Birmingham City Council is to spend £100m to fix implementation issues with an IT system which is impacting on its ability to close its 2022/23 accounts.
A report to be presented to the council’s cabinet on 27 June outlined that £46.53m is needed this financial year to resolve “urgent issues” with the Oracle IT system. This funding will be sourced through Birmingham’s reserves and flexible use of its capital receipts.
The IT system, created by database management company Oracle and customised for Birmingham City Council, was expected to go live in April 2020 and aimed to streamline the authority’s payments across its public services. However, elements of the IT contract have been delayed, including the council’s ability to issue invoices to businesses.
“Whilst it is not unusual for the implementation of new enterprise resource planning (ERP) systems to encounter difficulties, the transition to Oracle has proved incredibly challenging,” the council report said.
“Significant resources will be required to arrive at a position where the system can be fully implemented, and we estimate that the final costs of this will be in the region of £100m.”
The report stated that whilst this is a “substantial” investment, the proper functioning of the Oracle system is “critical” for Birmingham County Council’s size and complexity, with a gross revenue budget of £3.4bn per annum.
It detailed that implementation issues of the Oracle system started to arise when council officers changed their approach towards adapting the system. Originally, the council was going to change its existing business processes to fit the system, but this was adjusted to customising the Oracle system to meet Birmingham’s existing business processes.
Issue of Bank Reconciliation System
The report highlighted that “a key issue” relates to the council’s Bank Reconciliation System, which has meant that a “significant number” of transactions are having to be manually allocated to accounts rather than automatically via the Oracle system.
This issue is creating a backlog and impacting the council’s ability to formally close its accounts for the year 2022/23. The report added that Birmingham is working closely with its external auditors on the problem, with the goal to close its accounts by the end of August.
Brigid Jones, cabinet member for finance and resources at Birmingham City Council, said: “It is never easy when implementing a new IT system for an organisation of our size and scale – but there are lessons to be learned from what has happened and I am determined that the council will learn from this.
“Most important of all right now is the need to work at pace to resolve the issues we are facing and to be open and transparent about what they are. The focus of the council leadership on this will be relentless in the weeks and months ahead.”
15th Annual LATIF & FDs’ Summit – 19 September 2023
250+ Delegates from Local Government & Investment
The report outlined a plan to stabilise the Oracle system, which is split into two phases: the first phase to deal with “urgent issues” and the second to “develop and deliver” the council’s vision for the IT system.
In April, it was reported that Birmingham County Council had brought in external consultants from PWC and KPMG to help resolve implementation issues with the IT system.
Also, in March 2022, council documents revealed that the overall cost of the implementation phase had increased from an estimated £19.9m at the time of the original business case to £38.7m as a result of the implementation delays.
—————
FREE weekly newsletters
Subscribe to Room151 Newsletters
Follow us on LinkedIn
Follow us here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
