RELOF3 – A GDSI Success Story Under Ana Jolović’s Leadership

The Local Government Finance Reform in Serbia Project—Phase III (RELOF3), implemented by GDSI Limited in partnership with MAXIMA Consulting and supported by the Government of Switzerland (SECO), showcases innovative governance and impactful Public Financial Management reform. Led by Dr. Ana Jolović, the project has achieved significant milestones in strengthening local government systems across Serbia since 2016. 

Building on RELOF1 and RELOF2, the third phase has expanded its scope to include local administrations, municipal enterprises, and budgetary users, engaging 48 local governments nationwide. With a pilot reform in 10 local systems, RELOF3 emphasises transparency, managerial accountability, and efficient public resource management. 

A key innovation is the RELOF Index, a unique tool measuring managerial accountability across local governments, enterprises, and institutions, providing actionable insights for systemic improvement. The project also promotes inter-municipal cooperation, capacity-building, and alignment with Serbia’s EU accession under Chapter 32: Financial Control. 

Close collaboration with national institutions such as the Ministry of Finance, Ministry of Economy, the Ministry of Public Administration and Local Self-Government, as well as the National Academy for Public Administration, ensures practical and sustainable reforms, bridging national policies with local needs. 

In this interview, Team Leader Dr. Ana Jolović shares insights on RELOF3’s achievements, innovative approaches, and future plans in advancing local government reform in Serbia.

 Can you describe the most significant achievements of the RELOF3 project so far, particularly in terms of improving local government finance systems in Serbia?

I can point out to two big achievements. One is that we designed, developed, tested and implemented the RELOF Index. What is so specific about the RELOF Index is the fact that this is the first time globally that we have developed a methodology and tool that can measure managerial accountability.

Because managerial accountability was a theoretical concept so far, it was very hard to make it applicable, especially at the local level. Now, with the Index, you can actually measure the current status of managerial accountability. You can see where all the flaws are. You can tailor-made the technical support, and what is also very important is that you can measure the progress achieved.

The RELOF Index helps not only the project it helps each CEO of a municipal enterprise, it helps the mayor, it helps the heads of institutions, the director of the library, and everybody in the system to actually see their current strengths and weaknesses and see what needs to be done in order to improve managerial accountability.

The second achievement is that the project itself and how it’s designed are very different from the usual technical approach to the local government. Normally, every project deals with certain aspects of the reform.

In our case, the RELOF deals with a much broader horizon – not only with the local administration and implementation of narrow, specific reform. The initiative encompasses all municipal enterprises and institutions owned by the local government. Its goal is to provide support to the entire system and enhance the connections among the various players who need to work together harmoniously to deliver services to the citizens.

How has the collaboration between central and local governments evolved throughout the implementation of the RELOF3 project? What were some of the key factors driving this progress?

Yes, we have seen much stronger partnerships forming with the central level. It has become a two-way street in many ways. On the one hand, local governments have used the project to facilitate communication and convey messages, pushing for changes in laws, bylaws, and the regulatory framework to enable reforms at their level.

On the other hand, the central level has started using the project to gather input from local governments to understand better why certain reforms were not progressing as expected—whether in terms of direction or pace. With RELOF3, this synergy between the central and local levels has become even stronger, especially when combined with other projects like Exchange 6. Together, we have worked to dig deep into longstanding issues and make meaningful improvements.

One significant innovation we introduced is a semi-annual policy workshop between the central and local levels. For each meeting, the project prepares a policy brief based on topics assigned at the previous workshop, ensuring all sides are well-prepared. These meetings don’t always require direct involvement from ministries; we often invite various central-level actors when needed.

After each workshop, we follow up with action items, refine the brief, and continue advocating for necessary changes in laws, bylaws, and policies. We keep these topics in focus until the next workshop, which has proven to work very well.

This approach, initially driven from the bottom up, has evolved into a circular process—what we now call a “down-top, top-down approach.” It ensures a continuous flow of ideas and solutions between both levels.

