Europe's largest council kept auditors in the dark on Oracle rollout fiasco for 10 months

It took a whistleblower to expose disastrous ERP go-live

Birmingham City Council did not tell its official auditors about the disastrous Oracle implementation for ten months after the suite of applications went live, and appeared to obstruct access to the new system needed to complete their work.

Since it replaced aging SAP finance software with Oracle's cloud-based Fusion for HR, payroll, ERP, and finance in April 2022, Europe's largest local authority found the system "effectively crippled" its ability to manage and report on finances, auditors found. It was still not "safe and compliant" two-and-a-half years after the replacement went live, according to evidence presented to the council in January.

While the debacle hit local media headlines in May 2022 after schools were left unable to pay their bills and a series of complex manual workarounds were required to operate the system, councillors didn't begin to discuss the failures until April 2023.

During a council audit committee meeting last week, external auditor Mark Stocks, Grant Thornton Midlands public sector assurance practice lead, was quizzed over why his team had not raised the alarm earlier. Stocks said the situation with Birmingham City Council's Oracle implementation was "unprecedented" in his experience.

"I've never seen this level of failure if I could go back over all my audit plans for the last 35 years. Not one of them would have this in as a significant risk, because you ought to be able to implement it effectively. Every other council in the country can implement these systems effectively," he said.

Stocks added that after Oracle went live in 2022, Grant Thornton had not been able to access the Oracle system for auditing accounts. Stocks became involved in the Birmingham audit in February 2023, shortly after which "our IT people contacted me and said, 'We can't get into Birmingham: they're not providing us with any information on the implementation, so you need to intervene,'" he told the meeting.

He told the committee that earlier Grant Thornton auditors had commented in a report that they weren't getting access. "After that, we received a whistleblower who told us what was going on ... That was the first time that anybody had communicated to us that there was a problem, so that causes us problems as auditors."

The legal basis of external audits of councils in the UK is provided by the Local Audit and Accountability Act 2014. In guidance published on the Local Government Association website, one expert said that because of the significance of IT systems in the preparation of the financial statements, external auditors have their own IT audit strategies to examine the key technical and environmental controls.

Stocks told the audit committee that his team had not raised concerns about the failure to be provided with access to the Oracle system because they were focused on producing a public interest report, which found it did not have the skills to challenge its technology suppliers or missed warning signs that should have prevented the system going live.

"We have to be able to trust [the council] that [it's] going to be candid with us over what was happening, and certainly nobody was talking to us about what was going on with the ERP system. I've not felt the need to air that ... I needed to do the work on [the public interest] report first. But it makes it a difficult relationship between us and [council] officers and it's taken a little while to rebuild some of that trust. These things could have been communicated clearly to us, and it makes it difficult to do our job as auditors," he said.

The Register has asked Birmingham City Council if it would like to respond.

During the meeting, Councillor Lee Marsham, a Labour member of the audit committee, called for an inquiry into the Oracle ERP implementation.

Birmingham's initial implementation had relied on multiple customizations of the Oracle system. The council is currently reimplementing Oracle from scratch on an "out-of-the-box" basis and plans to go live with the functioning system in 2026.

Stocks said the council had to be ready for the required business change to adopt Oracle's standard processes. "You do have to drive change because the things have to change within how departments work and how you implement the next ERP system because it can't go wrong again. I don't think any of us can survive if it goes wrong again," he told the committee.

The 2019 business case said the project would cost around £19 million. Estimates of the total cost of the old and the replacement Oracle implementation vary, but some suggest it could be as much as £130 million. ®