Performance Budget may be defined as a budget based on functions, activities and projects. Performance Budgeting may be described as a budgeting system, where under input costs are related to the end results, are related to the performance. Performance Budgeting is defined as the process of analyzing, identifying, simplifying and crystallizing specific performance objectives of a job to be completed over a period, in the framework of the organizational objectives, the purpose and objectives of the job. It involves evaluation of the performance of the organization in the context of both specific as well as overall objectives of the organization.
An overview of Performance Budgeting
The performance management concepts for budget management practices produced a performance budgeting. Performance budgeting is a goal-oriented budget, it is based on achievement of the government’s public sector objectives and it is in budget preparation, control and evaluation of a budget management model. In contrast with the traditional budget management, performance budget, focuses the effectiveness of fiscal spending in the stresses, at the same time it advocated to give managers sufficient autonomy in budget management and reporting system through the public sector, public sector reporting system in the traditional budget system to inject a kinds of incentive and restraint mechanisms to effectively contribute the organizational goals.
In the performance budget management, budget expenditure performance evaluation as a management control tool, which is a core content in performance budget management. The so-called budget expenditure performance evaluation refers to the use of certain assessment methods, quantitative indicators and appraisal criteria and functions of the department to achieve its performance goals established by the realization of the extent, as well as to achieve this goal; the implementation of the budget was carried out by the results of a comprehensive assessment and evaluation.
The aim of the department of performance objectives is rational allocation of resources, optimizing effectiveness and efficiency of the use of budgetary funds through a comprehensive evaluation. Performance evaluation of scientific conclusions of the performance of expenditure is the key to the successful implementation of performance management. This relates to how to organize the implementation, how to choose the scope of evaluation, how to determine the performance objectives, performance indicators and evaluation methods and so on; in order to obtain one scientific conclusion question on public expenditure in the “economic”, “efficiency” and “effectiveness “of the Three.
From the definition of performance budgeting, performance budget has two core elements, one is performance evaluation to solve how to set up performance evaluation system of science to arrive at the performance of scientific information; second is performance information and budget integration to solve performance information (PI) how to combine of management and budget issues, which is how to combine the performance information and budget preparation, execution and reporting system in order to achieve the efficient budget management and the promotion of organizational performance improvement. Both of these two aspects are interlinked and mutually distinction, which constitute a complete performance of the budget system.
Operational Steps in Performance Budgeting
- Formulation of objectives of the agency/department.
- Identification of various programmes projects, which will, help, the Agency to, achieves its objective.
- Evaluation, of the programmes in term of the benefits, that they produce compared to the resources that-they consume.
- Selection of the programmes on the basis of cost benefit analysis in order to utilize, the funds in optimal manner
- Development of performance criteria for the various. Programmes (suitable work measurement units, norms, yardsticks, standard and other performance indicators).
- Preparation of long-term physical as well as financial plans.
- Preparation of the annual budget.
- Assessment of performance of each programme and by each responsibility unit and comparison of the same with the budget.
- Undertaking periodical review of programmes with a view to assess the strengths and weaknesses and make modification, if necessary.