Auditors of Europe’s largest local government body say it’s time to decide whether to grind on with a rollout of Oracle – an ERP project set to be five times over-budget and which has shattered the council’s financial reporting – or choose another system.

Late last year, Birmingham City Council (BCC) effectively declared bankruptcy owing to the IT disaster combined with a staggering number of equal pay disputes dating back more than a decade that are collectively expected to cost opwards of £1 billion ($1.27 billion).

After a delayed and over-budget project, BCC went live with Oracle Fusion ERP software for its main finance, HR, and payroll system in April 2022. In May last year, it announced a rescue plan that would put the project budget at around £100 million ($127 million), five times the original estimated cost. And in a council meeting last week, the auditor reported that the system is still not “safe and compliant” in terms of financial reporting and legal requirements, missing a November deadline.

Mark Stocks, Grant Thornton West Midlands public sector leader, told councillors that unless it can be demonstrated that manual workarounds for the Oracle system are safe and compliant for the next financial year [2024/25] starting in April, the audit team would not be able to issue an unqualified audit for that year.

“Actually having a functioning finance system for 2024/2025, including budgets, is absolutely crucial,” he told councillors.

Yet there is also the thorny problem of whether to continue implementing Oracle, or bite the bullet and go with another solution. From 2019, the council had planned to adopt the Oracle system with few modifications, replacing a heavily customized SAP system. However, officers later decided to adapt the system and write modifications, some of which failed, leading to onerous manual workarounds and inaccuracies in reporting.

In June 2023, the council promised an optimization plan – to follow its safe and compliant workstream – “that will revert to a more ‘out of the box’ Oracle solution.”

In their December report, the council’s auditors drew attention to the challenges involved with this “optimization” plan.

“From our interviews, it appears that the primary focus is on establishing a new ‘clean’ Oracle instance, with a phased transfer from the current version. There are significant technical considerations and financial implications of this approach. Other options may offer a more practical and value for money solution,” the report said.

In front of councillors, Stocks was asked whether the local authority was “throwing good money after bad” in continuing to implement Oracle.

“That’s the decision I want you to make,” he told the councillors. “That’s my concern: I would have expected you by this point to have made that decision as to whether … do we stop or do we do something else? The optimization process isn’t there yet, and that’s what you need to get to quickly because it’s all taking too long.”

Any decision to move away from Oracle would be a personal embarrassment for founder and CTO Larry Ellison, who in 2021 named Birmingham City Council as a successful contract win over SAP.

The audit report said the council needs to understand whether modifications to Oracle were made to get it to perform like the previous SAP system, or whether they were needed to “deliver an effective and efficient solution” for the council.

“Our current understanding is the focus is on a new Oracle high-level design, but we are not clear on how, when and by whom the other areas are being considered before the sign-off for a low-level design. The key risk is [the council] cannot afford to adopt Oracle processes out of the box,” the report said.

Instead of modifying Oracle, the council is looking to buy more software to address its short-term problems. One of the major problems the organization hit when it went live was with the Bank Reconciliation Solution (BRS). As of September last year, it is estimated that an error in a modification led to unallocated transactions with a net value of £74 million ($93.7 million). The council is currently spending £500,000 ($635,000) per month hiring temporary staff to solve the problem.

“A specification process has been started for the replacement of BRS with standard Oracle functionality supported by specialist income management software. From procurement to implementation, it is estimated replacement of BRS will take up to 12 months once fully approved. It is likely that there will be no fully working cash system until early 2025. During this procurement manual workarounds will still need to be in operation,” the audit report said.