The key driving factors in this progress have been openness and creativity. Both sides must acknowledge when something isn’t working. During meetings, it’s crucial to admit openly, “This bylaw is impossible to implement,” or “These laws have certain limitations.” However, rather than focusing on criticism, the focus is on finding creative solutions.

Even if no immediate solution exists, this process helps eliminate unworkable ideas and ultimately leads to one that does. Additionally, the project focuses heavily on real, local problems in implementation—identifying why some things don’t work or why substantial effort sometimes results in little impact.

Another major factor has been improved coordination at the central level. Often, various central actors deal directly with local governments, but they don’t communicate effectively among themselves. For example, local governments frequently complain about having to send the same information in different formats to multiple ministries or being overburdened with unnecessary reporting requirements.

These issues highlight how important coordination and collaboration between the central and local levels are. Addressing these challenges through structured policy dialogue has allowed the project to resolve many of the daily, practical problems faced by local governments.

Ultimately, this collaboration not only helps the local level but also addresses challenges at the central level. If a policy, law, or bylaw isn’t working, the central level is accountable. Looking at it from the perspective of managerial accountability, those responsible for the policies are obligated to ensure they are effective.

The RELOF Index has gained attention as an important tool for local governments. Could you elaborate on its development, implementation, and potential for regional scaling?

The RELOF Index was developed entirely in-house. Initially, we hoped to find an already-developed tool that could meet our needs. However, we quickly realised that no such tool existed.

Inspired by the PEFA assessment, we began designing a solution that could effectively measure the current state of managerial accountability. Looking at it now, the RELOF Index is a complex and comprehensive tool. It assesses three key pillars within the local government system: local administration, municipal enterprises, and institutions (i.e., indirect budgetary users).

Each of these pillars is assessed separately, but the results are ultimately merged into one comprehensive score. This score reflects how closely the local government system aligns with international best practices in managerial accountability. The purpose is twofold: to provide an accurate assessment of performance and to identify gaps—those “holes” in the system—that need to be addressed.

The modularity of the RELOF Index is one of its most valuable features. It allows users to customise their approach based on specific needs. For example, a mayor interested only in transparency can focus on that part of the index, evaluating transparency across the system, within individual pillars, or even within a specific municipal enterprise. Similarly, a user could focus solely on HR or governance, depending on their priorities.

The tool is designed to identify both quick wins and more complex challenges. Sometimes, minor adjustments—a small “push”—can lead to significant improvements in managerial accountability, making it easier for top managers to implement change. In other cases, systemic redesigns are needed to achieve meaningful results.

The RELOF Index also serves as a benchmarking tool. For instance, a CEO of one municipal enterprise can compare their performance with others, identify areas of improvement, and learn from peers through knowledge-sharing and peer-to-peer meetings. This collaborative aspect further strengthens the tool’s practical value.

Technically, the RELOF Index is an Excel-based tool that combines modularity, scored indicators (A, B, C, D), and sustainability. It enables trained users to conduct self-assessments annually, empowering local governments to track progress over time without relying on external support.

As for regional scaling, we are currently tailoring the tool for Croatia. We have also invited master’s students to adapt and test the RELOF Index in other countries, focusing on specific pillars or the entire system. This initiative not only broadens the tool’s application but also fosters local expertise in its use. By working closely with students and other stakeholders, we aim to refine and expand the RELOF Index as a valuable resource for improving managerial accountability across the Western Balkans and beyond.

How will the customised ownership policies developed under the RELOF3 project help local governments improve financial management and accountability in the future?

Customised ownership policies are essential because they establish clear rules for managing municipal enterprises and institutions. Municipal enterprises, such as those responsible for water supply or waste management, play a critical role in local economic development and the overall quality of life for citizens.

These policies define the purpose and objectives of municipal enterprises, ensuring that their activities align with broader municipal priorities. They provide clear expectations, mandates, and performance targets, which are crucial for promoting accountability and fostering strategic planning.

