The New Vision of Local Governance
15
T A B L E 1 . 4 Principles and Better Practices in Grant Design Grant objective
Grant design
Better practices
Bridge fiscal gap
Reassignment of Tax abatement in Deficit grants; responsibilities, Canada and tax-by-tax sharing tax abatement, or tax-base sharing tax-base sharing in Brazil, Canada, and Pakistan
Reduce regional fiscal disparities
General nonmatching fiscal capacity equalization transfers
Fiscal equalization General revenue programs of Canada sharing with and Germany multiple factors
Compensate for benefit spillovers
Open-ended matching transfers with matching rate consistent with spillover of benefits
Grant for teaching hospitals in South Africa
Set national minimum standards
Nonmatching block transfers with conditions on standards of service and access
Roads and primary Transfers with education grants, conditions on as in Indonesia spending alone; (now defunct); ad hoc grants education transfers, as in Colombia and Chile; health transfers in Brazil and Canada
Influence local priorities Open-ended Matching transfers in areas of high national matching for social but low local priority transfers assistance (preferably with matching rate to vary inversely with fiscal capacity) Provide stabilization
Source: Shah 1994, 2004.
Capital grants with Limited use of maintenance capital grants and possible encouragement of private sector participation by providing political and policy risk guarantee
Practices to avoid
Ad hoc grants
Stabilization grants with no future upkeep requirements
