The Performance Based Budgeting And The Approach Of Allocating Funds That Link Measured Results With Policy Decisions

Performance-based budgeting measures, reports, and factors the outcome of an agency or program into future budget allocations. Moreover, this approach to appropriations creates incentives for an agency or program to produce measurable results in order to justify spending. This type of budgeting is defined as an “allocation of funds to achieve programmatic goals and objectives as well as some indication or measurement of work, efficiency, and/or effectiveness” (Young 12). Performance-based budgeting originated in the 1940’s after World War II when Hoover’s administration faced debt that surpassed the nation’s gross domestic product. The Hoover Commission attempted to align spending decisions with expected performance by recommending a shift from the traditional emphasis of government inputs to outputs (GAO 1997). Performance-based budgeting was designed to reform budgeting practices to focus on the measurement and reporting of outcomes.

Budget preparation is the principal mechanism for achieving items (1) and (2); item (3) typically features as an element of budget preparation only in industrial countries, while item (4) is essentially an issue in budget execution and cash management (see Sections 4 and 5). Moreover, no system of budget execution or cash planning (the subjects of Sections 4 and 5) can do more than mitigate the problems caused by poor quality or unrealistic budget preparation.

Budget preparation is a process with designated groups and individuals having defined responsibilities. According to Irene S. Rubin “ The public budget process mediates between organizations and individuals who want different things and determines who gets what out of the budget.”1The Government set up an annual budget that includes people perspectives, opinions , accountability and than determine how the budget will get divided based on protected interests. Moreover, Public budgeting determines how government spend money, provide necessary resources , and limit government expenditures to prevent overspending.

Performance Budget: Performance budget is compilation of programs and activities of different departments. It focuses on

\Governments undertake budgeting as one of the crucial activities with a budget comprising of a plan regarding financial operations that comprise of estimated revenues for financing estimated expenditures within a given period (Florida Finance Officers Association, 2011). Effective budget processes require involvement of all stakeholders so as to enhance in arriving at a budget that is well planned as well as communicated to the respective stakeholders.

1. (TCO A) One of our lectures discusses the budget execution stage of the budget cycle. Please identify and explain each of the major steps in the budget execution process. (Points : 25)

The City of Indianapolis uses a performance budget. The budget reflects resource input and service output for various departments of the city. It creates a connection between the funds provided to the public, and shows the outcomes of the services. This way, it breaks down into departments and helps in evaluating spending from every department in a more in-depth way. The budget format creates clear standards by which to measure success, which is evident in its simplistic nature. The structure makes it easy to understand the key variables that inform each department’s allocation in line with the need to meet the city’s development agenda. It promotes program efficiency and ensures that the program is cost-effective, which ensures efficiency and effectiveness of resource allocation. It ties expenditures to each program in relation to the specific goal developed for the program, which helps immensely in ensuring that resource utilization align with the goal, thereby promoting program accomplishment. This budget makes it easy for the organization to modify resource allocation for various tasks, depending on whether they want to upscale or downscale the program.

IDB (2015) identifies four basic aspects of effective performance budgeting. First, performance information system should be established in the system of a government. Performance budgeting calls for incorporating performance information on results in the process of decision making about resource allocation. Offering performance information to the major players in the budget cycle is a very common first step in the move to performance-informed budgeting (Arizti, 2010).

In my PAD 314 Leadership, Supervision and Performance class I am doing this second paper based on the book Performance Measurement: Getting Results by Harry P. Hatry. I will be working as a leader or manager who is doing a performance measurement. Harry said that “the results based on performance measurement is a valuable management tool that is widely applicable to public service programs, including those in developing countries.” In other words, I going to be in charge of making sure that the organization is working on performing it’s function to its optimal ability. I have to make sure things are working correctly in this program. There are many techniques that can help me perform a great job with the company I am working on, but in this

In some countries performance-based budgeting is known as budgeting results and performance funding (OECD, 2007). Young (2003) stated that most experts agree that, “Performance-based budgeting (PBB) is the allocation of funds to achieve programmatic goals and objectives as well as some indication or measurement of work, efficiency, and/or effectiveness”. PBB links directly the expected results and resource requirements (Navin, 2003). It is clearly shown that result is the focus of this budgeting method. Navin (2003) also said that performance measure is important in PBB because it shows whether the activities of the government departments actually make a difference in people’s life. Although performance would not be the only factor in a budget allocation decision, it has a significant contribution in the decision making process because it could give better informed

An effective Performance Management System should be based on :a) Setting up Key Result Area (KRAs) for the Region/Theme/Unit/ Department b) Clarity of Individual Roles and Responsibilities c) Laying down Plans and Performance Indicators for each position d) Periodic assessment of performance of the individual against such Plans/ Performance Indicators e) Identifying factors facilitating and hindering achievement of Plans - development of action plans for overcoming hindering factors and strengthening facilitating factors f) Periodic review of role incumbents' behavior, which contributes to effective functioning and working out action plans for developing such behavior. g) Identification of role incumbents' developmental needs and preparing plans for staff development through training and related activities. h) Implementation and review.

The budget should be realistic, well-reasoned and reflect current conditions. It should be consistent with the short-term and long-term strategic plans and in line with the organization's mission. Flexibility based on facts and assumptions is important, as well as opportunity to amend the budget, if events and conditions vary from the assumptions, to address revenue shortfalls and windfalls, as well as unexpected expenses. Budget measurement should be created on the same basis as the accounting procedures are maintained.

A budget is a tool that helps managers to ensure that the required resources are obtained and used effectively and efficiently as the organization moves towards achievement of its objectives. A budget is stated in terms of money and is usually made for one year depending either on the prior year’s budget or on existing programs (Cleverly & Cameron, 2007, p. 330). Creating a working budget is a very difficult undertaking, and for the budget to be functional, an organization must stick to the budget very closely. No matter how closely a budget is followed, there will be variances. Organizations can expect such variances and be able to work such situations into budgetary

Programme and Performance Budgeting system (PPBS) was introduced in order to replace Line-item Budgeting Systems (LIBS) due to there are some drawback of LIBS. PPBS were introduced in Malaysia on 1969 under Treasury Circular 5/1968.This system helps management make better decision on allocation of resources in order to achieve government objective through selection of best feasible objective. Furthermore, intends to reduce poverty and achieve government development objective. There are some of characteristics of PPBS in overcoming weakness in LIBS which is objective are highlighted, involved performance evaluation, budget express in term of function also effectiveness and efficiency in management.

Budgeting is a process to plan a budget which is used to explain fiscal expectation, expenditure and future planning of an individual, organization or government within a certain period of time (Olawale, et al. 2012). Up until now, there are many methods of budgeting for governments such as traditional budgeting (also known as line item budgeting), zero-based budgeting, and performance based budgeting (PBB). Due to its simplicity, the traditional budgeting which listed groups of expenditure using last year’s data such as office supplies, salary, electricity bill and used incremental approach on them (Navin, 2003) has become the most popular one in many countries. However, many people criticize this budgeting method because many believe that this budgeting method is ineffective and inefficient. As a result, since 1990s, many countries have reformed their budgeting method to performance-based budgeting which links directly the results and the resource allocations (Lee and Wang, 2009). Despite the trend of budgeting reform in the world, developed countries like Germany remain using traditional budgeting method. This result in a question, ‘Is the performance based budgeting better than traditional budgeting?’. Therefore, it is