Spotlighting the Positive Deviants
How Financially Prudent Municipalities in North Macedonia Are Pioneering Citizen-Centered Local Governance
By Ardita Zekiri and Aleksandar Stojkov
Reframing the Narrative on Local Public Finance
Sound public financial management is the cornerstone of effective local governance. When municipal budgets are transparent, efficiently managed, and grounded in accountability, they not only improve service delivery but also strengthen institutional resilience in the face of economic, social, or environmental shocks. In today’s decentralized governance systems, the way local governments manage public funds shapes public trust and long-term development outcomes.
In times where headlines often spotlight inefficiencies in government, the public discourse tends to be saturated with accounts of fiscal challenges, ranging from low property tax collection and excessive municipal debt to underfunded public services and limited fiscal autonomy. These issues are not confined to a specific region or development level, they are structural concerns shared across geographies.
Yet this prevailing focus on deficits and underperformance too often obscures a more hopeful reality: that some local governments are not only coping with adversity but are excelling despite it.
In North Macedonia, an initiative has helped shift this perspective. The Data Powered Positive Deviance (DPPD) method offers a data-informed lens for identifying and learning from municipalities that outperform their peers under similar conditions. These municipalities — termed positive deviants — demonstrate an alternative approach to public financial management, one rooted in citizen engagement, fiscal responsibility, and institutional resilience.
Understanding Data Powered Positive Deviance
While the concept of positive deviance is not new, its application through the DPPD method marks a significant innovation. Developed through its application in a global initiative by the GIZ Data Lab, the UNDP Accelerator Labs Network, UN Global Pulse Lab Jakarta, and the University of Manchester’s Centre for Digital Development, DPPD enables the integration of traditional fiscal indicators with unconventional data sources to uncover municipalities that defy the norm in complex public finance environments.
In North Macedonia, the DPPD method was employed to identify municipalities that consistently demonstrated better-than-average fiscal and governance outcomes, even while operating under the same structural and financial constraints as their peers. These municipalities displayed notable performance in areas such as budget transparency, citizen participation, responsible expenditure, and service delivery, in most cases without significant external financial support.
Recognizing the heterogeneity across municipalities in terms of population size, density, fiscal capacity, and service provision mandates, the analysis employed a typological grouping of North Macedonia’s 81 municipalities into three categories: small, medium, and large. This classification ensured that comparisons and benchmarking reflected structural realities, thereby strengthening the validity of the findings.
What Sets Positive Deviants Apart?
The analysis in North Macedonia identified a distinct set of characteristics that consistently defined high-performing municipalities. These traits offer critical insights into the institutional behaviors and governance practices that underpin their success. The analysis was able to identify 1–2 positive outliers per sub-group. Due to the unique challenges faced by local governments we were able to identify specific aspects that made some stand out within the subgroup from the rest.
Strategic and Principled Leadership
In all high-performing cases, leadership emerged as a foundational driver of success. Municipal leaders, particularly mayors and finance officials, prioritized transparency, fiscal discipline, and civic collaboration. They demonstrated the courage to pursue difficult reforms and proactively engaged with citizens, civil society, and the private sector to co-create effective governance models.
Prudent Fiscal Stewardship
In contrast to peers facing rising debt and fiscal distress, positive deviants maintained strong financial controls, avoided unsustainable borrowing, and practiced proactive debt management. A few introduced innovative financing mechanisms, such as municipal bonds, to fund capital projects while preserving overall fiscal balance.
Leveraging Digital Solutions for Financial Management
High-performing municipalities embraced digital transformation by adopting integrated financial management systems to support budgeting, procurement, and tracking expenditure. These tools enhanced transparency, reduced administrative errors, and mitigated opportunities for mismanagement.
Internal Audits as Instruments of Institutional Learning
In these municipalities, internal audit functions were not symbolic, they were institutionalized as mechanisms for proactive oversight. Regular audits enabled early identification of risks and facilitated corrective action, contributing to a culture of accountability and iterative improvement.
Citizen Participation in Budgeting
Municipalities that were identified as positive deviants institutionalized mechanisms for citizen engagement in fiscal planning. Through participatory budgeting processes, public consultations, and neighborhood forums, residents had a tangible role in shaping local budget priorities.
Commitment to Transparency and Open Governance
These municipalities publicly disclosed key documents, such as budgets, procurement records, and audit outcomes, through accessible online platforms. This culture of transparency promoted civic trust, deterred misconduct, and enabled more effective public scrutiny.
Real Policy Impact: From Lessons to National Reform
The experiences of these positively-deviant municipalities generated policy momentum at the national level in North Macedonia and catalyzed institutional shifts across other local governments. Their practices served as practical inputs into reform processes.
