingham City Council was effectively bankrupt in part because of the new software.

It has since emerged that no audit trail for fraud detection was in place for an 18-month period and the council is not likely to have reliable, auditable accounts until the reimplementation of Oracle is completed in 2026.

Large-scale IT projects often face delays and overspending. But it's rare for management to press the go-live button on a system that is so woefully unfit for purpose. In 2023, auditors Grant Thornton issued a statutory recommendations report, which said Birmingham's Oracle system implementation was rated as "red" before going live, but it did not explain why and how the council's management, officers, and members made such a decision.

A report from auditor Grant Thornton published earlier this month sheds some light on the details and provides salutary lessons for anyone considering flicking the switch on new software.

The list of mistakes is long, but one obvious error leaps out. The above quote describes the status of issues with the Oracle system and bespoke software the council built around it in answer to the question of the business impact of those problems.

However, the right people did not read the Financial Impact Assessment it was written in. Published on March 24, 2022, the assessment could have been included in an update to the Steering Committee, which met on March 25 and would ultimately make the go-live decision.

"Items in this report, not identifiable in the Steering Committee Update, relate to issues across the several modules, for example, testing and user training," the Grant Thornton report says.

"It is not clear how this report was used and there is no evidence of it being discussed in the minutes of the meeting," it adds.

Meanwhile, the results of testing did not fully come to the attention of the Steering Committee. In fact, some of the testing was incomplete because the system was not stable enough.

The bank reconciliation system (BRS) and cash management module was at the heart of the ERP disaster. The council has spent millions of pounds on manual workarounds, and is waiting for the implementation of third-party software it hopes will fix the problem.

"Emails exchanged between council officers responsible for testing, the systems integrator Evosys and the Programme Director – 29 to 31 March 2022 – indicate that council staff testing BRS were unable to fully test the solution because the first step in the process, loading the bank files, and key consolidation reports were failing. Additionally new errors were occurring in functionality that had worked previously," the report says.

"At the time, council staff expressed their concerns about going live with a solution that was not stable and that the issues were not being given sufficient priority. Despite this, cash management was given a 'Green' rating in reports to the Steering Committee."

Despite their deep involvement in the project, suppliers also gave a green light to the go-live. The report notes that while the suppliers – Evosys, consultancy Socitm Advisory (now Civiteq), and data migration specialist Egress – provided caveats to their opinion, these misgivings were "only identified in the supporting detail to Steering Committee reports."

The latest public interest report reveals the council's various meetings "failed to adequately scrutinize available information as part of their decision-making process" before going live.

"Whether officers did not review, or did not understand, the information provided, they ultimately placed reliance upon their suppliers," it states.

However, the reporting by the suppliers and the council's testing teams was overly positive. Minutes to the Steering Committee's April 1 meeting show that the suppliers supported the go-live decision, but there was "no evidence of suppliers adequately drawing the Steering Committee's attention to a) the level of uncertainty in the position being presented or b) the inherent risk that still existed within the solution."

The committee was also presented with overly optimistic information, particularly in hearing that the BRS had "no open defects except intermittent issues."

Tony Summers, CEO of Civiteq, formerly Socitm Advisory, told The Register: "We supported Birmingham City Council through their implementation of Oracle Cloud from the preparation of the initial business case through to go-live, with a primary focus on business change. It was a highly complex programme against the backdrop of a lot of organizational change.

"We worked with the council to deliver effective change management and our support was valued and commented on positively throughout. We were transparent with the council on our views on the programme and delivered to the requirements set out by them. "We were not engaged to manage the overall programme timetable and spend."

In its auditor'S report, Grant Thornton details many other reasons the Oracle implementation was a disaster. They include poor governance, lack of ownership among senior officers, poor business case design, a failure to stick to the adopt-not-adapt plan, lack of timely engagement with key users, a failure by the design authority to control the solution, combined with key officers facing conflicting priorities regarding adherence to budgets, timelines, and the protection of both the council's and their own reputations.

Nonetheless, the council could have avoided making a bad situation worse by delaying its go-live, paying to continue to support the existing SAP system, and taking the time to redesign the Oracle program. It might have cost the council, but it might be less than the potential £130 million bill the council currently faces for the completion of its ERP replacement – from an initial estimate of around £20 million.

"If information on the quality and completeness of testing had been presented more clearly and more effectively assessed by the Steering Committee ... it is unlikely that the program would have approved the decision to go live," Grant Thornton's report says.

Birmingham City Council has to live with these failures. Other vital IT projects don't have to. ®