Published by Institute for Territorial Economic Development (InTER)

For the publisher Dragisa Mijacic

Authors Dragisa Mijacic Jovana Jakovljevic Vesela Vlaskovic, PhD

Year 2017

This study was written as a part of the project financed through a U.S. Embassy, Pristina grant. The opinions, findings, and conclusions or recommendations expressed herein are those of the Authors and do not necessarily reflect those of the Department of State.

Local Self-Governments in North Kosovo

TOWERS OF CARDS

August 2017

LOCAL SELF GOVERNMENTS IN NORTH KOSOVO CONTENTS

CONTENTS 1. INTRODUCTION ...... 1 2. LOCAL SELF-GOVERNMENTS IN NORTH KOSOVO: A DODGEBALL GAME ...... 2 2.1 Introduction ...... 2 2.2 Local self-governments in North Kosovo ...... 2 2.2.1 Local self-governments in North Kosovo during the UNMIK administration (1999 – 2008) .. 4 2.2.2 Local self-governments after Kosovo’s declaration of independence ...... 6 2.2.3 Brussels Agreement and the changes in functioning of local self-governments in North Kosovo ...... 8 2.3 Conclusion ...... 11 3. LEGISLATIVE AND EXECUTIVE POWER IN NORTH KOSOVO MUNICIPALITIES – A ROLLERCOASTER IN TURBULENT POLITICAL CIRCUMSTANCES ...... 12 3.1 Introduction ...... 12 3.2 Assembly in the municipalities in North Kosovo ...... 13 3.2.1 Differences in legislation in relation to the Serbian system ...... 15 3.3 Election and responsibilities of the president of the municipality/mayor in the municipalities in North Kosovo ...... 16 3.4 Conclusion ...... 17 4. MUNICIPAL ADMINISTRATIONS IN NORTH KOSOVO – A TWO-HEADED DRAGON IN ONE BODY 18 4.1 Introduction ...... 18 4.2 Comparative analysis of the laws on local self-government in Serbia and Kosovo ...... 18 4.2.1 Local self-government bodies and their competencies ...... 18 4.2.2 Organisation of municipal administrations in Kosovo and in Serbia ...... 20 4.3 Municipal administrations in North Kosovo ...... 21 4.4 Conclusion ...... 25 5. FINANCING LOCAL SELF-GOVERNMENTS IN NORTH KOSOVO – A DANCE IN SUSPENSE ...... 27 5.1 Introduction ...... 27 5.2 System of financing Kosovo’s municipalities ...... 27 5.3 The process of drafting municipal budgets ...... 29 5.3.1 Procedures and deadlines for municipal budget drafting ...... 29 5.3.2 Civic participation in budget proposal drafting ...... 31 5.3.3 Analysis of northern Kosovo municipalities’ budgets for 2016 ...... 31 5.4 Annual financial and audit reports ...... 33 5.5 Conclusion ...... 34

LOCAL SELF GOVERNMENTS IN NORTH KOSOVO ABBREVIATIONS

ABBREVIATIONS

ECLSG European Charter of Local Self-Government of the Council of Europe FRY Federal Republic of Yugoslavia LLSG Law on Local Self-Government NATO North Atlantic Treaty Organization OSCE Organization for Security and Co-operation in Europe SKGO Standing Conference of Towns and Municipalities UN United Nations UNMIK United Nations Mission in Kosovo

LOCAL SELF GOVERNMENTS IN NORTH KOSOVO INTRO

1. INTRODUCTION

Serb-majority municipalities in North Kosovo, Mitrovica North/Kosovska Mitrovica,1 Leposavic, Zubin Potok and Zvecan are facing challenges which go far beyond the framework of local self- governments anywhere in the world. Due to persistent refusal to accept the solutions imposed by the UNMIK administration, and later by the Kosovo Government, these municipalities were placed in the centre of political events, primarily for the purpose of their integration into the constitutional and legal system of Kosovo. As a result, the so-called "institutional hybrid" was created in these municipalities, in which they operate according to the laws of Serbia, UNMIK and Kosovo, in accordance with the possibilities in the given circumstances and the political will of the local authorities.

In this study, the authors give a comprehensive overview of the institutional changes and functioning of local self-governments in North Kosovo since the signing of the Kumanovo Agreement and the arrival of the UNMIK mission. The study consists of four papers, each covering different segments of the functioning of the observed local self-governments in the complex political and institutional circumstances of North Kosovo. Since the papers are published as separate entities, there is a possibility of repeating certain findings and views. In the first paper, a conceptual analysis was provided with a review of events in the development of the local self-government system in North Kosovo since the arrival of the UNMIK mission. The second paper focuses on the legal framework that defines the authorities and responsibilities of the Municipal Assemblies and the Mayor. The third paper presents the work of municipal administrations in North Kosovo, while the fourth paper analyses the financing of local self-governments. Each paper has its own conclusion, so there is no overall conclusion for the overall study. Additionally, each work was given an intriguing title to illustrate the topic and complexity of the circumstances in which the observed local self-government operate.

This study was written as a part of the project financed through a U.S. Embassy, Pristina grant. The opinions, findings, and conclusions or recommendations expressed herein are those of the Authors and do not necessarily reflect those of the Department of State.

1 Mitrovica North was recognised as a separate municipality only after the signing of the Brussels Agreement (2013). In the Serbian system, this municipality is still using the name “Kosovska Mitrovica”, as it was called before the war.

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2. LOCAL SELF-GOVERNMENTS IN NORTH KOSOVO: A DODGEBALL GAME

2.1 Introduction The adoption of the United Nations Security Council Resolution 1244/99, which establishes Kosovo as an international protectorate, created numerous challenges, both positive and negative, and they later had an influence on democratisation, good governance and socio-economic development of the municipalities in Kosovo. Many of those challenges have not been resolved yet, and they are particularly strong in local self-governments in the Serb-majority municipalities in North Kosovo, where there are still different interpretations of the established solutions for legal, institutional and constitutional framework for local self-government units in Kosovo.

The situation was additionally complicated after Kosovo’s declaration of independence, since Serb- majority municipalities in North Kosovo did not recognise the legitimacy of the central government in Pristina. After Kosovo declared independence, local elections in those four municipalities were organised within the legal system of the Republic of Serbia with the results not recognised by the Government of Kosovo and international community. With the signing of the Brussels Agreement in April 2013, the conditions were in place for elections for local self-governments in North Kosovo, which would make these municipalities a part of the constitutional and legal system of Kosovo. However, local elections have not solved crucial problems in the functioning of local self-governments faced by these municipalities since UNMIK Mission arrived to Kosovo.

This paper provides a historical overview of the development of legislative framework for operations of local self-governments in Kosovo since the signing of the Kumanovo Agreement and arrival of UNMIK Mission, with a special focus on the functioning of Serb-majority municipalities in North Kosovo.

2.2 Local self-governments in North Kosovo With the signing of the Kumanovo Agreement and the adoption of the United Nations Security Council Resolution 1244/99, United Nations administrative mission was established in Kosovo, called UNMIK.2 UNMIK was responsible for the establishment of interim local self-government bodies in Kosovo, as well control of their work. As a legal framework, UNMIK used the Constitution of the Socialist Federative Republic of Yugoslavia from 1974.

Following the adoption of the Resolution 1244/99, the governing structures and public administration of the Federal Republic of Yugoslavia (FRY) and the Republic of Serbia were withdrawn at all levels, especially in the communities where the majority of the population was Albanian. However, this was

2 UNMIK - United Nations Mission in Kosovo

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not the case in Serbian communities in Kosovo, where the administration of the Federal Republic of Yugoslavia and the Republic of Serbia (or part of the administration) remained within the structure that was possible to keep under given circumstances. Hence the Serb-majority municipalities in North Kosovo retained the institutional structure, the number of employees and legal continuity with the pre- war period, when they functioned within the legal framework of the Republic of Serbia. In addition, the legitimacy of these institutions is also reflected in the fact that the Federal Republic of Yugoslavia or the Republic of Serbia have never adopted a legally binding document that dissolves state bodies (including municipalities, as well as other institutions and organisations, including public, state owned and social enterprises) in Kosovo, and places them under the authority of UNMIK.

In the meantime, international community and central authorities in Kosovo, dominated by Albanians, whose legitimacy was generally not recognized by Serbs, initiated the process of forming a legal and institutional framework in which local governments in Kosovo would operate later. The genesis of the process of developing the institutional and legal framework of local self-governments in Kosovo can be divided into two periods: 1. The period of constructing a legal and institutional framework during the UNMIK Mission, between 1999 and 2008; 2. The period of constructing a legal and institutional framework after Kosovo’s declaration of independence, since 2008.

Local self-governments with Serb majority in North Kosovo mostly did not participate in this process, nor did they implement in practice the legal and institutional solutions imposed by the international community. Instead, they continued to function within the laws of Serbia where it was possible, creating an institutional “hybrid”3 that is unique to the functioning of local governments in North Kosovo.

The situation with local self-governments in the municipalities with Serb majority in North Kosovo is further complicated by the declaration of Kosovo's independence, when these municipalities cease all forms of cooperation with central authorities in Kosovo. However, the situation is changing significantly after the signing of the Brussels Agreement in 2013, when, pressured by the international community, the Government of Serbia agrees to dissolve local Municipal Assemblies and introduce interim measures in local self-governments operating under the laws of Serbia. Then, for the first time, elections were held for the Municipal Assemblies under the laws of Kosovo throughout the territory, including the Serb-majority municipalities in North Kosovo (Leposavic, Mitrovica North, Zubin Potok and Zvecan).

The following chapters describe different periods in the development of local self-government institutions from 1999.

3 “Hybrid” in the sense that the institutional framework of these local self-governments was created by mixing the Serbian system before the democratic changes (before 2000) and the Kosovo system from the time of UNMIK, in the manner that this institutional form took some elements from each of these two systems, but, by functionality, it is different from other local self-governments operating within one or the other system.

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2.2.1 Local self-governments in North Kosovo during the UNMIK administration (1999 – 2008) The signing of the Kumanovo Military Technical Agreement on June 9, 1999 ended NATO’s4 air campaign against FRY. The Kumanovo Agreement established the conditions for the adoption of the United Nations Security Council resolution 1244, which was adopted the following day by the Security Council. With this resolution, UN Security Council authorizes “…the Secretary-General, with the assistance of relevant international organizations, to establish an international civil presence in Kosovo in order to provide an interim administration for Kosovo under which the people of Kosovo can enjoy substantial autonomy within the Federal Republic of Yugoslavia, and which will provide transitional administration while establishing and overseeing the development of provisional democratic self-governing institutions to ensure conditions for a peaceful and normal life for all inhabitants of Kosovo”.5

In fact, Resolution 1244/99 provided the basis for the establishment of the UN Administrative Mission in Kosovo, also known as UNMIK, with the Special Representative of the Secretary-General to monitor their work. UNMIK adopted regulations (decrees) that regulated the establishment of the legal and institutional framework of the administration in Kosovo. In accordance with UNMIK Regulation 1999/1 on the authority of the interim administration in Kosovo, all legislative and executive authority in Kosovo, including the administration of the judiciary, is vested in UNMIK, as well as the administration of its social and state property owned by the Federal Republic of Yugoslavia or the Republic of Serbia.

