Facing a budget overrun exceeding ten times original estimates, West Sussex County Council escalates reliance on property sales to fund Oracle implementation, testing compliance boundaries of capital receipt usage.
Facing a budget overrun exceeding ten times original estimates, West Sussex County Council has significantly increased its reliance on capital asset sales to fund its Oracle ERP implementation. The council now projects using £12 million from property disposals in the current financial year, tripling the £4 million utilised in 2024/25. This approach pushes against regulatory boundaries governing capital receipt usage.
Regulatory Context and Compliance Requirements
Since 2016, UK councils have been permitted to use capital receipts from asset sales for service transformation projects. However, government guidance explicitly states this flexibility should not relieve ongoing budget pressures or fund recurring operational costs. Capital receipts traditionally finance infrastructure investments like schools and roads, not software implementations.
The council justifies this exception under the 'transformation expenditure' clause, claiming the Oracle project will generate long-term savings through "automation and enabling more tasks to be undertaken via self-service." This rationale hinges on classifying the ERP implementation as transformational rather than operational. Compliance requires documented evidence of sustainable future savings exceeding initial costs.
Budget Timeline and Governance Concerns
| Period | Budget Allocation | Capital Receipts Used | Key Milestones |
|---|---|---|---|
| 2019 | £2.6 million | N/A | Original SAP-to-Oracle plan |
| 2021 | £14.07 million | N/A | Budget revised for supplier expansion |
| 2024/25 | £27 million* | £4 million | DXC contract terminated after £6.6m spend |
| 2025/26 | Active | £12 million (projected) | Finance/HR modules due April 2026 |
*Current approved budget covering May 2024-April 2027, excluding pre-2024 expenditures
Auditors EY previously identified "weaknesses regarding budgeting, governance and risk management." The project's timeline has slipped repeatedly, missing its original March 2021 launch. The £27 million current budget covers a three-year program ending in 2027, yet excludes approximately £6.6 million paid to former systems integrator DXC.
Compliance Risks and Monitoring Requirements
Three key compliance risks emerge:
- Asset Depletion: Selling fire stations and other properties reduces long-term revenue-generating assets for short-term IT funding.
- Savings Validation: Councils must demonstrate actual savings post-implementation. Previous ERP projects have underdelivered on promised efficiencies.
- Funding Transparency: The £27 million budget's exclusion of pre-2024 costs obscures true project expenditure.
Officials confirm rigorous quarterly reviews by the Performance and Finance Scrutiny Committee. All capital receipt usage requires documentation proving qualification as transformation expenditure under the Local Government Act 2003. The council must also submit annual reports to the Ministry of Housing, Communities and Local Government detailing asset sales and funded projects.
For similar ERP implementations, the Local Government Association's guidance on capital finance recommends maintaining separate reserves for technology projects. West Sussex's approach highlights how budget overruns can force councils into complex compliance tradeoffs between immediate project needs and long-term financial sustainability.
Final approval of capital receipt usage occurs during year-end financial reconciliations. Taxpayers await validation of the council's savings projections as the April 2026 go-live deadline approaches.
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