Decentralization in Macedonia was conceived of in two different phases, allowing for an asymmetric allocation of fiscal powers. During the first phase, all local governments were assigned the responsibility to deliver only a few mainly communal local government functions. After fulfillment of specific conditions and approval by the central government, local governments in Macedonia would be allowed to take on their broader functional responsibilities. Using a detailed dataset of local government finances, this study analyzes the evolution of local government revenues and expenditures in Macedonia and highlights the main problems of the country's intergovernmental finance system.