The arrival of the UNMIK mission brings a change in the functioning of municipal administration. UNMIK adopted the administration model that prevailed in Kosovo before the conflict, as well as the provisions prescribed by the Rambouillet Agreement on the division of the territory of Kosovo into municipalities. With the Regulation 1999/14, UNMIK appointed municipal administrators in municipalities in Kosovo to control and supervise the functions entrusted to public services and local government bodies, with the right to require that those services or bodies seek their prior approval for initiatives or decisions.

However, as noted earlier, with the arrival of UNMIK administration, the situation in the functioning of municipalities in the Albanian majority areas was significantly different from those in Serb- majority areas. Namely, while the administration of the Federal Republic of Yugoslavia and the Republic of Serbia withdrew from the areas dominated by the Albanian population, it continued to function in Serbian areas after 1999. This is especially the case in the municipalities in North Kosovo, Zubin Potok, Zvecan, Leposavic and in the northern part of Kosovska Mitrovica,6 which continued their work under provisions of the Law on Local Self-Government of Serbia.

4 North Atlantic Treaty Organisation 5 Security Council Resolution 1244 (1999) on situation relating Kosovo, article 10, available at http://bit.ly/2sC10xg 6 At that moment, Mitrovica North was still not a separate municipality

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With the Regulation 2000/13, UNMIK established a legal framework for registration of voters in Kosovo. Since more than two-thirds of the population of the Serb ethnic population left Kosovo after NATO troops arrived, the remaining Serb population was afraid that by participating in the civil registration process, a permanent record of a small number of Serbs in Kosovo will be made. For this reason, Serbian community refused to participate in the census,7 demanding that issues of return, security and freedom of movement be addressed before any census. However, UNMIK ignored the requests from Serbs and continued building Kosovo institutions through regulations that led to the elections and the formation of local self-governments. Thus, in July 2000, UNMIK adopted Regulation 2000/39 on municipal (local) elections in Kosovo and Regulation 2000/43 on the number, names and boundaries of municipalities. According to Article 1.1 of UNMIK Regulation 2000/43 in Kosovo, 30 municipalities were formed.

The same year, UNMIK Regulation 2000/45 on self-government was adopted, which defines municipalities as provisional institutions for democratic and autonomous self-government. The Preamble to this Regulation is in line with the European Charter of Local Self-Government of the Council of Europe (ECLSG),8 where Article 3.1 clearly emphasized the right and ability of local governments for self-government. According to Article 10.1 of Regulation 2000/45, the highest representative body of the municipality is the Municipal Assembly whose members are elected directly in the elections.

In accordance with UNMIK Regulation 2000/45, all municipalities in Kosovo have two bodies (bodies) - legislative and executive. The legislative body is composed of representatives elected directly by citizens in each municipality. The Assembly is the highest representative body of the municipality and represents the basis of the legislative body. The Regulation stipulated that the number of members may be between 17 and 59, and Article 10.2 specified the number of the Assembly members for each municipality in Kosovo. This article stipulated that the Assemblies of Municipalities in Zubin Potok, Zvecan and Leposavic have 17 members. The first terms of office of members was two years, and thereafter each term of office should be four years.

In May 2001, UNMIK adopted Regulation 2001/9, known as the “Constitutional Framework for Provisional Self-Government in Kosovo”. The Regulation played the role of a provisional constitutional and legislative framework for provisional self-government in Kosovo and described the institutions that would be handed for management to the elected leaders and public officials after the elections planned for November 2001. Article 1.3 of this Regulation defined municipalities as basic territorial units.

Functioning of local self-governments regulated through UNMIK Regulations 2000/45 and 2001/9 is not defined clearly enough because there were problems in overlapping of competencies between the central and local levels of government in Kosovo, as well as problems in relations between Municipal Assemblies, Mayors and Chief Executive Officers in municipalities. As a solution to these and other

7 So far, the census has not been organized in the municipalities with Serbian majority in Kosovo, and the population is estimated according to the population figures from before 1999. 8 European Charter of Local Self-Government, Council of Europe, available at http://bit.ly/2tY7zOx

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problems related to the organizational structure and strengthening the accountability of the public administration, UNMIK adopted the Regulation 2007/30, which was an amendment to the Regulation 2000/45. For example, unlike the Regulation 2000/45, which stipulated that the mayor is elected by the Assembly members, Regulation 2007/30 introduced direct elections for the mayors in Kosovo municipalities.. This Regulation also brings changes to the competences of the mayors, especially in the areas of: local economic development, urban and rural planning, development and use of land, enforcement of building permits and control of building standards, environmental protection at the local level, supply and maintenance of public services, and response to emergency situations at the local level. These competences will later be transferred to the Law on Local Self-Government, which was adopted after the declaration of Kosovo's independence.

UNMIK Regulations that established and organized the work of the authorities in Kosovo, including the work of local self-governments, significantly influenced the definition of Ahtisaari's Comprehensive Proposal for the Kosovo Status Settlement (hereinafter: Ahtisaari Plan),9 and they were later also integrated into legal solutions adopted after Kosovo’s declaration of independence.

2.2.2 Local self-governments after Kosovo’s declaration of independence Kosovo declared independence on 17 February 2008. Subsequently, in accordance with the principles of the Kosovo Constitution, the ECLSG and the Ahtisaari Plan, the Assembly of Kosovo adopted the Law on Local Self-Government10 (hereinafter LLSG) as the basic act for the organization and functioning of local self-governments in Kosovo. According to the LLSG, municipalities in Kosovo enjoy a high degree of self-government and encourage active participation of all citizens in the decision-making process of municipal bodies.11 LLSG also takes into account the principles contained in ECLSG. In addition to LLSG, in line with Ahtisaari's plan, the Government of Kosovo adopted a set of accompanying laws that further regulate functioning of local governments, namely the Law on Administrative Boundaries of Municipalities,12 the Law on Local Elections,13 and the Law on Local Government Financing.14

Legislative solutions have defined three categories of competencies of municipalities: original competencies, delegated powers and extended powers for municipalities with majority Serbian population (which are not transferable to another entity). The original competencies of local governments are listed in LLSG and municipalities have the autonomy to decide on their implementation. Delegated powers belong to the group of competencies delegated by central

9 In March 2007, UN Special Envoy for Kosovo Martti Ahtisaari proposed the Comprehensive Proposal for the Kosovo Status Settlement at the UN Security Council session, the so-called Ahtisaari plan. The proposal was not adopted thanks to the Russian veto. However, the authorities in Pristina called for this document when declaring Kosovo's independence, using it as a framework for the Kosovo Constitution. 10 Law no. 03/L –040 on Local Self-Government, available at http://bit.ly/2tyqufg 11 The decentralization process in Kosovo and the creation of the new municipalities, Directorate-general for external policies of the union, European Parliament, 2010, available at http://bit.ly/2hb0JMF 12 Law no. 03/L – 041 on Municipal Administrative Boundaries, available at http://bit.ly/2sLLTov 13 Law no. 03/L – 072 on Local Elections in the Republic of Kosovo, available at http://bit.ly/2sM08K5 14 Law no. 03/L – 049 on Finances of Local Self-Governments, available at http://bit.ly/2rDSwti

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government to local governments. These powers may be taken away from (certain) municipalities if the central government determines that they have no capacity for their good execution.15 Extended jurisdiction for Serb-majority municipalities is part of the decision on the essential decentralization of Kosovo taken from the Ahtisaari Plan. This gives these municipalities a privileged status in deciding on issues important for the sustainability of Serbian communities in Kosovo. However, the law limits the possibility of transferring these extended competencies to other bodies, which may be the subject of changes in the establishment of the Association/Community of Serb majority Municipalities in accordance with the provisions of the Brussels Agreement.

The legal framework also entitles municipalities to have inter-municipal and cross-border cooperation. The municipality is allowed to establish cooperation with other municipalities for the purpose of faster local economic development, greater efficiency and effectiveness in providing services to citizens and other users of municipal services.16 An important aspect of LLSG is that each municipality can transfer its mandate to another municipality for the exercise of competencies for which it has no capacity to carry by itself.

International municipal cooperation is limited only to the administrative and technical aspect, with the exception of the Serb community, which has the right to cooperate with Serbia in the areas of particular importance for the survival of this community.17 However, the law stipulates that partnerships with Serbian municipalities or institutions cannot be made, nor can they interfere and merge the competencies that jeopardize the “sovereignty of Kosovo”. During the negotiations in Vienna, the Government of Serbia argued that education, health care, social protection and cultural heritage in the municipalities with Serbian majority remain under the authority of the Serbian Government and not the Government of Kosovo. However, according to the provisions of the Ahtisaari Plan, which formed the basis of the Constitution of Kosovo, the Kosovo Ministry of Administration and Local Self-Government has the role of supervisory authority over all municipalities in Kosovo.18

According to LLSG, local self-governments in Kosovo have gained greater freedom of action in relation to the central level, thus achieving a certain level of decentralization. However, decentralization takes place in a complex political environment, which includes those that support it, as well as its opponents, and in practice not all the provisions prescribed by law have been implemented (yet). In addition, decentralization was significantly oriented towards the integration of minority communities, with a special emphasis on the integration of the Serbian community in North Kosovo, which boycotted every kind of cooperation with the Kosovo institutions for political reasons. The boycott by the Serb-majority municipalities in North Kosovo also referred to the implementation

15 Organisation and Functioning of Local Self-Government in Kosovo, Ministry of Local Government Administration, 2013, available at http://bit.ly/2rJqHuB 16 The right on inter-municipal cooperation of municipalities (both inside Kosovo and on the international level), and the right on formation and membership in inter-municipal associations are guaranteed in the European Charter of Local Self-Government. 17 Article 30.2 Law no. 03/L – 40 on Local Self-Government, available at http://bit.ly/2tyqufg 18 The decentralization process in Kosovo and the creation of the new municipalities, Directorate-general for external policies of the union, European Parliament, 2010, available at http://bit.ly/2hb0JMF

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of LLSG, as well as other laws of Kosovo, and this is partly the reason why the legal solutions for decentralization have not been applied. The situation in these municipalities has changed significantly after the signing of the First Agreement of Principles Governing the Normalisation of Relations between Belgrade and Pristina, also known as the "Brussels Agreement", signed in Brussels on 19 April 2013, when elections for local institutions were organized for the first time under the laws of Kosovo.

