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Fiscal federalism is the system of transfer payments or grants by which a federal government shares its revenues with lower levels of government. Federal governments use this power to enforce national rules and standards. There are two primary types of transfers, conditional and unconditional. A conditional transfer from a federal body to a province, or other territory, involves a certian set of conditions. If the lower level of government is to receive this type of transfer, it must agree to the spending instructions of the federal government. An example of this would be the Canada Health Transfer. The second type of grant, unconditional, is usually a cash or tax point transfer, with no spending instructions. An example of this would be a federal equalization transfer.
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