This paper analyzes the role of management capacities in the successful withdrawal of European Union funds at the local level in the Republic of Croatia in the case of the city of Petrinja. A synthesis of the literature of two theoretical directions, EU funds and public policies is carried out and the key capacities for withdrawing EU funds at the local level are investigated. The paper presents EU funds as an important instrument of public policies, extremely important for local development, especially in the Republic of Croatia and the functioning of EU funds in theory and practice, i.e., fund absorption as a concept and challenges in withdrawing EU funds. Also, based on previous research, the paper points to the definition and dimensions of the capacity to withdraw EU funds. Emphasis is placed on management capacity and the research is conducted through interviews with key actors in the city of Petrinja who are involved in writing and implementing EU projects. Using the analytical framework, it was concluded that there are certain capacity shortcomings at the local level of government in the Republic of Croatia in the case study of the city of Petrinja. The capacity and skills of human resources are still not at the european level, i.e., inadequate knowledge and poor coordination and cooperation between and within institutions impairs the quality of project preparation and implementation, as well as the quality of management leading to poor utilization of state and local government available funds. The research showed that it is necessary to work on strengthening these capacities to be able to implement policies more successfully for withdrawing EU funds.