Dimitar Glavchev to the World Bank: Local Authorities’ Administrative Capacity Needs to Be Strengthened

Strengthening the administrative capacity of local authorities is essential, particularly in smaller municipalities, so that municipal administrations can better serve their citizens and reduce the irregularities and non-compliance issues identified by the Bulgarian National Audit Office in the course of its audits. This would also enable local authorities to manage municipal debt more effectively, as this process is closely linked to the management of all other municipal activities. Within the scope of their mandate, the auditors of the Bulgarian National Audit Office make every effort to support municipal administrations through their audit work.

The statement was made by the President of the Bulgarian National Audit Office, Dimitar Glavchev, during a meeting with Ms Isabella Barati, Head of the World Bank mission assessing municipalities’ administrative performance and capacity under the Municipal Administrative Performance and Capacity Assessment Framework (MAPCAF) project and examining the credit climate for municipalities.

Dimitar Glavchev pointed out that the Bulgarian National Audit Office conducts audits of almost all municipalities in Bulgaria. Under the annual audit programme, 249 financial audits of municipalities' annual financial statements for the previous year were carried out in 2025, while 251 such audits are planned for 2026, out of a total of 265 municipalities in the country. In addition, compliance audits of municipalities have been carried out to assess whether decisions taken by municipal administrations comply with the applicable legal framework. The scope of these two types of audits also includes the processes related to the incurrence, management and reporting of municipal debt, as well as the implementation of investment projects.

The President of the Bulgarian National Audit Office pointed to two particularly significant weaknesses identified in the work of municipalities. One of them is the exceeding of the debt limit established under the Public Finance Act, according to which the annual amount of debt payments of each municipality may not exceed 15 per cent of the average annual amount of its own-source revenues and the general equalisation subsidy received over the preceding three years. In some municipalities, the amount of such payments reaches 70 per cent, with old debts being refinanced through new borrowing, thus creating a debt spiral. According to the President of the Bulgarian National Audit Office, another serious problem is the very low tax collection rate in many municipalities, which is an important factor both for increasing revenues and for complying with this threshold.

When violations of budgetary discipline are identified, the Bulgarian National Audit Office notifies the competent authorities – the Ministry of Finance and the Public Financial Inspection Agency – including in cases related to the management of municipal debt. Where there are indications of criminal offences, the institution refers the matter to the Prosecutor's Office.

The Bulgarian National Audit Office submits its municipal audit reports both to mayors and municipal councils, as well as to the National Association of the Municipalities in the Republic of Bulgaria.

The meeting was also attended by Teodora Bakardzhieva-Lyutskanova and Pavlina Mihaylova, Chief Audit Methodologists at the Cabinet of the President of the Bulgarian National Audit Office. They outlined other irregularities and problems identified during audits in relation to the incurrence, management and reporting of municipal debt. These included poor management of municipal property; insufficient communication with local communities regarding the appropriateness of projects financed through borrowing; inadequate transparency and public disclosure in relation to all debt-related activities; the incurrence of debt later than 39 months after the beginning of the term of office of the municipal council; violations related to the provision of municipal guarantees; and a formalistic approach to investment projects, with the focus placed on the absorption of funds rather than on the achievement of results.

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MAPCAF has been developed in cooperation with the Ministry of Finance to support the Government’s objectives of strengthening local capacity in the areas of public finance, investment management and human resource management.