SUMMARY  5

1. STUDYING LOCAL STATE CAPTURE  7

2. FORMS AND WARNING SIGNS OF LOCAL STATE CAPTURE  11

2.1. Political control, weakened pluralism and abuse of power  12

2.2. Control and misuse of public resources and administrative systems  18

2.3 Weakening or capture of oversight and accountability mechanisms  26

3. EFFECTS OF LOCAL STATE CAPTURE ON DEMOCRACY  33

4. CASE STUDIES: BEST PRACTICE SCENARIOS  39

4.1 Case study 1: Anti-corruption practice in Sarajevo Canton (BIH)  39

4.2 Case study 2: Integrity planning and corruption risk management in local governments of Montenegro  47

4.3 Case study 3: Open Local Budget Index in Croatia — budget transparency monitoring as a tool of local accountability  52

4.4 Case study 4: Islands of good governance — Alcobendas and Sant Cugat del Vallès (Spain)  57

Mykolaivvodokanal: a Ukrainian case of early-stage corporate governance reform in a frontline city  64

5. POLICY RECOMMENDATIONS  66

5.1 Recommendations for local and regional authorities  66

5.2 Recommendations for national governments  69

5.3 Recommendations for national governments of EU enlargement countries  70

5.4 Recommendations for EU institutions  71

5.5 Recommendations for the European Committee of the Regions (CoR)  73

CONCLUSIONS  74

REFERENCES  76