Research examining the relation between municipal governance and expenditures and accounting outcomes has found competing results as to whether governance matters. These competing results may be driven by inadequate measures of municipal governance. Using a sample of over 1,700 cities from a survey on municipal governance and eight measures of municipal governance mechanisms (e.g. form of government, the presence of a chief administrative official, whether budget setting authority is shared or not between the chief elected officer and other officials, voter oversight, separation of power, and board terms) my latent class analysis suggests that there are four classes of governance in municipalities compared to the two classes (form of government – mayor council or council manager) currently used in the literature. These governance classes are driven by the interplay between governance mechanisms, incentives, monitoring, and organizational goals. I show that the conditional probability of governance class membership is associated with total expenditures, park and recreational expenditures, and cash holdings. These findings are in contrast to prior literature that has used a dichotomous measure of municipal governance. The variance in governance types also shows that municipal agents face different incentives than agents in corporations which creates a need to provide multiple incentive structures to government bureaucrats and elected officials depending on voter preferences. These results are timely in light of recent scandals, problems with corruption, and financial distress in municipalities and may enlighten policymakers, academics, and constituents of what governance mechanisms provide the right incentives to municipal employees, managers, and elected officials.