A Government-imposed governance review of Birmingham City Council has been expanded after massive failures in its accounts IT system emerged.

Last week, it materialised that the £19m costs of an IT and HR contract, which was supposed to streamline the council's accounts, had ballooned to nearly £40m.

The Oracle contract – due to be delivered in December 2020 – is unlikely to be up and running until next year. Currently, the council's payment system is in chaos, with the finance department unable to track who owes it money.

According to sources close to Birmingham, it is thought that up to 100,000 transactions for 2022-23 could have been affected, with a further 2,000 new transactions a week going through the failing system.

Now local government minister Lee Rowley has stepped in and demanded the Whitehall governance review planned for the troubled council's housing and special educational needs and disability services be extended to cover its finances too.

The IT system was commissioned as part of the council's transformation plans and was supposed to cut £16m in spending. However, the £40m cost so far may be the tip of the iceberg.

PwC and KPMG have been brought in to resolve the issues, but one source suggested the cost of consultants and fixing the failing system could dwarf the current £40m bill – potentially doubling or more.

Strategic director of council management, Becky Hellard, who is responsible for the council's finance department, is absent from the council.

A spokesperson for the council said it was ‘not unusual' for IT systems to experience teething difficulties, but said this contract had been ‘particularly challenging'.

They added: ‘To resolve all issues, an action plan has been drawn up, governance strengthened and a new taskforce is being set up, which will be chaired by the chief executive [Deborah Cadman], with progress overseen directly by the leader of the council [Ian Ward]. 

‘In addition, the council is also actively engaging with its external auditors, who have offered to independently review the plans to ensure the implementation of the system is successfully complete.'