Legislative Reform for Fiscal Recovery
The initial results were presented in a meeting with the leadership of the Ministry of Finance. Particular attention was placed on the problem of rising municipal arrears and the limitations they impose on citizen-centered local public finance management.
Several policy proposals were shared with the Minister of Finance, who promptly initiated legislative changes aimed at strengthening fiscal discipline at the municipal level. In July 2023, amendments to the Law on Financing Local Self-Governments introduced structured mechanisms for municipal debt restructuring. For the first time, municipalities gained the legal authority to issue three categories of bonds aimed at clearing arrears to private contractors. This reform was inspired both by the responsible financing practices of positive deviants and the pressing needs of fiscally distressed local governments.
Digital Governance Uptake Across Municipalities
The demonstrated efficacy of digital financial tools among high-performing municipalities spurred demand from their peers. A growing number of local governments began seeking ERP solutions and related platforms, signaling a transition from sporadic digital adoption to a more strategic embrace of e-governance in public financial management.
Mainstreaming Participatory Budgeting
Inspired by early adopters, numerous municipalities initiated participatory budgeting practices, including citizen consultations, youth forums, and neighborhood assemblies. These efforts marked a shift toward more inclusive and collaborative governance, where citizens play an active role in shaping local development agendas.
Institutionalization of Internal Audit Functions
What was once a procedural formality in many municipalities has become an integral governance function. Several local governments have now established internal audit departments with trained personnel and standardized systems, contributing to strengthened oversight and regulatory compliance.
From Innovation to Institutionalization
What originated as a method to uncover outliers has evolved into a catalyst for policy reform. By applying the DPPD method in North Macedonia we not only highlighted resilience but also facilitated institutional learning, challenging the prevailing assumption that failure is normative and success is accidental. This meant shifting the focus toward recognizing and scaling local capabilities rather than relying solely on external interventions.
More importantly, DPPD promotes a constructive mindset. It moves away from punitive comparisons or “naming and shaming,” and instead emphasizes “naming and framing” those who succeed. This reorientation enables policymakers to move beyond problem diagnosis toward identifying scalable solutions rooted in institutional success.
As we embarked on our data-driven inquiry, we quickly encountered a common constraint: digital data availability was limited to just a handful of datasets. This prompted us to explore where other forms of data — particularly non-digital, administrative records — were stored and how they might be leveraged. While every municipality maintained some form of record keeping, the systems were highly fragmented and lacked standardization. One of the key contributions of the DPPD method was its ability to identify context-relevant indicators and initiate the collection of targeted data aligned with local realities. This approach enabled the development of a more holistic, grounded, and actionable analytical framework — one capable of yielding meaningful insights for both learning and reform. The method has proven particularly effective in data-constrained environments. In North Macedonia, the integration of digital data (such as online fiscal transparency scores) with conventional administrative records (including audit findings and revenue statistics) offered a comprehensive and context-sensitive portrait of what successful local governance looks like.
From Deficits to Strengths: Implications for Practice
The case of North Macedonia reflects a broader reality: that challenges in subnational public finance are widespread. The DPPD method provides a replicable model for identifying outperformers, understanding the contextual drivers of their success, fostering peer learning, and informing national-level reforms based on credible, local-level evidence.
This “inside-out” approach to development, anchored in the experiences of successful institutions within the system, serves as a powerful counterpart to traditional models of external technical assistance. It demonstrates that solutions to complex governance problems often already exist within the system.
As decentralization deepens, it is imperative to transition from a deficit-oriented lens to one that highlights institutional strengths and emergent capabilities. DPPD does not minimize existing challenges; rather, it mobilizes real-world examples of success to inform and accelerate meaningful reform.
This is a powerful reminder that although the challenges are similar, there are practices that are more resilient than others. National policymakers are encouraged to study the outliers — not just as exceptions, but as sources of insight. Creating enabling conditions for experimentation, peer learning, and diffusion of institutional practices can foster more adaptive governance.
Municipalities should not wait for reform directives from above but should proactively learn from peers, invest in institutional capacity, and nurture public trust. For citizens and civil society, the call is to engage: demand transparency, participate in local budget processes, and hold institutions accountable not only for failures but also for achievements.
In a media environment saturated with crisis narratives, highlighting constructive stories of local innovation is both timely and necessary. The municipalities advancing citizen-focused, transparent, and accountable financial management are not anomalies but practical laboratories of what effective governance can look like.
By identifying and learning from positive deviants, we unlock a distinct form of influence: the power of example. When supported by rigorous methodology, adaptive thinking, and institutional commitment, these examples offer pathways for replicable and scalable transformation.
