In the local government financing system the central government has opted for a central role in the distribution of authorities as well as sources of financing, which can be seen in an increase in the resources that the central government transfers to local government units for the financing of decentralised functions and capital projects. Unluckily, the fiscal equalisation system that relies on the distribution of revenue between the state and local government units and on grants from the central to the local government units is far from effective. The problem inheres in the failure of the mechanism of fiscal equalisation to be based on an accurate assessment of fiscal inequalities or any properly defined fiscal position of the local government units taking into account well founded calculations of fiscal capacities. Because of the poorly regulated mechanism of intergovernmental budget transfers, and particularly because of the lack of quality criteria for the transfer of grants, the implementation of fiscal decentralisation has been slowed and the use of the resources obtained via decentralisation is inefficient. The reasons for this state of affairs should be sought both at the central government and the local government unit level.