2.2.3 Brussels Agreement and the changes in functioning of local self-governments in North Kosovo The Brussels Agreement, signed by the representatives of the Government of Serbia and the Government of Kosovo, consists of 15 points.19 Organisation of local elections in the municipalities with Serbian majority in North Kosovo is defined by point 11: ''Municipal elections shall be organized in the northern municipalities in 2013 with the facilitation of the OSCE in accordance with Kosovo law and international standards”.

One of the first results of the implementation of the Brussels Agreement was the organisation of local elections in the municipalities in North Kosovo in November 2013. Elections for the Mayor of the newly established municipality of Mitrovica North20 were repeated in early 2014, and by June 2014, the process of constitution of Municipal Assemblies in all four municipalities in North Kosovo was finished (Leposavic, Mitrovica North, Zubin Potok and Zvecan).21

The basis of the Brussels Agreement is the intention to integrate four municipalities from North Kosovo in the constitutional and legal framework of Kosovo, and the elections for local authorities in these municipalities was seen as a necessary condition and a significant step in that process. However, the development of the situation and the circumstances in the field have shown that the process continues to bear many challenges, most of which have not been resolved to date.

The biggest challenge in the municipalities with Serbian majority in North Kosovo remained to be a duality of local self-government system. As mentioned earlier, after the signing of the Kumanovo Agreement and the arrival of the UNMIK mission, local self-governments in Serbian communities in Kosovo, and in particular in the four observed municipalities in North Kosovo, maintained legal and institutional continuity with the pre-war period. In support of such activities, all these years, the

19 Brussels Agreement, available at http://bit.ly/2sZmwLN 20 The municipality of Mitrovica was formed in 2013 after the first local elections under Kosovo laws in North Kosovo. Prior to that, there was a UNMIK administration in Mitrovica North, which was operational by the end of 2012 when it was closed, due to the alleged lack of funding. Immediately before the closure of the UNMIK Administration, the Government of Kosovo decided to open an Administrative Office in the northern part of Kosovska Mitrovica, which will have the same authority as all other municipalities in Kosovo. Thus, the UNMIK administration in Kosovska Mitrovica grew into the Administrative Office of Mitrovica North, which was the first step towards the formation of a separate municipality of Mitrovica North. 21 Other municipalities with the majority Serb population in other parts of Kosovo were already operating in the Kosovo system.

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Government of Serbia has been regularly paying salaries to employees in these local self-governments and affiliated municipal companies.

In the period after 1999, the Government of Serbia has changed its position on participation of local self-governments with the majority Serb population in the work of Kosovo institutions several times, as well as the position on the participation of the Serb population in local (and parliamentary) elections.22 After the signing of the Brussels Agreement, in September 2013, the Serbian Government passed a decision to dissolve local Assemblies in four municipalities in North Kosovo. This decision introduced provisional measures and the appointed presidents and members of the Provisional Authorities were appointed to manage affairs in the area of competence of local self-governments in these municipalities. Under the laws of Serbia, the President of the National Assembly is obliged to call elections within the municipalities in which the Municipal Assembly is dissolved within two months, but this did not happen in these four municipalities.23 Instead of organizing local elections under its own laws, the Government of Serbia actively advocated the participation of citizens of the four municipalities in North Kosovo in the local elections organised by the Government of Kosovo, in accordance with the principles agreed within the Brussels Agreement.

Except in the case of the municipality of Zubin Potok, the elected mayors in the other three municipalities are not the same persons as the presidents of the Provisional Authorities previously

22 For example, according to the recommendation of the Government of Serbia, the local population boycotted local elections in Kosovo organized by UNMIK and OSCE in 2000. Having in mind that by doing this, local self-governments in the areas with Serb majority were left without representatives of local authorities, the agreement between UNMIK and the Government of Serbia found a solution in appointing representatives of local assemblies to manage local self-governments for a period of two years, but without influence on local budgets because the management of local finances in these municipalities remained in the hands of UNMIK. At the same time, with the appointment of representatives of the Serb community who will participate in the work of the Municipal Assemblies by UNMIK, the Government of Serbia dissolves the Assemblies in these municipalities and introduces interim measures headed by the Provisional Bodies that were most often the same persons as the nominated representatives by UNMIK. After two years (in 2002), UNMIK and OSCE organised a new cycle of local elections where the Government of Serbia invited the local population to take part, and later recognizes the legitimacy of the elected bodies that manage the municipalities either under the UNMIK system or by the system of the Republic of Serbia . However, in the following local elections organised in 2007, the Serbian government did not support the participation of the Serbian population, and the boycott of elections was particularly successful in four municipalities in North Kosovo. The authorities in these municipalities are the mayors elected in the 2002 elections. Kosovo declared independence in 2008, which was not recognised by Serbia, so local government representatives from North Kosovo boycotted every contact with government representatives in Pristina. On the other hand, in 2008, Serbia organised local elections throughout its territory, including Kosovo. This was the first (and last) time since 1999 that Serbia organised (local) elections in Kosovo. The representatives of the self-government in charge of the municipalities in North Kosovo were elected then, but their legitimacy was not recognised by the international community or the Government in Pristina. In the following election cycle, in 2012, Serbia also called the regular local elections that were supposed to be organised in North Kosovo, but this did not happen due to the pressure of the international community on the Government in Belgrade. 23 Situation is the same in other municipalities with Serb majority in Kosovo, which operate within the system of the Republic of Serbia, and also with provisional measures in place for years.

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appointed by the Government of Serbia.24 The division of power between elected mayors and the Provisional Authorities is particularly strong in the municipality of Leposavic, where there was a political conflict after the elections between the persons and structures that govern the municipal authorities in the system of Kosovo and the Serbian system.

Municipalities in North Kosovo face the problem of establishing functional and efficient local government bodies. Namely, these local self-governments did not participate in capacity building programs and reforms of municipal administrations in Kosovo organised with the support of international organizations during the UNMIK mission, but also later. These municipalities were also not included in the reform processes that took place (or are still taking place) in Serbia, nor are they included as members of the Standing Conference of Towns and Municipalities (SKGO) - the Association of Municipalities in Serbia, which is actively working to improve the capacity of municipal administrations.25 At the same time, municipalities from North Kosovo are also not included in systemic solutions for the implementation of some important laws in Serbia,26 which sends a clear message that legal solutions from Serbia are selectively applied in case of these municipalities. From all this, it can be concluded that local governments in North Kosovo (operating under the laws of Serbia) represent institutional hybrids, where solutions are implemented as the only possible option in the given circumstances, and that they are significantly different from other municipalities in Serbia by their functionality and capacity.

Elections in North Kosovo have not led to the (full) implementation of Kosovo laws, but the elected leaders have discretion to choose which legal solutions will be applied and which will not. For example, municipalities in North Kosovo have adopted the Statutes of municipalities that are in line with the law and verified by the Ministry of Administration and Local Self-Government. However, even after almost four years, the municipalities have not established departments, as defined in their Statutes.

The specificity in the functioning of the municipalities in North Kosovo (according to the Kosovo system) is also reflected by the process of drafting the budgets of local self-governments for 2015. All municipalities in North Kosovo have dropped out the items for education and health from the budget proposal, although these areas must be in the budget of local self-governments under Kosovo legislation. Municipalities have justified such a decision with the intention that financing of health

24 Only in the municipality of Zubin Potok, the appointed President of the Provisional Authority is also the selected Mayor, which is why this municipality is politically most stable of all four municipalities in North Kosovo. 25 For example, by adopting the new Constitution of the Republic of Serbia (2006) and changing the legislation regulating the work of local self-government units, with the help of the line ministry and SKGO, the majority of municipal administrations in Serbia significantly changed their structure and method of operation in relation to the period prior to democratic changes in Serbia, by forming new departments and professional services to perform activities in accordance with the Law. Municipalities in North Kosovo did not participate in these processes, so their administrations remained in the same form as before 1999. 26 For example, municipalities from North Kosovo are not included in the Serbian Government's electronic system for issuing building permits, which prevents the issuance of building permits by these municipalities on the basis of the Law on Planning and Construction of the Republic of Serbia.

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care and education will be the responsibility of the future Association/Community of Serb majority Municipalities, whose formation is also provided for in the points of the Brussels Agreement.

It should also be noted that the municipality of Mitrovica North, formed through the process of Brussels negotiations, faces the challenge of the lack of physical space for the adequate work of the Municipal Assembly and municipal services. However, the construction of a new administrative building of the municipality of Mitrovica North is underway with the financial support of the European Union, and the completion is expected in 2018.

2.3 Conclusion Since 1999, the system of local self-governments in the Serbian communities in North Kosovo has been followed by numerous challenges, primarily political, because immediately after the war, the atmosphere was created making these municipalities the last bastion of defence of the institutions of Serbia in Kosovo. The burden that these municipalities carry goes far beyond the frameworks in which other local governments operate in Kosovo, or anywhere in the world. Hence the legal and institutional solutions created in Kosovo after 1999, both by UNMIK, during the mediation of Martti Ahtisaari for the settlement of the status of Kosovo, and by the Kosovo Government after the declaration of Kosovo's independence, have not been sufficiently acceptable to the Government of Serbia, and therefore to the local authorities in these municipalities.

As a consequence, there is a resistance of local officials in the implementation of legal solutions from Kosovo, as well as the problem of the functionality and efficiency of these local self-governments due to the lack of reforms and the lack of operational capacities of their administrations.

Signing and implementation of the Brussels Agreement resulted in the introduction of provisional measures in these municipalities by the Government of Serbia, and later in the organisation of elections under the laws of Kosovo. However, this did not solve problems at the local level. They only got a different form, and by their complexity, they are not at all behind the situation that existed before the signing of the Brussels Agreement. In all likelihood, this situation will last until the establishment of the Association/Community of Serb majority Municipalities, which is included in the Brussels Agreement, and which has not yet been initiated, but it is the subject of political turmoil between politicians and representatives of the authorities in Belgrade and Pristina.

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3. LEGISLATIVE AND EXECUTIVE POWER IN NORTH KOSOVO MUNICIPALITIES – A ROLLERCOASTER IN TURBULENT POLITICAL CIRCUMSTANCES

3.1 Introduction A system of local self-governments in which Serb-majority municipalities in North Kosovo have been operating after the war and the arrival of UNMIK is like a rollercoaster,27 which surprises you with a free fall and a sudden change of direction, but it always goes back to the beginning, where the ride started. Namely, Serb-majority municipalities in North Kosovo retained the institutional structure that existed in Kosovo before 1999, which continued to operate under the laws of the Republic of Serbia even after the signing of the Kumanovo Agreement and the arrival of the UNMIK mission. On the other hand, municipalities have also adopted administrative structures established within the framework of the UNMIK mission, and later the Kosovo Government. In this way, a dual system was created in which the municipalities in North Kosovo operate: one in line with Serbian and the other with Kosovo legislation.

