Table 1 AUDIT study hypotheses

H1

Municipal administrators in treated municipalities are aware of

their treatment status

H2

Municipal administrators in treated municipalities audited in year 1

believe the probability of being audited in year 2 is lower than in

year 3

H3

Municipal administrators in treated municipalities have higher

long-run beliefs about the probability of being audited

H4

Municipal administrators in treated municipalities have higher

knowledge of FISM grant rules and regulations

H5

Municipal administrators in treated municipalities manifest

preferences for municipal investments more in accordance with

FISM priorities

H6

Municipal administrators in treated municipalities are more

aware of lack of capacity and more likely to manifest plans for

improving capacity

H7

Municipal administrators in treated municipalities are more likely

to comply with FISM reporting and data accessibility rules

H8

Audited municipalities report allocating more FISM investment

funds to localities outside the council seat and to public goods

  Secondary objective: Differences between state and federal audits

H9

The federal auditor (ASF) yields more observations and more

refunds to the federal treasury than state auditors (EFSL)

H10

The ASF yields more severe observations and opinions than EFSL

  Tertiary objective: Interactions with local accountability system

H11

Municipal administrators in treated municipalities have different

expectations about future political appointments

H12

Municipal administrators in treated municipalities have different

expectations about career prospects

H13

Municipal administrators in treated municipalities perceive the

ASF as a more important principal

H14

State governors compensate audited municipalities for refunds to

the federal government