Local governments need to be endowedwith administrative autonomy to be able to respond to localneeds effectively. The purpose of this note is to clarifycomponents of a well-designed administrativedecentralization system and to assist task teams andstakeholders to assess administrative decentralizationeffort in any given country. There are two main componentsof an administrative decentralization system: discretionallowed to the local government to direct the business ofthe local government, and mechanisms to hold the localgovernment accountable for appropriate use of thisdiscretion. The objective of this note is to explain theimportance of each of these components. The note alsoillustrates how these components should be put intopractice. Challenges and good practices in implementationsin various developing countries are highlighted. The reviewof study countries shows that local governments in thePhilippines and Kerala have the authority to engage in allkinds of procurement contracts.