Administrative and territorial reform was performed to create bigger municipalities (by number of inhabitants and also by size of financial resources). Bigger municipalities can better (more qualitative and accessible) perform their functions and can also increase their level of self-government. Reform was made to stimulate in municipal activities self-dependency, stability and development. In other words, administrative and territorial reform was made to increase the efficiency of municipal budget. Object of this research is to evaluate the impact of administrative and territorial reform on local budget structural efficiency in the short term. Analysing the efficiency of municipality activities, the main point is to evaluate the budget efficiency. Budget is the main document with information about work of the municipality. To make valuable budget efficiency analysis, it is required to use information about incoming and outgoing cash flows. To make objective conclusions, it is necessary to make assessment on how municipality obtains income, consumes expenditure, implements objectives and achieves results. It is essential to the government of Pavilosta district to pose specific objectives and priorities for analyzing efficiency of its activity. Absence of objectives is the main problem of local government management. To provide sustainability and sustainable development, it is necessary for municipalities to make planning of their financial assets (make budget plans) for a longer period of time (at least three years). The performed analysis is related to the short term changes of the budget effectiveness. It is made by using the accounting method. Research results make it possible to conclude that formally and in the short term the budget efficiency has increased.