Local democracy and the involvement of local communities in the provision of social services are central issues in the local government reforms that are presently being implemented in many developing countries. At the same time, institutions that run parallel to local authorities, such as social funds and various user-committees, are established to improve accountability and participation. By focusing on actual political processes rather than administrative, legal, and fiscal aspects of decentralisation, this article traces the breakdown of two development projects in Tanzania to the existence of parallel structures, and suggests that user-committees and social funds should be integrated in local authority structures to avoid fragmentation of participation and to enhance local democracy.