Although it was expected that the implementation of the Brussels Agreement would bring drastic changes in terms of the functioning of local self-governments in North Kosovo, this did not happen. Temporary measures were introduced in municipalities operating under Serbian laws, and presidents of municipalities were replaced by presidents of provisional bodies. On the other hand, local elections were organized as a part of the Kosovo system, when the mayors of these municipalities were elected and the municipal assemblies were constituted under the laws of Kosovo.

Namely, after the signing of the Brussels Agreement in 2013, local elections were held for the first time in the whole territory of Kosovo, including the municipalities in North Kosovo. Serbs are the majority in 10 of the 38 municipalities in Kosovo, and Serb-majority municipalities have extended jurisdiction in relation to the neighbouring municipalities where Albanians are the majority. However, despite the changes resulting from the Brussels Agreement and the organisation of local elections within the Kosovo system, the Serbian Government continued to finance local institutions in Kosovo that continue to provide a large number of services to their citizens within the system of local self- government of Serbia.

Therefore, it can be said that the municipalities in North Kosovo operate in the circumstances that constitute the symbiosis of the two systems, those of Serbia and Kosovo. This paper presents the similarities and differences in the functioning of these two systems in Serb-majority municipalities in North Kosovo. Also, a comparative overview of the laws on local self-government of Serbia and Kosovo has been presented, with particular emphasis on the competences regarding the functioning of municipal assemblies, and the elections, responsibilities and authority of the mayor.

27A rollercoaster is a type of ride in amusement parks, safe but powerful and fast, with free falls, sudden changes in direction, riding in upside down positions and similar stunts.

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3.2 Assembly in the municipalities in North Kosovo According to the Serbian Law on Local Self-Government28 and Kosovo’s Law on Local Self- government,29 Municipal Assembly is the highest body of local self-governments. As part of the implementation of the Brussels Agreement and the creation of conditions for the organisation of the first local elections within the Kosovo system, in September 2013, the Government of the Republic of Serbia dissolved the Municipal Assemblies in the four municipalities in North Kosovo and introduced provisional measures headed by the Presidents of the Provisional Bodies. Even though according to the laws of Serbia, the president of the National Assembly should announce the elections for councillors within two months of the entry into force of the decision on the introduction of provisional measures and the dissolution of the Municipal Assemblies in local self-government units, this has not happened even after almost four years. Therefore, the municipalities in North Kosovo that operate within the Serbian system continue to function without the elected Assemblies, but are managed by the Provisional Bodies, headed by the Presidents.

On the other hand, in the municipalities of North Kosovo, there is also a system of local self- governments that emerged after the arrival of the UNMIK mission, which was later taken over by the Kosovo authorities. Following Kosovo's declaration of independence, this system was not applied in four northern municipalities, but the situation changed with the signing of the Brussels Agreement when the conditions for the organisation of local elections were created. Municipal councillors were elected and Municipal Assemblies were formed at the local elections. Also, new municipal statutes were drafted, which were verified by the Ministry of Administration and Local Self-Government of Kosovo. Municipal Assemblies in North Kosovo are rare examples of institutions that operate only under Kosovo's laws, and not Serbian, so the operation of these institutions will be analysed only in the Kosovo system.

The Municipal Assembly has the authority to pass the statute, the rulebook, municipal regulations and any other legislation that are necessary for the efficient functioning of the municipality (Article 12 of the Law on Local Self-Government of Kosovo). Members of the Municipal Assembly, the councillors, are elected by citizens in local elections, and their term is four years (Article 37). There is a gender clause in local elections that promotes gender equality (one in three councillors in a political body must be female).

The number of councillors in the Assemblies is proportional to the population of the municipality, so depending on the population, Assemblies may have 15 to 41 councillors. The exception is the Municipal Assembly of the city of Pristina, consisting of 51 councillors (Article 36). All four municipalities in North Kosovo have an equal number of councillors in the Assembly (19 each). According to the official estimates and data of the OSCE Mission in Kosovo,30 the municipality of

28 "RS Official Gazette", no. 129/2007, 83/2014 and 101/2016 29 Law no.03/L – no. 040 on Local Self-Government, available at http://bit.ly/2tyqufg 30 OSCE Mission in Kosovo

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Mitrovica North has 29,460 inhabitants31 and thus, according to the Law on Local Self-government of Kosovo, it should have 21 councillors. However, Pristina's central authorities do not recognize population data, but they have their estimates, and according to those, much less people live in this municipality. Municipal Assembly elects the president by secret ballot of councillors. In order to become president, a candidate councillor should receive more than half of the votes of the total number of elected councillors (Article 41). In the municipalities where more than 10% of the population is from non- majority communities according to the last census, the Assembly must also have a deputy president for communities (Article 54). For this position, the Assembly appoints councillors from the non-majority community with the most votes in the elections. (Article 54)

Municipalities are obliged to have at least 10 assembly sessions annually, of which 5 should be scheduled in the first six months (Article 43.3). According to the report of the Ministry of Administration and Local Self-Government on the functioning of municipalities in Kosovo, in 2016, all the municipalities in North Kosovo fulfilled the legal obligation on the number of regular sessions held by Municipal Assemblies. The municipalities of Mitrovica and Leposavic have exceeded the number of ten assembly sessions in the past year.32

The Assembly sessions are open to the public and all interested parties are permitted to follow and participate in the work of the sessions, in accordance with the provisions of the Rules of Procedure. In North Kosovo, monitoring of the Assembly's sessions and their duration vary between municipalities. For example, the sessions of the Municipal Assembly of Leposavic last for a long time, and due to the existence of a strong opposition, the discussions are dynamic and often on the verge of verbal conflict. The session of the Leposavic Municipal Assembly is recorded by local television and the public is significantly informed about their work. On the other hand, in Zubin Potok, municipal assembly sessions are short and rarely attended by the media or citizens.

All Municipal Assemblies have an obligation to form a Politics and Finance Board and a Community Board. The Politics and Finance Board is responsible for proposing municipal budget, participating in its drafting, adopting the final account, reporting to the Assembly on the financial situation of the municipality and all issues related to the financing of the municipality and the adoption of guidelines for the work of the Assembly. This Board must reflect the composition of the Assembly and it is chaired by the President of the Assembly (Article 52.1). The Community Board is composed of councillors and representatives of non-majority communities. The Board is authorised to ensure respect of the rights and interests of minority communities on the territory of the municipality, as well as to promote the cultural, ethnic and religious identity of communities (Article 53.2).

Both local self-government systems (Kosovo and Serbian) are mainly conducted in the same administrative buildings. The only exception is the newly formed municipality of Mitrovica North which does not have an adequate space for the work of its bodies. However, this problem will be

31 Municipal profile – Mitrovica North, Organization for Security and Co-operation in Europe (OSCE), Mission in Kosovo, available at http://bit.ly/2dHGdoL 32 Izveštaj o funkcionisanju opština, januar – decembar 2016, Ministarstvo administracije i lokale samouprave, available at http://bit.ly/2rC0zXq

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solved with the financial support of the European Union, which has allocated funds for the construction of a new municipal building.

3.2.1 Differences in legislation in relation to the Serbian system There are some differences in the functioning of the Assembly between the Kosovo and Serbian legislation. Although they are not significant in terms of the functioning of Municipal Assemblies, it is important to list them. One of the differences relates to the number of councillors in Municipal Assemblies where Serbian laws provides for a greater number of councillors than Kosovo. According to the Kosovo system, the Municipal Assembly of Leposavic has 19 councillors, and while it functioned within the Serbian system, it had 31 councillors. The following table gives a comparative overview of the number of councillors in the Municipal Assemblies in North Kosovo in the two systems.

Table 3.1 Comparative review of the number of councillors in Municipal Assemblies according to the Kosovo and Serbian system Number of councillors according to Number of councillors according Municipality the Kosovo laws to Serbian laws Mitrovica North/Kosovska 19 30 Mitrovica Zvecan 19 27 Zubin Potok 19 31 Leposavic 19 31

There are also visible differences in the number of Assembly sessions that should be held in the course of one year. According to the laws of Serbia, the Assembly sessions were held at least once every three months, or at least four times a year. According to the laws of Kosovo, the Assembly must hold at least 10 sessions a year, which is considerably more than stipulated by the law in Serbia.

In accordance with the ethnic structure of municipalities, the Kosovo law provides for the existence of the Deputy President of the Assembly for Communities as one of the mechanisms for the inclusion of non-majority communities. For the appointment of the Deputy President, the law stipulates a threshold of 10% of the municipality's population who are members of non-majority communities (Article 54). In the event that this threshold has not been reached, municipalities have the discretion to establish the post of the deputy, if they estimate that this would be useful for the protection of non-majority communities. In the municipalities of northern Kosovo, this position was established in Mitrovica North, Zubin Potok and Leposavic.

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3.3 Election and responsibilities of the president of the municipality/mayor33 in the municipalities in North Kosovo In the municipalities that operate under Kosovo laws, the executive authorities are the mayors directly elected in the elections, who have their authority and responsibilities defined in the Law on Local Self- Government. Their work is assisted by deputies and advisers appointed by them, whose term of office is related to the mayor's.

The description of the duties of the mayor indicates that he also appoints and dismisses municipal directors, i.e. directors of municipal departments. Although in municipalities in North Kosovo, the mayors have accepted most of the responsibilities that should be exercised as the holders of executive power, due to the specific political situation, some of them are still not easy to implement. This is primarily reflected in the process of establishing a municipal administration, that is, the appointment of directors of municipal departments, which has not yet been completed in all municipalities. Although this is a decision that the mayors should make, it does not depend solely on their will, but also on the municipal budgets that should provide sufficient financial resources for the establishment of a functional municipal administration. The exception is the Municipality of Mitrovica North which has inherited the bodies of the Administrative Office of Mitrovica North which includes seven functional departments.34

Under the Law on Local Self-Government of Kosovo, the Mayor is obliged to report on the economic and financial situation and implementation of municipal investment plans at regular time intervals, at least once in 6 months, or when required by the Municipal Assembly (Article 58). Whenever they deem it necessary, the councillors have the right to request a report on the work of the executive authority. For this reason, the presence of the Mayor is necessary during the sessions of the Assembly.

