Counties and other local government entities increasingly have more documentation and reporting requirements placed on them by state and federal government regulations. This, along with other factors, has put many local governments in a difficult financial situation. Business and larger government entities have begun to use document image processing technology to more effectively reduce costs and provide quality services. Document image processing allows a paper document to be converted to an electronic image that can be retrieved, printed, sent electronically or even retrieved at a distant location in a matter of seconds. The Phase I project surveyed rural county governments to gather necessary information to design a pilot document image management system. The study identified the document type, retrieval and reporting needs of county governments and other factors that will be used to design a document management system. In Phase II the computer software system will be developed and tested in three county offices. Based on the Phase II test results final modifications in the software will be made prior to marketing the product in Phase III .Applications:The Phase II effort will develop a document image processing system to meet the needs of many of the 2,300 rural county governments. The ability to develop the software through the SBIR program would allow the system to be marketed at a cost, $10,000 range for hardware and software, that rural county governments can afford. The package could also be adapted to meet the needs of other small rural local government entities in phase III .