What is Grant-in-Aid?

A grant-in-aid is the transfer of resources from a higher-level government to a lower-level government for the purpose of funding a project or program. This is treated as a one-way transfer to the recipient, since there is no obligation to repay the funds. A grant-in-aid is also not classified as a loan. The receiving government must spend a grant-in-aid in accordance with the guidelines set by the transferring party. The higher-level government may conduct an audit to verify that the lower-level government spent the transferred funds in the correct manner.