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Electoral motivations behind the allocation of intergovernmental grants have extensively been analyzed. This article complements this research agenda by testing a hypothesis accounting for the influence of municipal governance on discretionary funds allocation in Brazil. Utilizing a local government capacity multidimensional index, calculated to the year 2009, multivariate econometric models were employed to capture the conjoint influence of local capacity and partisan alignment on 2010 federal grants releases. The results show robust evidences of a positive and significant association between local government capacity and the grants released to the Brazilian municipalities. However, the hypothesized conjoint influence of local capacities and partisan alignment was only captured after a matching procedure on socioeconomic covariates. Additional evidence suggests, moreover, that mayors’ alignment with an opposition state governor negatively affects the grants released by the federal cabinet, and this effect is larger to high capacity local administrations.