The right answer is “local governments derive their authority from state governments”. Federal systems have three orders: local, state/province and federal which must work together. The role of local government is central for this kind of systems. They are the main interface between civil society and the state, the democratic structures must be defined in here if not they will be missed elsewhere. It has a dependent relationship with the federal system with the state power, because it has to respect the order of this system in order to work and be part of its structure.