Agenda item

The Chair introduced the Financial Modernisation Programme.

The Financial Modernisation Programme had been initiated in response to recommendations from external and internal auditors. It aimed to improve certainty around the Council’s financial position, particularly in light of challenges with budget monitoring and the transition to Oracle Fusion. The programme was being delivered in partnership with Grant Thornton and encompassed finance structure and systems; budget monitoring and management; Oracle system optimisation; and governance and accountability.

Hillingdon had been working with Grant Thornton on the Oracle Improvement Plan since September 2024. In February 2025, Cabinet had approved a request from the Corporate Director of Finance to bring in capacity and capability to create and deliver a Financial Improvement Plan with CIPFA. These were combined into the Finance Modernisation Programme, launched in April 2025. The initial focus had been to support the understanding of the budget outturn position; to improve the budget monitoring forecasting processes; and to address issues with the use of Oracle. It was also noted that the Council had recently appointed a new Section 151 Officer.

A review of accounting had been done to ensure that there was a solid baseline on the 2024/25 outturn. Adjustments to the 2024/25 financial position had been identified, totalling an approximate £14.1 million adverse impact as a result of historic issues including writing out a negative reserve, updates to the Council’s Treasury and Minimum Revenue Provision calculations and changes to the Council’s Bad Debt Provision policy.

The Council’s finance system had gone live in May 2024, upgrading to the latest cloud-based version of Oracle. However, inadequate training and knowledge transfer had led to poor understanding of changes to business processes and the routine maintenance requirements of the system. The system as implemented had proved to be overly complex and had been adapted to meet existing Council processes. Documentation of the system was incomplete and not always up to date. The Council did not have the in-house capacity or capability to effectively support and maintain the solution.

Oracle’s planning and monitoring functionality had underperformed, leading to off-system workarounds. Some documents around processes and procedures lacked detail. Budget holders lacked confidence and access to reliable data.

The current finance team was large and high-cost relative to the Council’s size. Manual interventions in basic functions such as forecasting and reporting were prevalent due to unrealised system efficiencies. Accountability was concentrated among a small number of senior officers.

The Council had been using Oracle for a long time. The latest cloud-based version, Oracle Fusion, included enterprise resource planning (ERP) for core finance and enterprise performance management (EPM) for planning and budgeting. Budget holders primarily interacted with EPM.

The initial stage of the Financial Modernisation Programme had been organised into six key work streams with the immediate priorities around ensuring a robust understanding of the 24/25 outturn and targets for 25/26.

1. Accounting and control – identification and assessment of areas of risk in the Council’s Accounting processes and Controls and 24/25 Year End preparations
2. Budget Monitoring – Implementation of good practise Budget Management and Capital Monitoring processes and supporting tools (excluding Oracle)
3. Oracle EPM (Planning System) – Implementation of key functionality to support Budget Management and Capital Monitoring through Oracle Fusion
4. Finance Systems Support (ERP) – Support to develop the capacity and capability of the Council’s Finance Systems team, to deliver improvement in the basic operation of Oracle, reduce manual intervention and risks related to access control and routine updates
5. Finance Operating Model – Establish a new delivery model for a modern finance service to the Council
6. Supplier contract review – Expert review of the current managed service and supplier performance and options/ recommendations to continue, exit or migrate to a model that better supports the Council’s needs and drives innovation

Future improvement projects included:

• Balance Sheet Assurance Process – Documentation of best practise process, procedures and reporting to ensure the ongoing integrity of the Council’s Balance Sheet
• Financial Close Process – Documentation of good practise processes and procedures to enable the Council to close its ledgers and report on its financial position (Monthly/ Quarterly/ Annually)
• Budget Setting process – Documentation of processes and procedures for Budget setting based upon recognised good practise
• Capital Governance – Documentation of processes and procedures for Capital monitoring and Governance based upon recognised good practise
• Oracle EPM Refresh – Simplification of EPM structures and reporting:
  • Use of core functionality, removing duplication and complex configuration
  • Update of existing reports
• Oracle ERP Enhancement – A range of improvements to functionality and operational efficiency, including:
  • Improved integration with feeder systems
  • Implementation of Risk Management Module

Members were concerned to note that budget holders did not have confidence in their budgets or adequate access to information and asked when they would have confidence and access to information. Officers noted that confidence in budget management had grown but had required significant manual work. The current setup had led to excessive processing that sometimes overshadowed delivery. Work was ongoing to align systems with the finance structure and delegation of budget responsibilities. The aim was to establish distributed leadership in budget management, where team leads could access clear data on staffing, costs, and forecasting needs. Ultimately, the vision was for everyone to have the understanding and tools to manage budgets effectively. Increased confidence in budgets would increase accountability.

