Financing eGovernment can pose a major challenge for developing countries, especially given the range of needs competing for funding. Accordingly, governments often rely on donor support to launch eGovernment initiatives, and they might explore a range of non traditional funding mechanisms, discussed in the following sections.

Government Funding:

Governments are using a range of mechanisms for funding eGovernment projects. According to a study commissioned by SIDA, primary mechanisms for funding include:

• Central funding - appropriate for initiatives relating to general values (standards/interoperability, openness, transparency, democracy) and value-added services (e.g. security, identification, search)
• Ministry-level financing through normal budget allocation processes - best for projects aimed at service process redesign and capacity building.
  
• Budget guidelines or requirements - central government mandates to ministries and departments to allocate a certain percentage of their budgets to eGovernment.
• Budget offsets through cost saving brought on by greater efficiency; assuming that the computerization of manual processes can save money, it can free up resources that can be re-allocated and used to fund additional eGovernment projects.

Some governments budget for eGovernment on the basis of multi-year action plans, others allocate eGovernment expenditures on a year-to-year basis. Some countries set up special central innovation funds for eGovernment. Some have also set-up incentive funds to support cross-organizational integration. New Zealand, for example, utilizes accrual accounting, performance-based budgeting, and quantitative risk-analysis as financing and management mechanisms for ICT investments, while the UK relies on capital budgeting mixed with innovation funds and incentives for co-ordination. Canada's experience has revealed that central or innovation funds can be effectively catalytic even if they account for only a small portion of total ICT budgets. In particular, such funding mechanisms can be used to fund innovative and high-risk demonstrations that otherwise would not receive funding. See OECD eGovernment Task Force, Seminar on eGovernment, "Strategic Implementation of eGovernment - Summary Record" (June 2002)


Resource:
Practice Notes: Securing Funding by Showing Value in eGovernment

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