ABSTRACT. Managing local government units in the 21st century faces new challenged
connected to the conditions of knowledge-based economy. Currently the greatest approval is
gained by the view which states that the ability to manage knowledge becomes a truly deciding
factor for the efficiency of economic processes. In the conditions of globalisation, free capital flow
and dynamic development of the capital market and new financial instruments, the LGUs are
forced to seek new paradigms for finance management, such as will focus – to a greatest extent
than before – on diffusing information and knowledge, developing competences of key significance
for the LGUs, developing financial knowledge among LGU employees and supporting
organisational learning.