Ownership policies also enhance coordination among municipal enterprises, preventing inefficiencies such as redundant efforts (e.g., digging up streets multiple times for unrelated projects). By ensuring that enterprises work together seamlessly, these policies maximise resource utilisation and service delivery efficiency.

Additionally, these policies include planning and reporting requirements, helping municipalities evaluate whether their enterprises are necessary and whether they are operating effectively. This structured approach ensures that public resources are managed responsibly while aligning enterprise operations with municipal strategies.

For both municipal enterprises and institutions, ownership policies clarify their roles in implementing public policies—whether it’s providing clean drinking water or other essential services. They also strengthen governance by offering a framework for boards, supervisory committees, and enterprise operations, ensuring that all activities are guided by transparent, accountable, and strategic principles.

What lessons learned from the RELOF3 project, would you consider most valuable for future initiatives aimed at public finance and governance reforms?

One of the key lessons from the RELOF3 project is that partial solutions do not add. There is still missing something to make the system work. While addressing specific parts of public finance or governance reform may solve isolated issues, it often leaves gaps and fails to create a cohesive system. This has shown that moving from targeted, fragmented support to comprehensive, systemic solutions is critical.

However, implementing systemic solutions is far more challenging. It requires every component of the system to function effectively, which means reforms must address the entire governance framework.

Another important lesson is the need for flexibility in project management approaches. RELOF3 demonstrated that a pure waterfall model is too rigid, while a fully agile approach can lack structure. A hybrid model, combining waterfall for straightforward solutions and agile for more complex or innovative components, has proven to be the most effective. This approach ensures innovation while maintaining structured implementation.

Finally, donor-supported projects must embrace this hybrid methodology to achieve systemic solutions. Isolated technical assistance is no longer enough; future initiatives need to adopt a broader, more integrated perspective to deliver long-lasting results.

With the adoption of the Action Plan for Local Government and inclusion in the Reform and Growth Facility for the Western Balkans, what do you see as the next steps for expanding the impact of the RELOF3 project?

The next steps for RELOF3 involve piloting two innovative initiatives:

  1. Internal Audit Tools: These tools are designed to support internal auditors by helping them prioritise high-risk areas and execute audits systematically. This ensures more efficient and impactful audits directly contributing to better governance practices.
  2. Oversight Model for Grants and Subsidies: This model enhances transparency and measures the impact of public funding provided to recipients such as NGOs, SMEs, and farmers. It shifts the focus from simply ensuring that funds are properly allocated to assessing whether they have achieved the desired outcomes. For example, in the case of agricultural subsidies, the model evaluates whether the funds have translated into tangible improvements for farmers.

Both initiatives aim to strengthen governance by ensuring accountability not just for compliance but also for results. If these models prove successful during their pilot phases, they will be scaled up across Serbia, furthering RELOF3’s legacy of systemic reform and innovation.

The results of the RELOF3 project clearly exemplify how innovative governance and strategic collaboration can drive meaningful change. From the development of the RELOF Index to the introduction of ownership policies and systemic reforms, the project has enhanced public financial management in Serbia, serving as a scalable model for regional adoption.

Under the visionary leadership of Ana Jolović and with steadfast support from the Government of Switzerland and GDSI, RELOF3 has demonstrated how central and local governments can collaborate effectively to overcome challenges, foster accountability, and deliver tangible results for communities.

As transformative initiatives such as the Internal Audit Tools, the Oversight Model for Grants and Subsidies, and the Energy Efficiency Model continue to take shape, the project is already inspiring systemic improvements and reshaping public financial management. With its unwavering commitment to innovation, collaboration, and sustainability, we are sure that  RELOF3 will set new benchmarks for public finance reform, strengthen local governance, and maintain itself as a flagship initiative for the Swiss Government, GDSI and the Government of Serbia.