IT upgrade cops blame for missing millions

Australian Pharmaceutical Industries (API) has blamed an IT system upgrade for the disappearance of $17 million from its annual trading figures.

An exhaustive search by forensic accountants KPMG and Ernst & Young was unable to locate the missing millions which forced the Australian Stock Exchange (ASX) to suspend trading in the company's shares.

When filing results for the 2005/06 financial year, the company lodged a statement with the ASX stating that: "A complex set of issues had emerged as a result of an IT systems changeover. The changeover involved a move from an outdated mainframe system and associated financial package to a fully integrated ERP system.

The implementation of the conversion was phased in over a period of time, and completed in March 2006. The resultant conversion has not affected the company's ability to service its pharmacy customers and in this regard it's business as usual."

The incident also led to the resignation of API chief executive officer Jeff Sher, who said he had a long-held ambition to work as a consultant.

In February 2003, API inked a $6.5 million deal with Movex (which was then owned by Intentia International and in April 2006 merged with Lawson Software) to implement an ERP system. API, as well as pharmaceuticals manufacturing and distribution, operates and franchises retail outlets such as Soul Pattinson, Chem World, House, Price Attack and Priceline.

The contract covered warehousing, retail, distribution and retail support as well as financial, managerial and executive reporting tools.

Previsouly, API had a mainframe-based system running sub-ledgers and a Unix-based general ledger system using Excel spreadsheets for budgeting performance and reporting. A Business Objects X1 system has been integrated with the Movex system.

The provider, Lawson Software last week defended its product, pointing out that API has made it clear that the ERP purchase is not responsible for the disappearing funds.

API account manager and Lawson Software's A/NZ consulting services manager, Geoff Squires said the API system is robust and functioning as expected.

He said it was API's redundant, old IT systems that were responsible for the error.

Squires said the "upgrade" issue stems from API moving from three different financial systems on two different mainframe legacy hardware systems over to the Movex ERP platform.

"API has told us that, with all investigations around closing their books, our ERP system has passed every test," Squires said.

"API has rolled out the system over a number of national sites and gone live across the organization; in their presentation to us they told us there were errors in the old mainframe and other financial systems.

"We do not believe API in any way shape or form is laying blame on the Movex system, and public announcements have been very clear that the issue lies elsewhere," Squires said.

The API project was completed in March, 2006.

API was not available for comment despite repeated attempts by Computerworld to contact the company.

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More about Australian Pharmaceutical IndustriesAustralian Pharmaceutical IndustriesAustralian Securities ExchangeBusiness ObjectsErnst & YoungErnst & YoungKPMGLawsonLawson Software AustraliaLawson Software Australia

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