Three quarters of local authorities say they will meet the e-government deadline of 2005 - but more work is needed, warns the Audit Commission.
According to a survey by the Commission, 78 per cent of councils will have all services delivered electronically by 2005.
But councils warn that a lack of IT staff and a culture resistant to change will hold them back.
"This suggests that perhaps the greatest risk is that technology will be sidelined as many do not understand its potential and the benefits it can bring," the report warned.
Most e-projects have only just begun, said the report. Over half of the work has started in the last year, and when asked about their most successful project to date, 18 per cent of e-champions said there has not been one.
"The biggest challenge is to move from talk base to action base," one head of IT was quoted as saying.
One third of projects are focused on developing websites, and putting payments and some services online.
While some councils have made progress in developing transactional websites, many websites still only offer the user an information service.
The Commission also said there is a lack of staff conviction and unclear accountability in some projects: "We also found a lack of clear activity and outcome measures and this was supported by our survey - only 5 per cent of councils cited local targets being used to measure success."
But 40 per cent of chief executives and e-champions think the e-government agenda is too broad to tackle alone, and 61 per cent think it is too costly.
"There is a huge gap in understanding and knowledge about what people want and how things should be done. More research is needed on how to connect with people before we start trying to find solutions," said one council official.
Peter Thomas, director of performance development for the Audit Commission, said: "Some councils are struggling to understand how e-government fits with other priorities, and so for some it feels marginal to improving core services."
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