Tha main goal of this pape ris budgeting in local self-vermentunits showing the example of the town of Hrvatska Kostajnica. The budgetit self is the key structure necessary for establishment and implementation of the towns social development from the stand point of the possibilities of satifying the needs of the local population and meeting the prerequisites for social standard with emphasis on the financial potential of projects financed by the European Union. Firstly, research has been conducted for the purpose of this paper in order to analyze the revenue and yield settlment of expenditure and costs of the local self-government unit as well as the possibility of providing additional standards using the means of the European structural and investment funds which have become available up on Croatia's membership of the Europen Union. These founds have greatly impacted the quality of life in the local community. Further more, research has been done about the functioning of local municipalities and local budgets. These menthod sporovided the bility to offer a critical review upon the problems of this demending system. The results of research present the stretch and significance of local municipalities in contemporary society and point to the importance of local budgeting in the process of creating a social standard of the local community. The analysis of Hrvatska Kostajnica budgetin the period of 5 years (2014. – 2015.) shows that local budget plays a key role in development of local economy and organisataion of social life. In relation to the results of the research it is visible that the local community isn't ready to change the current territorial organizatio which doesn't present anobstancle to future development of local self-governmment. Further strengthening of the process of decentralization of fiscal capacity would lead to significat improvement of local municipalities in the Republic of Croatia. Empowering local self-government units would improve the usage of European structura land investment founds whish reflect on the faster economic grow thandcreation of stimulation genvironment for the whole development.