Regulation and enforcement around the use of public funds can reduce corruption, but does it also alter incentives to spend? In this paper, we investigate whether compliance uncertainty around spending rules can stifle valuable-to-the-public spending and distort policy choice. We begin by leveraging administrative data of local government accounts to establish a puzzling phenomenon: substantial shares of local budgets in Brazil are not spent despite clear needs for additional resources for public services. We also investigate how random audits, which might increase the salience of compliance uncertainty, affect public spending. Then, we leverage a collaboration with the Brazilian Council of Municipal Health Secretaries (CONASEMS) to conduct an experiment with municipal health secretaries in order to shed light on the impact of compliance uncertainty on secretaries’ choices. In the experiment, we offer valuable-to-the-public spending plans randomly varying the degree of compliance guarantees from the audit courts.