Auditors highlight poor oversight and reporting at city council over troubled IT programme
External auditors reporting on Birmingham City Council's implementation of its Oracle system have highlighted a culture where "either bad news was not welcome, or officers felt uncomfortable to communicate bad news".
Writing in a public interest report published on Thursday (20 February), external auditors at Grant Thornton also described member oversight and ownership by senior officers of the project as either "absent or ineffective".
Birmingham's implementation of the Oracle system – an IT system for payments and HR processes - has been plagued by delays and ballooning costs and was partly blamed for the council's decision to issue a section 114 notice in 2023.
In October last year, commissioners sent into the city council described the Oracle programme as the "poorest" 'Enterprise Resource Programme' deployment they had seen.
Grant Thornton's report said the programme's governance and programme management arrangements "had fundamental weaknesses that were never effectively remedied and were further exposed by high turnover of staff in both senior and operational roles".
The auditor said this resulted in the implementation coming at a significant cost to the council, "contributing to a breakdown of financial control such that it has been unable to adequately control its finances throughout 2022/23, 2023/24 and into 2024/25".
According to the report, Birmingham is unlikely to have a functioning finance system until 2026 at the earliest.
The auditor highlighted a series of key problems with the programme, including a tendency to report optimistically, "with risks and issues not identified in key messages but set out in the detail of reporting and further obfuscated by overly optimistic mitigations".
"This contributed to a lack of transparency and presented a potentially misleading view to senior stakeholders", the report said.
Elsewhere, the report said that while member oversight improved as the project progressed, "Members, for the most part, did not appreciate the complexity and level of risk in the programme and the potential impact upon the Council's ability to fulfil its statutory responsibilities".
It added: "Interviews with Members indicated they felt they lacked the capacity or capability to apply meaningful scrutiny, relying on Senior Officers and delivery partners."
The report also claimed that officer reports to members were "considered to acknowledge but minimise issues".
Commenting further on the reporting practices within the authority, the report said that while it was "clear" that the issues with the ERP system were known by officers throughout 2022 and up to March 2023, the auditors could not find a report to cabinet or another committee that clearly reported the difficulties to members.
It later added: "We note that the culture of the Council at that time appears to be one where either bad news was not welcome, or officers felt uncomfortable to communicate bad news."
The report also said: "If the Council is to succeed with other major projects, including the current ERP project, and avoid similar issues to the failed ERP implementation, it will need to carefully consider how it can change its culture to one of openness, mutual support and transparency."
A spokesperson for Birmingham City Council said: "While the report makes for difficult reading it is an important document that sets out clearly where mistakes have been made, the significant impact they had and how we must learn from them.
"We will take on board all the findings. We are making significant progress on the reimplementation of the Oracle system and getting our finances back on track."
It added: "We have worked to significantly strengthen governance, to understand the issues within the system, and to learn lessons from what went wrong.
"The further work being undertaken is significant to resolving the issues identified, and that a properly functioning Finance and HR system is crucial to the effective running of the council."
Adam Carey