Members asked about the best model for accountability of budgets. Accountability in finance was closely tied to organisational governance, which was why the financial organisation programme was presented alongside the GRIP. Budget reviews were now more systematic, transparent, and frequent, with sessions held monthly or more often depending on budget size and risk. This created a clear accountability hierarchy. Regular reporting to Cabinet Members now included comprehensive updates on budgets, savings, and capital, reinforcing accountability throughout the organisation.

Members noted that accountability required training and asked about progress on this. Training was in early stages. Oracle had been used for 2025/26 Month 2 monitoring as a learning phase. A best-in-class training provider had been identified, and there was an emphasis on creating manuals and guides for ongoing reference. Training would be rolled out as the system design stabilised.

Efforts were underway to improve clarity and accessibility of financial reports for Members and the public.

Members were concerned to note that ‘the planning and budgeting functionality, in Oracle, has been a significant weakness leading to off system processes being implemented’, and ‘Documented processes and procedures, for Budget Monitoring, lack detail and do not provide the level of regular guidance and communication required’, and asked for more detail on these. Grant Thornton discussed how transactional data was captured and transformed into financial information for reporting purposes. It was noted that while Oracle captured transactional data cleanly in some areas, the process of translating this into accounting entries was complex. There was often manual effort required to convert information into meaningful reports. This complexity posed challenges for users trying to extract useful financial insights. Existing documentation was often superficial and outdated.

Members asked about spending controls. Officers advised that there were a mixture of manual and automated spend control parameters. For example, on contracts, warnings appeared when spending came close to the approved limit so that spending could not go above the limit unless approved. There was a weekly board to look at any establishment changes.

There were accountability controls including the Constitution and Scheme of Delegations. There were regular meetings to ensure controls were in place.

Members asked about a financial procedures manual and if this could be shared with Members. It was noted that this document was still being drafted and was expected around September.

Members asked about training for Members. Officers advised that there were regular training sessions such as Member Development Day. There would also be training upcoming post-2026 elections.

Members asked why training on the new system had not been the first action taken. Officers noted that there had been Oracle training in 2023 and 2024. It was noted that the original Oracle implementation had leaned towards adapting the system rather than adopting standard processes. The current system design had been tested using Month 2 as a reference point. There was a need to finalise the system design to a satisfactory level. Training should commence thereafter. Training would cover not only system usage but also the underlying processes and decision-making approaches. Forecasting had been identified as a key issue due to varying interpretations among users.

As part of the Finance Modernisation Programme, the current Oracle support arrangements were under review. Officers were assessing how well the existing support structure aligned with the needs of the Oracle refresh and broader finance modernisation efforts. A reliable and responsive support partner was essential to implement system improvements and provide ongoing support for Oracle, which was a live, cloud-based platform. The team had provided feedback to the current support partner regarding performance concerns. Regular reviews were being conducted by the team to monitor contract performance and ensure delivery against agreed terms. The review aimed to identify the right support partner to optimise Oracle’s use and ensure the system continued to meet organisational needs.

The Financial Modernisation Programme was roughly a six-month programme launched in April 2025. The current phase was planned to end in October 2025. Monthly reviews were conducted to assess progress and plan next steps, though finance improvements will continue beyond the formal programme.

Grant Thornton noted that there was an element of them presenting their experience of best practise but an element of co-creation with the finance team. This involved a preferred methodology adapted to local circumstances.

Members asked if this work would have any effect on the Council’s audit, and if there had been discussions with EY. Officers noted that there was a specific work programme to move data from one system to the other and there were checks ongoing with EY. EY noted that they had issued their audit planning report to the Council this morning and that this would come to the next Committee. This would show that the Oracle transition was one of the identified risks. This included ensuring that balances from the old system had made it onto the new system. Some of the challenges that the Council had encountered would be included in EY’s Value for Money commentary.

RESOLVED: That the work undertaken to date on the Finance Modernisation Programme be noted.