A grant-in-aid is a grant from a national government to a regional government, as for example from the British government to the City of London. Grants-in-aid are usually used to provide funding for projects which regional governments are reluctant or unable to fund. In addition to being given to governments, they can also be given to agencies, institutions, and individuals, as long as it can be demonstrated that the funds will be used for a public service project.
Regional governments are expected to raise a lot of their operating costs on their own, but national governments are also aware that some projects are too large for regional governments to handle. A grant-in-aid is used when the national government does not want to handle the administration of the project, but simply to make funds available for the purpose of doing the project. However, money is not handed out with no strings attached.
A regional government may be required to meet certain standards for a grant-in-aid. For example, before being given grants to cover repair, maintenance, and expansion of public roads, a regional government might have to agree to provide reports about accidents and other incidents which happen on the road. Likewise, a regional government which wants money to subsidize housing for low income residents might be required to maintain demographic statistics which the government can use, or may be required to screen all applicants in accordance with national guidelines.
Block grants are general grants-in-aid, while a categorical grant is a grant-in-aid which has been earmarked for a very specific purpose. For example, a city could apply for a community development block grant which could be used to fund a variety of community projects which would benefit the community in some way. Conversely, it could also apply for a categorical grant-in-aid which would cover the construction of a new bridge.
These grants are used to fund activities which will benefit the public. This can include direct public assistance such as programs which are intended to provide services to low income people, or the funding of research and development which will have long term benefits. For example, a grant-in-aid provided to a university for cancer research benefits public health, but also provides employment for researchers and support staff, which in turn benefits the local economy. In addition, adding research programs to a university enhances its reputation, which can also provide positive impacts for the local community.
