A block grant is the process by which a centralized government awards funds to a provincial or regional government. This usually occurs from a national level to a state or province, but can also be awarded from the state or province to a municipality. A block grant is different from other forms of government payment because there are very little or no stipulations regarding how the money is spent.
The concept of a block grant is used primarily by the federal system of government. Citizens of a nation are taxed by the central or state government. This money is accumulated and dispersed to various regions for use by the local government. It is then up to the local government how to spend the resources. For example, in the United Kingdom, Ireland and Wales oversee funds for the Arts and Humanities Research Council.
Sometimes the federal or central government places rules regarding how the money can and cannot be spent. For example, in the United States, no federal money issued to the states can be used to fund abortion procedures. This is known as the Hyde Amendment.
The advantages to this system is that it allows local lawmakers to decide which priorities are most important to them. Rather than setting a nationwide agenda that treats all areas of the country the same, different constituencies can determine what areas in which the government should play an active role. It also allows those closer to situations to be able to determine where to best spend funds. For example, if road repair is necessary in a certain section of the state, the federal government does not have to oversee the project. Instead, a local agency is put in charge.
A block grant is different than a categorical grant, the other major form of federal government funding programs. Categorical grants are those issued by the government for specific purposes. Usually, these sort of funding programs require the state or municipality to produce matching funds for the projects. Examples of projects that use categorical grants are the Interstate Highway System and the Food Stamp Program in the US.
In order to ensure that the funds are being used appropriately, the federal government assigns oversight groups to review how the money is spent. In the US, this is the General Accounting Office. Opponents of increases in block grant spending often cite reports from this agency as a way to push for reform of the funding system.