Challenges Faced by Local Government Units in the Use of EU Funds

Abstract

This article examines the main challenges faced by local government units
(LGUs) in Croatia in the process of absorbing funds from the European Un
ion. The research is based on a thematic analysis of interviews conducted with
representatives of local governments and business consultants from all Croatian
regions, ensuring comprehensive territorial coverage and capturing the diversity
of local governance experiences in terms of administrative capacity, levels of
development, and geographical distribution. The findings are organized into
thematic categories according to their frequency and significance within the re
search context. Four key challenges are identified: (1) limited human capacity,
(2) financial sustainability, (3) administrative complexity, and (4) political
influence. Limited human capacity emerges as a particularly critical issue, as
many local administrations struggle to attract and retain qualified professionals
with expertise in project management and EU funding procedures. Financial
sustainability represents an additional obstacle, particularly for smaller and less
developed municipalities that face difficulties in meeting co-financing require
ments. Administrative complexity, including demanding regulatory procedures
and bureaucratic requirements associated with EU funding instruments, fur
ther constrains the ability of local administrations to effectively prepare and
implement projects. Finally, political influence continues to shape local deci
sion-making processes, affecting both institutional performance and the alloca
tion of development priorities. The results support theoretical perspectives empha
sizing the importance of administrative capacity and institutional context for the
effective implementation of EU cohesion policy within a multi-level governance
framework. The article contributes to the ongoing debate on the need for compre
hensive reform of the Croatian local government system, arguing that reducing
territorial fragmentation and strengthening local institutional capacities repre
sent key preconditions for improving the absorption of EU funds and achieving
balanced regional development.