What is a grant-in-aid?
June 22, 2021, | AtoZ Markets – Grants-in-aid are financial aids from one level of government to another. They are income tax revenues, and the recipients can be a state, local, municipality, or even an individual. There is no repayment required; however, before awarding, the reason for transfer should be substantive. The grant should be for eligible use, match the requirements, and maintain prior spending levels.
Also, the recipient must meet the procedural conditions and the regulations of the administration. The grant must create opportunities for citizens, significant environment-friendly projects, and nondiscrimination programs.
Three critical dimensions of grants-in-aid
Let us talk about the three main vital dimensions in every grant-in-aid.
The recipient jurisdictions
Recipients have absolute discretion when it comes to grants’ usage. Categorical grants being the least have spending limits on their programs. Next, block grants tend to have more loose restrictions. However, the grants’ allocation should be more on community development, health programs, and employment. General-purpose grants give the full liberation on spending to receiving jurisdictions.
Grants-in-aid are prescribed formula-based in terms of funding entitled jurisdictions. Project grants are like competitions where the winner receives an award. The issuers’ (authorizing statute or administrative regulation) discretion with the authorized award can either be a maximum or a minimum grant.
Duties and responsibilities of receiving jurisdictions
A grant-in-aid may require the recipients to prepare matching-fund information as match rates are different from program to program. Other grants-in-aid require recipients to disclose how they will maintain their spending at prior levels. Why is this required? It is to make sure that the grant funds don’t supersede the previous expenses of the jurisdiction.
Other recipients choose to directly allocate grant funds to existing agencies, departments, or subgrantees like nonprofit organizations for their services and activities.
How are grants-in-aid used?
Grants-in-aid serve general purposes. Some jurisdictions may use it on affordable housing or education for the indigents. These grants should be fair and just across jurisdictions. For example, disadvantaged individuals receive larger grants while affluent individuals will receive smaller ones. Grants also promote a stable economy, especially during times of economic downturns and recession. They provide help in times of natural disasters like typhoons, hurricanes, or earthquakes.
Grant-in-aid effects on recipient jurisdictions
Studies show that grants-in-aid mostly approve of three types of grant programs:
- Fiscal effects. How does the amount of government aid affect a state’s spending?
- Programmatic effects. What is a grant’s impact on the receiving jurisdiction’s services and programs?
- Institutional effects. What are the changes in a recipient jurisdiction’s decisions and organizational structure after receiving a grant?
Grants-in-aid as primary means
Grants-in-aid have helped become a medium for both government pursuance in domestic policy objectives and cooperation and conflict from one government to another in domestic affairs.
According to the Catalog of Federal Domestic Assistance 2004 edition, there are almost 1,200 grants where half are local and state grants. The excess is direct support to nonprofit organizations or people engaged in research, training, and educational activities. The grants supported the domestic policy objectives for the last 50 years.
According to Richard Nathan’s observation, a grant-in-aid is the result of the political bargaining process. It is not in Washington alone but also in the jurisdictions where the execution occurs.