Incorrect Presentation of Municipal Capital Investments: Implications for Transparency and Monitoring

Today, GAP Institute published a short analysis “Incorrect Presentation of Municipal Capital Investments: Implications for Transparency and Monitoring”, which raises concerns that municipal capital expenditures are not accurately reflected in the financial reports of the Kosovo Treasury.

Considering the drastic increase in payments for court and enforcement obligations in Kosovos municipalities, mainly arising from collective contracts in education and healthcare, in many cases the Kosovo Treasury has executed these payments from all available budget lines, including those for capital investments. The problem is that these funds are reported in financial statements as capital expenditures, distorting the actual level of public project implementation and preventing accurate monitoring of municipal works.

GAP Institute recommends updating Treasury financial reports with new categories that clearly show spending according to purpose and distinguish actual project expenditures from enforcement-related payments. Additionally, the Ministry of Local Government Administration should review the minimum criteria under the Municipal Performance Grant rules. Many municipalities are being disqualified from the Grant due to unfavorable opinion from the National Audit Office (NAO) on their financial reports—an opinion that primarily arises from expenditures related to enforcement obligations stemming from collective agreements and salary supplements, even though municipalities did not draft the laws or contracts from which these obligations originate. Specifically, since 2024, the current minimum criteria have not adequately reflected the fundamental purpose of the Grant — to support municipalities with better performance — as in practice, they favor only those municipalities with fewer enforcement cases related to collective agreements.

You can read the full analysis by clicking here.