As part of an anti-corruption campaign, the Brazilian government began to audit the municipal expenditure of federally-transferred funds. Using these audit reports, a unique data set of political corruption was constructed to test whether re-election affects the level of corruption in a municipality. Consistent with a political economy agency model, it was found that mayors who are in their second and final term are significantly more corrupt than first term mayors. In particular, second term mayors on average divert R$ 188,431 more than first term mayors, which is approximately 4 percent of the total amount transferred to municipalities. There is also much more pronounced effect among municipalities where the costs of rent-extraction are lower, and density of pivotal voters is higher. The results also illustrate an important trade-off: second term mayor, while more corrupt, provides a higher level of public goods. As Brazil and other countries continue their decentralization process, these findings promote the need for a better understanding of how local institutions can help reduce the incentives for corruption.Internet: <http://are.berkeley.edu/~ferraz/corruption_01_26_05.pdf> (with adaptations). According to the text above, it can be concluded thatfederally-transferred funds have long been auditing as part of an anti-corruption campaign.