Europe's largest council could face £12M manual audit bill after Oracle project disaster

Europe’s largest local authority faces a $15.58 million (£12 million) bill for manually auditing accounts which should have been supported by an Oracle ERP systems installed in April 2022.

The £3.2 billion ($4.1 billion) budget authority has become infamous for its ERP project disaster, which has seen its switch from legacy SAP software to cloud-based Oracle Fusion, a customer win co-founder and CTO Larry Ellison once flaunted to investors.

The delayed project left the council without auditable accounts, and without security features, along with costs climbing from around £20 million to as much as £131 million. The IT problems contributed to the Birmingham City Council becoming effectively bankrupt in September last year.

A report from external auditors stated the council will not have a fully functioning cash system until April next year, three years after it went live on an Oracle ERP, and will have to wait until September 2025 for a fully functioning finance system.

Yesterday, Mark Stocks, head of public sector practice at external auditors Grant Thornton, told councillors that officials had told him the new accounting “out-of-the-box” system might not be ready until March 2026, nearly four years after the failing customized system first went live.

The lack of a functioning accounting system was making it costly and time consuming to produce a full audit, the auditors concluded after exploratory work.

“Our ability to get through those two audits —22/23 and 23/24 — and give you the surety that you would normally expect is severely limited now, because of the ERP system and because of the timetables that we're likely to be working to,” he said.

He told the Council’s audit committee that producing manual audits for these years would be a mammoth task.

“The audits would take a minimum of a year for a full team, full time [to complete] and I would have thought they would run into probably £3 million per audit, and you would have to match that with investment in your finance staff. It's an enormous undertaking to actually do those audits without an IT control environment and without a business process environment,” he said.

Even if the external auditors did the work, there was no guarantee they could sign off the books with an unqualified opinion.

“There's a there's a significant likelihood that we can do all that work, and you could still end up with a disclaimed opinion. It's a risk, and I am cautious about spending your public money in this way to end up in the same position,” he said.

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Problems with the customized ERP system were multiple, but cash management, bank reconciliation and accounts receivable were of particular concern. The council has bought third-party software — CivicaPay/Civica Income Management — as the replacement for the banking system.

Stocks said officials had been working hard to improve the current Oracle system, and said he did not “lose that message.”

Nonetheless, serious issues continue. “You're not going to have a fully functioning finance system and cash system [until] April next year. The actual financial ledger could be April 2026. That's really difficult from a finance officer point of view [and] it's particularly difficult from an external audit point of view to draw a conclusion on your accounts,” he said.

Committee member Richard Parkin said the assessment was “sobering.”