The Ministry of Administration and Local Self-Government of Kosovo has conducted the monitoring process of the municipalities in relation to the obligation of the Mayor to submit a report to the Municipal Assembly, especially on the economic and financial situation in 2016. The monitoring has shown that the municipalities in North Kosovo have fulfilled this legal obligation, because during the year, the mayors reported to the Municipal Assembly twice35 and showed a high degree of responsibility and cooperation that enables the complementarity of the functioning between the two bodies, the Assembly and the Mayor.

33There are differences in terminology in the laws on local self-government of Serbia and Kosovo. In the Serbian legislation, the executive body of the municipality is called the president of the municipality, and in the Kosovo law it is called the mayor. Further in the paper, terminology will be used in accordance with the terms used by the relevant laws. Mayor/s for elected leaders under the laws of Kosovo and president/s of the municipality - president/s of the provisional authority for the holders of this function under the laws of Serbia. 34According to the Organogram of the North Mitrovica Administrative Office, these are the following departments: Department of General Administration; Department of Finance, Budget and Economic Development; Department of Public Services, Infrastructure, Inspection and Emergency; Department of Urban Planning, Cadastre and Geodesy; Department of Education, Culture, Youth and Sports; Department of Health and Social Welfare; Department of Local Communities, Return and Public Relations 35 Izveštaj o funkcionisanju opština, januar – decembar 2016, Ministarstvo administracije i lokalne samouprave, available at http://bit.ly/2rC0zXq

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The president of the municipality, as the holder of executive function in the Serbian system, is elected by the Assembly from the members. However, after the introduction of provisional measures by the Government of the Republic of Serbia, the executive power in the municipalities in North Kosovo that operate in the Serbian system is carried out by a provisional body managed by the president, who performs tasks within the competence of the president of the municipality.36

As a consequence of the existence of a dual system, in each of the four municipalities in North Kosovo, there are two representatives of the executive power, the president of the provisional municipal authority, and the mayor. The exception is the municipality of Zubin Potok, where one person holds both functions.

3.4 Conclusion The functioning of local self-governments in the Serb-majority communities in North Kosovo is a reflection of political events in Kosovo after the war, and the institutional resistance of the Serbian community to the creation of an independent Kosovo. As a result, a unique dual system has been created where local self-government bodies work, and where political decisions are often above the established legal solutions.

The Brussels agreement brought a lot of changes in Serb-majority municipalities in North Kosovo, primarily in terms of organizing local elections, electing mayors and establishing Municipal Assemblies. In spite of the lack of adequate working conditions, and in some cases the lack of physical space for the normal functioning of municipal services, local self-governments in North Kosovo have shown a high level of responsibility in the performance of their duties, as can be seen from the report of the line ministry.

However, there are still many problems in the functioning of local self-governments, primarily in the functioning of municipal administrations and the duality in the enforcement of legislation. These problems will probably remain present until the establishment and creation of institutional solutions within the Community/Association of Serb Municipalities.

36 The presidents of municipalities in North Kosovo were replaced after the Government of the Republic of Serbia passed a decision to dissolve their Assemblies in September 2013 and the introduction of a provisional body. The provisional body consists of the president and four members appointed by the Government of the Republic of Serbia. The president of the provisional body performs the function of the president of the municipality

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4. MUNICIPAL ADMINISTRATIONS IN NORTH KOSOVO – A TWO- HEADED DRAGON IN ONE BODY

The system of functioning of municipal administrations in North Kosovo reminds us of a dragon, a mythical two-headed being in one body, where one "head" looks towards Belgrade, and the other towards Pristina

4.1 Introduction Since the signing of the Kumanovo Agreement and the arrival of the UNMIK mission in Serb- majority municipalities in Kosovo, there are two systems of local self-government, one operating in the legal system of Serbia and the other in the legal system of Kosovo. This situation is particularly emphasized in the four municipalities in North Kosovo (Leposavic, Mitrovica North, Zubin Potok and Zvecan) that maintained the same institutional structure from the pre-war period.

The system of organizing local self-governments created by UNMIK, and later the Kosovo Government, never succeeded in operating in full capacity in these municipalities. This did not happen even after the Brussels Agreement (April 2013), when the conditions for organising local elections under the Kosovo laws in these municipalities were set. At the elections, mayors and councillors in municipal assemblies were elected, but very few things have changed at the level of functioning of municipal administrations.

As a consequence, we often encounter duplication of municipal departments, functions and employees in municipal administrations that operate in two separate systems, which creates a confusing picture among citizens when it comes to the competencies of local administration, but also among employees in municipal administrations who are also torn between the two systems. This whole situation also affects the transparency, efficiency and accountability of municipalities in the performance of public functions under their jurisdiction.

This paper will give an overview of the competencies and system of organizing municipal administrations within the Serbian and Kosovo systems in Serb-majority municipalities in North Kosovo. A comparative analysis of the laws on local self-government in Serbia and Kosovo has also been provided, where similarities and differences between the two systems are highlighted.

4.2 Comparative analysis of the laws on local self-government in Serbia and Kosovo

4.2.1 Local self-government bodies and their competencies Laws regulating the operation of local self-governments in Serbia and Kosovo are in line with the European Charter of Local Self-Government of the Council of Europe, so they are very similar because they provide for the same or similar competencies of municipalities. However, due to

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different legislation and institutional development, to a certain extent, these laws are also different.37 Table 4.1 gives an overview of differences in terminology between the Laws on Local Self- Government of Serbia38 and Kosovo.39

Table 4.1 Comparative overview of differences in terminology in the Laws on Local Self-Government Law on Local Self-Government of Serbia Law on Local Self-Government of Kosovo President of the municipality Mayor Head of municipal administration Chief of staff Head of department Director of department Source: comparative analysis of laws on local self-government of Serbia and Kosovo

Both laws define the municipality as the basic local self-government unit. In Serbia, the municipal bodies are (Article 27 of the Law on Local Self-Government of Serbia): municipal assembly, president of municipality, municipal council and municipal administration. The Municipal Assembly is the highest body of the municipality that performs the basic functions of the local authorities, as defined by the Constitution, the law and the statute of the municipality (Article 28, ibid.). The executive body of the municipality consists of the president of the municipality40 and the municipal council (Article 42, ibid.). The president of the municipality is elected by the assembly from the councillors, by a majority of votes, and the term of office is four years (Article 43, ibid.). The municipal council consists of the president of the municipality, the deputy president of the municipality, as well as the members of the municipal council whose number is determined by the statute of the municipality, and who are elected by the municipal assembly by a majority of votes for a term of four years (Article 45, ibid.). The competencies of the municipal assembly, the president of the municipality, and the municipal council are described in the law on local self-government and in the statutes of the local self-government units.

In Kosovo, municipal bodies are composed of a municipal assembly and a mayor (Article 10 of the Law on Local Self-Government of Kosovo). The Municipal Assembly is the highest representative body of the municipality and it consists of its elected members. The Assembly adopts acts within its competencies, which are defined by the Constitution, laws and the statute of the municipality. The

37 It is important to mention that translation of Kosovo’s laws to Serbian is not sufficiently accurate, which makes their interpretation and implementation more difficult. 38 Law on Local self-Government, “RS Official Gazette”, no. 129/2007 and 83/2014, available at http://bit.ly/2gbtx7t 39 Law no.03/L – no. 040 on Local self-Government, available at http://bit.ly/2tyqufg 40 Law on Local Self-government of Serbia makes a difference between cities and municipalities. Cities are self- government units with a population of more than 100,000 (in special cases they can have a population of less than 100,000) and the executive function is performed by the mayor. Local self-government units with the population of less than 100,000 are municipalities, and the executive function is performed by the president of the municipality. According to the Law on Territorial Organisation (“RS Official Gazette”, no. 129/2007 and 18/2016, Article 28), in the territory of Kosovo (and Metohija) there are 29 local self-government units, including 28 municipalities (Vitina, Vucitrn, Glogovac, Gnjilane, Gora, Decani, Djakovica, Zubin Potok, Zvecan, Istok, Kacanik, Klina, Kosovska Kamenica, Kosovska Mitrovica, Kosovo Polje, Leposavic, Lipljan, Novo Brdo, Obilic, Orahovac, Pec, Podujevo, Prizren, Srbica, Suva Reka, Urosevac, Stimlje and Strpce) and one city (Pristina).

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Mayor is the highest executive body of the municipality elected in direct elections (Article 56, ibid). The Mayor also has the right to issue instructions and decisions in accordance with his/her authority and responsibility (Article 13, ibid.). Unlike Serbia, where there is a municipal council, in Kosovo, the mayor has all the executive power, but is assisted by the deputy mayor (appointed by the mayor). In municipalities where at least ten percent of citizens belong to non-majority communities, representatives of minority communities will have one deputy mayor in charge of communities (Article 61, ibid.).

The difference in legislation between Kosovo and Serbia is also reflected in the competencies in health care and education, where municipalities in Kosovo have much more authority than municipalities in Serbia. Consequently, municipal administrations in Kosovo have established departments dealing with these sectors, which is not the case in Serbia.

Based on a comparative analysis of the laws in Serbia and Kosovo, it can be concluded that the mayors of Kosovo municipalities have significantly more power than the holders of executive functions (presidents of municipalities) in the Serbian system, while in the Serbian system the authority of municipal assemblies is greater than in case of Kosovo.

4.2.2 Organisation of municipal administrations in Kosovo and in Serbia Municipal administration in Kosovo is organized by departments headed by a director appointed by the Mayor (Article 62 of the Law on Local Self-Government of Kosovo). Directors manage their departments in accordance with the strategic and political decisions of the Mayor, in accordance with the laws, the statute and other relevant acts. Municipal administration is comprised of employees in the municipality and elected persons (mayor, deputy mayor, department directors, president and deputy president of the municipal assembly and councillors). Municipal administration has a chief of staff who is equivalent to the head of the municipal administration according to the Law on Local Self-Government of Serbia. However, the Kosovo Law did not precisely define the competencies of the municipal administration, as is the case in the Serbian Law.

The difference between the two laws is in the election of the head of the municipal administration, that is, the chief of staff. In Serbia, it is specified that a person with a law school degree, with an exam for work in state administration bodies and at least five years of work experience in the field can be appointed for the position of the head of municipal administration (Article 54 of the Law on Local Self-Government of Serbia). This person is elected by the Municipal Council on the basis of a public vacancy, for a period of 5 years (Article 56, ibid.).

According to the Law of Kosovo, the Mayor announces a vacancy for the Chief of Staff (Article 66.3 of the Law on Local Self-Government of Kosovo), in accordance with the applicable Law on Civil Service, which states that employment in such a position is carried out in accordance with the principles of “competence, impartiality, equal conditions, non-discrimination and equal representation, through a public competition and after confirming the candidates' ability to work” (Article 11 of the

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Law on Civil Service of Kosovo).41 For their work, Chief of Staff in Kosovo is directly responsible to the mayor, but not to the assembly (and the municipal council), as is the case in Serbia.

