This note presents the methodology and findings of a field study on the financing needs of Madagascar's communes-the country's lowest but most institutionally advanced level of subnational government. Following a first round of municipal elections in 1995, more than 1,500 communes are now formally responsible for maintaining basic administrative services and social and economic infrastructure, including local waste disposal and sanitation. In addition, communes are responsible for identifying and coordinating local investments and for supporting implementation of the national Poverty Reduction Strategy at the local level. To finance these activities, communes receive population-based transfers and small conditional transfers, and can collect revenue from property, market, and consumption taxes as well as user charges. Yet little is known about how much these fiscal assignments satisfy local needs. As part of its policy dialogue with the government of Madagascar, the World Bank is engaged in extensive research that includes geographic mapping of social spending and a review of opportunities and obstacles to fiscal and sectoral decentralization. This research generated the following analysis of local and cross-sectoral service needs and available financing.