Municipal administration in the Serbian system is also organised by departments. The differences are, however, noticeable in the appointment of the heads of departments (in Serbia) or directors of departments (in Kosovo). In Serbia, local self-government units with over 50,000 inhabitants can organize several municipal administrations, that is, they can train municipal administrations in certain sectors (Article 53 of the Law on Local Self-Government of Serbia). Municipal administration is managed by the head, whether it is a single municipal administration or a number of municipal administrations (Article 55, ibid.). Municipal councils are appointed by the head of municipal administration in a public call (Article 56, ibid), and in accordance with qualifications defined by the Law (Article 55, ibid.). The Rules on Internal Organisation and Job Classification of Municipal Administrations is adopted by the Head of Municipal Administration, with the approval of the Municipal Council, and the Head also appoints the managers within the organizational units in the municipal administration (Article 59, ibid.).

4.3 Municipal administrations in North Kosovo Municipal administrations in North Kosovo have retained the same pre-war institutional form, and UNMIK's efforts to form a different structure of municipal departments have not had significant results. After the declaration of Kosovo's independence, the municipalities in the north refused to cooperate with the central authorities in Pristina, and consequently there were no changes in the form of municipal administrations in accordance with Kosovo's legislation. Therefore, the municipal administration system in these municipalities differs significantly from other municipalities in Kosovo, as well as from municipalities in Serbia. Following the democratic changes (2000), there were significant reforms of local self-governments in Serbia, including the reform of municipal administrations, and those processes excluded municipalities in North Kosovo.

After the signing of the Brussels Agreement (2013), the Serbian Government introduced provisional measures in the municipalities in North Kosovo, and appointed the Provisional Bodies, headed by the presidents, in charge of managing municipal affairs, including the management of municipal administrations. On the other hand, local elections were organised under the Kosovo laws, where the mayors and councillors in municipal assemblies were elected.

However, the election of officials did not bring significant changes on the level of functioning of municipal administrations, since the institutional structures remained the same as in the period after the Brussels Agreement, with the existence of a dual administration - one operating within the Serbian and the other within the framework of Kosovo’s legislation. Both municipal administrations operate in the same premises (except Mitrovica North where the Administrative Office took over the function of municipal administration) and a part of the employees perform duties (the same or different) from both systems.

41 Law no.03/L – no. 149 on Civil Service of Kosovo, available at http://bit.ly/2gSqFR5

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After local elections (2013), the Municipal Assembly was constituted and new statutes of municipalities were adopted, which were verified by the Ministry of Administration and Local Self- Government of Kosovo. When adopting the statute, there was a problem with the selection of the symbols of these municipalities (coats of arms, seal, emblem and flag), where it is stipulated that they are defined by a special procedure and a two-thirds majority at the municipal assembly session. However, even four years after the adoption of the statute, there was no definition of the symbols of these municipalities, which is a good indication of how sensitive this topic is. As a transitional solution, it was agreed that municipalities in the north use seals from the period when local self- governments were under the control of UNMIK.

According to Kosovo’s legislation and statutes of municipalities, the municipal administration is organized by departments. Departments are, furthermore, organized by sections, whose job description is defined in a special act of the Mayor. Since departments have not been formed, the mayors of these municipalities have not yet adopted acts defining the number and description of the jobs performed by the sections. Table 4.2 Overview of departments in municipal administrations in North Kosovo

Number of departments in Number of departments in Municipality municipalities by the system municipalities by the system of Serbia of Kosovo Kosovska Mitrovica / Mitrovica North 7 16 Zvecan 3 13 Zubin Potok 4 15 Leposavic 5 15 Source: Statutes of local self-governments in North Kosovo by Serbian and Kosovo’s system

The number of units according to Kosovo’s system is much higher than it was in the Serbian system (Table 4.2). However, after the election, not all departments of municipal administrations were established, as stipulated by the statute, and the reasons are numerous - from the lack of budget funds to the resistance of holders of public functions, primarily the mayors, to execute the task.

The exception is the newly formed municipality of Mitrovica North, which inherited the Administrative Office42 of Mitrovica North which has become an essential part of the municipal administration of this local self-government. That is why the municipality of Mitrovica North is the

42 Administrative office was established in 2012 in accordance with the Comprehensive Proposal for the Kosovo Status Settlement, known as the Ahtisaari Plan. Point 13.5 of the Comprehensive Plan indicates that during the 120 day transition period, Special Representative of the Secretary General (SRSG), shall, in coordination with the International Civil Representative, “create provisional municipal structures for the new municipality of Mitrovice/Mitrovica North… which shall be under the authority of the CIR, until the time of the first local elections in that municipality.” The Government of Serbia and Serbs from Kosovo have not accepted the Maarti Ahtisaari’s Comprehensive Proposal, and accordingly, they have not accepted institutional solutions from the Proposal, including the Administrative Office of Mitrovica North. After the signing of the Brussels Agreement and organisation of local elections in the municipality of Mitrovica North, Administrative Office became a part of the municipal administration of this local self-government. With this, the issue of employees in the municipal administration which operated in Mitrovica North (Kosovska Mitrovica) before the Brussels Agreement within the Serbian system remains unclear.

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only municipality in North Kosovo with a municipal administration that functions under the Kosovo’s system and provides services to citizens in accordance with the Kosovo’s legislation. There are currently seven departments within this municipal administration, and the plan is to set up nine more departments (a total of 16), as defined by the statute of this municipality.

In the other three municipalities (Leposavic, Zvecan and Zubin Potok), the functioning of municipal administrations is mainly based on activities related to the application for finance from available funds in order to develop municipalities. This work is mainly done by the mayors with their assistants and finance and public procurement officers. Bearing in mind that the process of forming departments in these municipalities has not been completed, other employees are mostly unassigned to their duties.

One of the biggest challenges in the process of forming municipal administrations by the system of Kosovo, i.e. the establishment of municipal departments, is in the fact that the number of jobs in the municipalities under the Kosovo’s laws is much lower than those currently provided in municipal administrations operating under the Serbian system. Consequently, a significant number of workers in the existing municipal administrations would lose jobs because municipal budgets do not provide funds for their salaries. Therefore, resolving this problem requires a more comprehensive approach that no one currently wants to deal with, neither the Government in Pristina nor the Government in Belgrade, and especially the mayors (or the presidents of provisional authorities) in these municipalities.

Municipal administrations that functioned under the laws of the Republic of Serbia until the signing of the Brussels Agreement and the organisation of local elections (until 2013) continued to exist in a form that is possible under the circumstances. As for operations, these municipal administrations carry out the original and delegated responsibilities defined in the Law on Local Self-Government of Serbia. As noted earlier, these municipal administrations are managed by the Provisional Bodies, headed by the presidents appointed by the Government of Serbia. The Serbian government also continued to pay salaries to employees in these municipal administrations. However, it must be noted that these municipal administrations are not able to exercise all competencies from the Serbian system of local self-governments because many legal solutions in Serbia do not foresee enforcement in the territory of Kosovo. Thus, for example, a unified system for electronic submission of requests for building permits which is in place in municipalities in Serbia, does not include the municipalities in North Kosovo.

As noted earlier, municipalities in Kosovo have broader powers in the field of education and health care than those in the Serbian system. For this reason, municipal administrations in Kosovo have departments that perform jobs in these sectors. However, it turned out that the establishment of these departments in the municipalities in North Kosovo is not so easy as education and health care are planned to be under the jurisdiction of the Community/ Association of Serb Majority Municipalities, the establishment of which has not yet started, although it is foreseen by the Brussels Agreement from April 2013.

In the education sector, the competencies of municipalities relate to the provision of public preschool, primary and secondary education, as well as the registration and licensing of educational institutions, employment, salaries and training of instructors and education administrators (Article 17 (h) of the

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Law on Local Self-Government of Kosovo). The municipality of Mitrovica North has expanded competencies in university education, and it is authorised to provide university education, including the registration and licensing of educational institutions, employment of teaching staff, payment of salaries and training of teaching and administrative staff (Article 21, ibid.). This legal solution entitles the municipality of Mitrovica North to establish a university, which seems to be the possibility of legalizing an existing state university functioning within the education system of Serbia.43

According to the laws of Kosovo, the municipality of Mitrovica North also has extended competencies in the provision of secondary health care, which makes it authorised to provide secondary health care, including the registration and licensing of health institutions, the employment of health workers, payment of salaries and training of health workers and those employed in the administration (Article 20, ibid). This legal solution can be interpreted as part of the solution for the status of the Clinical Centre Kosovska Mitrovica, which operates within the legal system of Serbia. The other three municipalities (Zvecan, Zubin Potok and Leposavic) have extended competencies in the provision of primary health care, including the employment of health workers, the payment of salaries and training of health workers and those employed in the administration.

An interesting novelty is that in the statutes of the municipalities of Mitrovica North, Zvecan and Zubin Potok there is a department for European integration. A similar solution was also introduced in the municipality of Gracanica, which established a department for European integration and economic development. However, in Gracanica, this department was renamed to the Centre for Economic Development with the task of strengthening the municipality's economy by providing support to existing business entities, as well as providing support for the establishment of new ones. It remains to be seen whether similar practices will be established in municipalities in North Kosovo.

Budgets of local self-governments in North Kosovo operating under the Kosovo system is divided into 5 categories: salaries and per diems for employees; goods and services; municipal expenditures; subsidies and transfers and capital expenditures. salaries and per diems are further categorised to: employees in the municipality (elected persons and employees in the municipal administration); employees in health and employees in education. Unlike the municipality of Mitrovica North, the other three municipalities (Zubin Potok, Zvecan and Leposavic) have not established municipal departments, but they have a defined number of employees with regular payment of salaries from the Kosovo’s budget. An overview of the number of employees in municipalities in North Kosovo in 2015 and 2016 is given in Table 4.3.

43 “University of Pristina”, a state university of the Republic of Serbia located in Pristina was transferred to Kosovska Mitrovica after the war.

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Table 4.3 Number of salaries in the municipalities in North Kosovo (2015 and 2016) Municipalities Number of salaries in 201544 Number of salaries in 201645 Mitrovica North 732 152 Zvecan 251 67 Zubin Potok 331 141 Leposavic 416 196 Source: Quarterly financial reports of the Kosovo’s budget realisation for the period 1 January – March 31 2015 and 1 January – 31 March 2016

As presented in Table 4.3, the number of budgeted salaries is significantly lower than in 2015. This situation arises from the fact that the mayors of the four municipalities in North Kosovo have decided not to accept funding for health and education from the Kosovo’s budget until the issue of establishment of the Community/Association of Serb Majority Municipalities that should have authority in these areas is resolved.

4.4 Conclusion Although the Brussels agreement was expected to solve the issue of the dual administration in municipalities in North Kosovo, this did not happen. The reasons for this are political and technical. At the political level, even four years after the signing of the Brussels Agreement, the Community/Association of Serb Majority Municipalities was not formed, which was recognised as an institution for the protection of collective rights of the (remaining) Serbs in Kosovo. Therefore, one should not be surprised by the great resistance of politicians (whether local or those from Belgrade) to the implementation of Kosovo’s legislation, especially those legal solutions that address the issue of identity or strategic areas of survival of the Serb community in Kosovo (e.g. education and health care).

In technical terms, the Brussels agreement does not specify whether newly formed municipalities, constituted after local elections, will inherit the existing municipal administrations that had previously functioned under Serbian legislation or new administrations would be established. Also, it is not specified what will happen with the employees in the existing administrations, or what will be the role (and whether there will be a role) of the Government of Serbia in the future functioning of local self- governments and municipal administrations. In all likelihood, there will be no collective solution to this problem, but each municipality will begin to solve this situation by itself.

Namely, according to the laws of Kosovo, mayors have the discretion to decide who will receive the salary from the municipal budget provided by the Kosovo Government, not only in case of employees in the municipal administration, but also in education and health care. Based on that, mayors may

44 Quarterly financial report, Kosovo’s budget for the period 1 January – 31 March 2015, available at http://bit.ly/2tdLWa0 i 45 Quarterly financial report, Kosovo’s budget for the period 1 January – 31 March 2016, available at http://bit.ly/2sbTZWe

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decide whether to include the existing employees in the payroll or to hire new employees. This situation often provokes a paradoxical situation that employment within the Kosovo’s system is used to implement a social program rather than taking into account the establishment of a professional local administration.

This conclusion is a result of the public discourse of the mayors from North Kosovo who often declare that employees cannot receive salaries from two sources, from the Government of Serbia and the Government of Kosovo, but this situation must be used to create new jobs. So recently, the Municipality of Mitrovica North has announced a vacancy for 168 jobs in the field of education and health. However, the question is where the new employees will work (and what will they do) when educational and health care institutions work in the Serbian system, and what will happen to employees in municipal administrations, health care and education when the Serbian government suspends the funding? It seems that at this moment, the answer is so far away and that none of the actors in Belgrade, Pristina, Brussels or in North Kosovo want to think about it.

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5. FINANCING LOCAL SELF-GOVERNMENTS IN NORTH KOSOVO – A DANCE IN SUSPENSE 5.1 Introduction Northern Kosovo municipalities became budgetary users only after the local elections and forming of local municipal authorities. However, the process of financing local self-governments in northern Kosovo was accompanied by many challenges distinctive also for other segments of the functioning of these municipalities.

The goal of this paper is to display the legal framework regulating the processes of preparation, representation, and adoption of municipal budgets, as well as to present the main challenges in the process of budgetary realization in northern Kosovo’s municipalities.

5.2 System of financing Kosovo’s municipalities Financing Kosovo’s municipalities is regulated by the Law on Local Self-Government,46 Law on Local Self-Government Finances47, and the Law on Public Finance Management and Accountability.48 In the course of developing these laws, the Council of Europe’s European Charter on Self-Government was considered; in article 9, the document defines that municipalities should possess sufficient financial means for the successful implementation of designated competencies.49

The Law on Local Self-Government defines municipalities’ competencies as primary, delegated, and expanded.50 On the other hand, the Law on Public Finance Management and Accountability determines that the Assembly, Government, and competent ministries should provide municipalities with budgetary funds necessary for the realization of their competencies. Article 7 of the law defines the sources of financing municipalities as consisting out of: 1) Its own revenues, proscribed by article 8 of the Law; 2) Operational grants; 3) Grants for expanded competencies; 4) Transfers for delegated competencies; 5) Extraordinary grants; 6) Republic of Serbia’s financial support;

46 Law no. 03/L – no. 040 on Local Self-Government, available here http://bit.ly/2tyqufg 47 Law no.03/L – no. 049 on Local Government Finance, available here http://bit.ly/2uO271h. Law no.05/L-108 on amending and supplementing the Law, available here http://bit.ly/2tsHILa. 48 Law no.03/L – no. 048 on Public Finance Management and Accountability, available here http://bit.ly/2tH9BSs. Last amendment of this law: Law no.05/L-063 on amending and supplementing Law no. 03/L-048, on Public Finance Management and Accountability, amended and supplemented by laws no. 03/L- 221, no. 04/L-116 and no. 04/L-194, available here http://bit.ly/2uOxetA. 49 Council of Europe’s European Charter of Local Self-Government, available here http://bit.ly/2vOse5b. 50 Expanded activities are defined in articles 19, 20, 21, 22 i 23 of the Law on Local Self-Government, concerning competencies in the fields of health services, education, and culture, as well as the right to participate in the election of the police station commander.

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7) Income from municipal debt.

Primary municipal revenues/income are determined by article 8 of the aforementioned law, referring to the following: 1) Municipal fees, recompenses, user charges/tariffs, other payments for public services provided by the municipality, as well as regulatory fees and penalties approved on the basis of this law; 2) Revenues for renting immovable property located in the respective municipality, and under the jurisdiction or ownership of the municipality; 3) Revenues from selling municipal property; 4) Revenues from enterprises that are fully or partially in the ownership of the municipality; 5) Joint payments on behalf of the user of educational and health services provided by the municipality; 6) Revenues obtained from any municipal agency, department, or organization, as a result of offering goods or services; 7) Interest on municipal investments, if existing; 8) Grants and/or donations from foreign governments (except the financial support of the Republic of Serbia) or foreign organizations, including governmental and nongovernmental organizations, and international and supranational institutions; 9) All other categories of revenues defined as primary municipal sources of income on the basis of the law.

This law determines that municipalities obtain operational financial means from the central state budget (Article 23), encompassing general operational means, those designated for education, and operational means dedicated to satisfying the needments of health care. These funds should be distributed on the basis of fair, transparent, and objective criteria, giving municipalities greater freedom for allocation and consumption of grants.

Conditions for financing the four Serb-majority municipalities in northern Kosovo (North Mitrovica, Zvecan, Zubin Potok, and Leposavic) have been created only after the signing of the Brussels Agreement, conducting local elections, and forming municipal authorities (Municipal Assembly, and Mayor). It was just upon completion of this process that the municipalities commenced developing local budgets, which this paper refers to in a later stage.

When it comes to the process of financing north Kosovo municipalities, it is important to mention the North Municipalities Development Fund – which emerged as a result of the Agreement on Customs signed as part of the Brussels Agreement. Namely, this Agreement foresees the establishment of the North Municipalities Development Fund (or so-called Customs Fund) on the basis of customs revenues for Gates 1 (Jarinje) and 31 (Brnjak) obtained from customs clearance of goods distributed to northern Kosovo. Financial means from this Fund may exclusively be utilized by the northern Kosovo municipalities for their development projects, such as construction and maintenance of public infrastructure (including roads, hospitals, water supply systems, wastewater treatment, and waste management), support given to enterprises/companies, farmers, and the civic sector, promotion of human rights, education, access to healthcare, and transportation.

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5.3 The process of drafting municipal budgets

5.3.1 Procedures and deadlines for municipal budget drafting The Law on Annual Allocations regulates allocations for all budgetary users, including municipalities, and authorizes them to spend or transfer public funds to a certain amount, and for a set of purposes within the given fiscal year.

The process of drafting the municipal budget commenced by developing a medium-term budgetary framework (in the further text: Medium-term Framework). It is a document adopted each year by the Municipal Assembly, encompassing elements from three fiscal years and offering a detailed analysis of municipal incomes and expenses. The expenses are planned with the purpose of maintaining strategic priorities for the socio-economic development of the municipality. The Medium-term Framework represents a useful mechanism helpful for a more proper integration of municipal strategic priorities into the budgetary process. Each municipality is obliged to draft a Medium-term Framework, which is a request demanded by the annual rulebook for drafting municipal budgets (in the further text: budget circular) published by the Ministry of Finance.

As for Medium-term Framework and municipal budgets preparations, the main role and responsibility lies in the Mayor’s hands and the Municipal Assembly. The Mayor is responsible for drafting a budget which is then submitted to the Municipal Assembly for adoption. After the budget is adopted, the Mayor is in charge of its implementation as well.51 At the Municipal Assembly level, the Policy and Finance Committee is responsible for reviewing all financial and fiscal documents, hence for taking the budget proposal into consideration.52 As a municipal body with the right to present an advisory opinion on allocations for non-majority communities in municipalities, the Communities Committee may also provide the budget proposal with its commentary. After that, both documents are sent for adoption to the Municipal Assembly, as the highest representative body of a municipality. In the course of drafting (or implementing) the budget, the municipality may consult the Municipal Budget Department at the Ministry of Finance, in charge of assisting municipalities in these issues.

There are a few concrete steps that must be complied with in the process of Medium-term Framework and annual municipal budget drafting and adoption. These steps are elaborated in the budget circular published by the Ministry of Finance. The budget circular is the basic document for municipal budget planning, containing guidelines for its drafting. This document offers instructions, deadlines, and initial financial constraints for the needs of preparing a municipal budget and providing an assessment of the following three fiscal years.

During budget drafting, there are certain time limits that must be complied with, determined by the following dates:

April 30 The budget drafting process is initiated by the Government of Kosovo being obliged to submit to the Assembly of Kosovo – by April 30 of every calendar year

51 Article 58, Law no. 03/L – 040 on Local Self-Government, available here http://bit.ly/2tyqufg 52 Article 52.2, Law no.03/L – 040 on Local Self-Government, available here http://bit.ly/2tyqufg

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– a Medium-term Framework for adoption53 covering the next fiscal year, and estimates for the following two fiscal years.54

May 15 is the time limit for the Minister of Finance to send the first budget circular to the Departments of Finance of municipalities.55

June 30 is the deadline for the Municipal Assemblies to consider, amend, and adopt the Medium-term Framework, which should be delivered to the Ministry of Finance and made available to the public. In the course of drafting the Medium-term Framework, the local authorities should consult key community actors, including public debates and other mechanisms (questionnaires, direct meetings, etc.), the topic being the respective municipality’s priorities. Prior to adopting this document, the Policy and Finance Committee should also conduct public sessions, during which the strategic municipal priorities would be discussed.56

August 15 is the time limit for the Minister of Finance to deliver the second budget circular, which has the purpose of providing final budgetary instructions with dernier amounts of budgetary transfers calculated in accordance with the Law on Local Self-Government Finances and the suggestions from the Medium-term Framework.

September 1 is the deadline for the Mayor to submit a municipal budget proposal to the Municipal Assembly for consideration and adoption. The proposed municipal budget must contain the following items: economic and budgetary forecasts and assumptions; the total assessment of revenues from all sources; the estimates of total expenses in all economic expenses categories; the expected donor support assessment; and all other information of essential importance for the budget.57 In the case of the Mayor not fulfilling his or her duty within the legal deadline, the Government introduces sanctions against the municipality, including the appointment of a Financial Manager to take over all Mayor’s competencies in this regard.58

September 30 Municipal Assemblies should review, and if necessary – amend, approve and adopt the municipal budget for the following year, which should be submitted to the Ministry of Finance by September 30. Besides the budget proposal, the

53 Content of the Medium-term Framework is given in Article 19 of the Law on Public Finance Management and Accountability. 54 Article 5, Law no. 03/L-221 on amendments to Law no. 03/L-048 on Public Finance Management and Accountability, available here http://bit.ly/2tM8NM9 55 Article 6.2, Law no. 03/L-221 on amendments to Law no. 03/L-048 on Public Finance Management and Accountability, available here http://bit.ly/2tM8NM9 56 Budget circular 2016/01 for municipalities, Ministry of Finance, available here http://bit.ly/2tQilWZ 57 Article 61.1 Law no. 03/L-048 on Public Finance Management and Accountability, available here http://bit.ly/2tH9BSs 58 Article 62, Law no. 03/L-048 on Public Finance Management and Accountability, available here http://bit.ly/2tH9BSs

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municipalities also deliver the Funds Allocation Request.59 If the Municipal Assembly does not adopt the budget proposal in the legal timeframe, the Minister of Administration and Local Self-Government may apply steps in dissolution of the Assembly, and introduce provisional measures.60

Thus, in the course of drafting a budget, municipalities are obliged to submit two main documents to the Ministry of Finance. The first document is the Medium-term Framework that must be adopted first by the Policy and Finance Committee, and then the Municipal Assembly, further having to be delivered to the Ministry of Finance by June 30. The second document is the Annual Municipal Budget Proposal submitted to the Policy and Finance Committee, and Municipal Assembly by September 1 on behalf of the Mayor. The Assembly adopts it by a majority vote and forwards it to the Ministry of Finance by September 30. When the adopted budget proposal is delivered to the Ministry of Finance, it verifies whether the budget is in accordance with the budget circular, after which – in the timeframe of eight days – the said Ministry notifies municipalities if their budget is approved or whether changes need to be applied.

5.3.2 Civic participation in budget proposal drafting The process of drafting a Medium-term Framework and the annual municipal budget envisages the possibility of active civic participation. Citizens have the legal possibility to demand changes of certain budgetary categories and request allocation of budgetary funds, whereas the decision on accepting or rejecting their proposals is in the Mayor’s hands. Citizens may also attend Policy and Finance Committee sessions and/or sessions of the Municipal Assembly, where they can put forward proposals for financing projects of general significance. According to the Law on Local Self- Government, sessions of the Municipal Assembly and all its Committees are open to the public. Besides this, the Law obliges the Policy and Finance Committee, and the Municipal Assembly to conduct public debates on documents of general importance for the citizenry. In the course of these meetings, it is compulsory for the local authorities to inform citizens on all important plans or programs of public interest, including the budget proposal. According to the Ministry of Public Administration and Local Self-Government data, in 2016 – the municipalities of North Mitrovica, Leposavic, and Zvecan have not conducted a single public debate with their citizens in terms of budget-related issues.61

5.3.3 Analysis of northern Kosovo municipalities’ budgets for 2016 In 2016, north Kosovo Serb-majority municipalities had at their disposal budgets of the following amounts: North Mitrovica – 6,771,782€, Zvecan – 2,788,498€, Zubin Potok – 2,459,026€, and Leposavic – 4,227,337€. These municipalities have in different ways distributed these budgetary means by categories, clearly presented in Chart 5.1.

59 Article 20.3, Law no. 03/L – 048 on Public Finance Management and Accountability, available here http://bit.ly/2tH9BSs 60 Article 50.2 Law no.03/L – 040 on Local Self-Government, available here http://bit.ly/2tyqufg 61 Report on the functioning of the the Republic of Kosovo Municipalities for the period of January-December 2016, available here http://bit.ly/2rC0zXq

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Chart 5.1. Distribution of budgetary funds in northern Kosovo municipalities by categories (2016)

North Mitrovica Zvecan

Salaries Salaries Goods and and and wages services wages 18.9% 5.7% 27.6% Capital Utilities Investmen 0.5% Goods Capital ts Utilities and 0.3% Investment 55.6% Subsidies services Subsidies s and 14.03% and 72.2% transfers transfers 2.7% 2.4%

Zubin Potok Leposavic

Salaries Salaries and and Goods wages Goods wages 30.0% and Capital and 26.8% services Investme services Capital 6.7% nts 9.6% Utilities Investme Utilities 58.7% Subsidies0.0% nts 0.1% and 64.8% Subsidies transfers and 1.6% transfers 1.7%

Source: Audit reports on annual financial statements of the municipalities of North Mitrovica, Zvecan, Zubin Potok, and Leposavic for the whole year – conclusive with December 31, 2016.

The chart shows that the Municipality of Zvecan allocated most funds to capital investments (72.2%), whereas the largest allocations for salaries and wages occurred in the Municipality of Zubin Potok (30%), while the most significant amount of financial means dedicated to goods and services was spent in North Mitrovica (14%). In all aforementioned municipalities, utilities amount for less than 1% of the budget, while sums dedicated to subsidies and transfers move from 2.7% in Zvecan to 1.6% in Zubin Potok.

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5.4 Annual financial and audit reports After the budget has been realized, municipalities are obliged to prepare and submit an annual financial report. This report is delivered to the Director of Treasury,62 whereas the deadline for submitting is 30 days since the fiscal year conclusion. The main financial officer and head administrative official of a given municipality are in charge of submitting the annual financial report.63 The report is also delivered to the National Audit Office64 that conducts yearly audits of the regularity of the Kosovo budget and its budgetary users (in this case – the municipality) in accordance with the law.

The municipal budget’s audit is implemented each year in order to determine whether the budgets were administered properly, economically, and efficiently, and if systems for measuring their efficacy are in place. In North Kosovo’s municipalities, audit reports of municipal budgets are conducted from 2014, whereas the report for the budgetary 2016 was published in June this year.

In the findings of audit reports for north Kosovo municipalities it is stated that budget planning is inadequate and its realization is at a low level. For instance, in 2016, the Zvecan Municipality used only 58% of the budgetary means at its disposal.65 However, next to the weak realization budget rates, the reports state an improvement in comparison to 2015, showing a positive trend in strengthening municipal capacities for budget realization.

Auditors established that not all northern Kosovo municipalities possess development strategies66 and other plans for growth. The lack of a general development strategy and other growth plans is making it impossible to track and measure the fulfillment of long-term and short-term goals. Hence, the report contains auditors’ recommendations to mayors to commence drafting a general development strategy and creating an action plan in order to track budgetary achievement of goals and priorities of the given municipality.

As for the public procurement process, the north Kosovo municipalities still find it to be a great challenge – due to the complexity of harmonization with Kosovo Government’s demands. That is why it often occurs that projects are not terminated in the budget year for which it had been planned to be completed within. Therefore, financial means and remaining activities are then transferred into the next year; in order to do so, the Ministry of Finance needs to issue a special consent. Audit reports

62 The Treasury Department (“Treasury”) was established within the ministries of Finance and Economy, and it is in charge of managing the Consolidated Kosovo Fund, as well as responsible for practicing other competencies given to them by the law. 63 Ministry of Finance’s Rulebook no. 03/2013 on annual financial reports of budget beneficiary organizations, available here http://bit.ly/2tyRoqg 64 National Audit Office is an independent constitutional institution. For more on this institution, but only in Albanian, see http://bit.ly/2uwVAqS 65 Audit report on annual financial reports of the Zvecan Municipality for the year conclusive with December 31, 2016, June 2017, available here http://bit.ly/2vcjPrW. 66 These findings of the audit report provokes suspicion, since the Zubin Potok Municipality adopted a Municipal Development Strategy for the period of 2013-17, and a Tourism Development Strategy for the period of 2015- 20, whereas the Leposavic Municipality also has its own Tourism Development Strategy for 2017-22.

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mention that, despite the increase in capital investment budgets, the realization of those funds is still at a low level.67

Another joint finding of the audit reports for all four municipalities involved is that the municipalities themselves collect only a small amount of their own revenues/incomes. In municipal budgets, primary revenues are split into three categories: revenue collected by the municipality, police penalties, and court sentences. According to the Ministry of Administration and Self-Government report, the municipalities of Zubin Potok, Zvecan, and Leposavic collected below 10% of the envisaged amounts of direct primary revenue. In collecting their own primary revenues, the North Kosovo municipalities refer to UNMIK administration decisions, which do not foresee income from sales and property tax, building permits, use of public property, or other sources of municipal revenue in accordance with Kosovo legislation. Hence, all means collected through this budgetary item belong to income gathered from administrative fees, taxes for birth, marriage and death certificates, which are still symbolic financial means in comparison to the previously planned amounts. It may be interesting to mention that, except the Zvecan Municipality,68 no other municipality has had expenditure from this budget category (primary revenues).

5.5 Conclusion There are four main challenges the north Kosovo municipalities face in terms of their finances. The first one refers to the dissatisfaction of all northern Kosovo municipalities with the amount of yearly budgets designated by the Government in Pristina, since these local authorities claim that they are entitled to significantly larger budgets from those they have been given. This was particularly an issue in 2014, when these municipalities did not want to accept assigned budgetary means for a long period of time.

The second challenge is referring to the insufficient capacities of municipalities to realize assigned means within a fiscal year. The weak budget implementation is particularly noticeable in the area of capital investment projects realization, where projects are transferred from one fiscal year to the next one, which requires a special authorization from the Ministry of Finance.

The third challenge refers to the rejection of these municipalities to realize financial budget means from the sector of education and health services. The reason for this lies in the fact that these two sectors have been envisaged to be part of the Association/Community of Serb-majority municipalities, hence the implementation of available budget funds in these fields is considered as undermining initiatives for establishing the Association/Community.

The last challenge is about the municipalities’ refusal to implement the provisions of the Law on Local Self-Government Finance in the field of primary revenues/income. Hereof, the revenue collected by the municipality from primary sources are negligible, below 10% of the envisaged funds.

67 For instance, during 2016, the Municipality of Zvecan spent only 51% of its capital investments budget. 68 In the course of 2016, the Zvecan Municipality spent 6,342€ from its primary income category.

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Ultimately, it may be concluded that there is a positive trend in the process of financing northern Kosovo municipalities in all fields, particularly those concerning the strengthening of local capacities for budgetary funds implementation.

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