Performance budgeting

Definition

Performance budgeting is a budgeting process that focuses on the outcomes and results of government programs, rather than just the inputs or expenditures. This approach aims to improve efficiency and effectiveness in public spending by linking funds to specific performance objectives, enabling better decision-making and accountability in government finance.

5 Must Know Facts For Your Next Test

1. Performance budgeting originated in the 1960s as a response to concerns about inefficient public spending and the need for greater accountability in government finances.
2. This budgeting approach requires clear performance metrics to evaluate the success of programs, which can help identify areas for improvement and reallocation of resources.
3. Governments using performance budgeting can foster a culture of continuous improvement, as agencies are incentivized to meet or exceed established performance goals.
4. Performance budgeting is often combined with strategic planning to align budgetary decisions with broader organizational objectives and priorities.
5. Successful implementation of performance budgeting can lead to increased transparency in government operations and improved public trust by demonstrating how funds are used to achieve desired results.

Review Questions

• How does performance budgeting improve decision-making in government finance?
  • Performance budgeting improves decision-making by linking funding directly to specific performance objectives. This allows government officials to prioritize resources based on outcomes rather than just inputs or expenditures. By focusing on the results of programs, agencies can make informed choices that enhance efficiency and effectiveness in public spending, ensuring that taxpayer dollars are utilized effectively.
• Evaluate the role of performance metrics in the effectiveness of performance budgeting systems.
  • Performance metrics are crucial in performance budgeting systems as they provide measurable indicators of program success. These metrics help track progress towards goals and enable agencies to assess whether they are achieving desired outcomes. Without reliable metrics, it becomes difficult to evaluate performance accurately, which can lead to misallocation of resources and hinder improvements in public service delivery.
• Analyze how performance budgeting can transform government accountability and public trust.
  • Performance budgeting can transform government accountability by requiring officials to justify their budgetary decisions based on program results rather than historical expenditures. This shift encourages transparency as agencies must demonstrate how public funds contribute to achieving specific outcomes. As a result, when citizens see tangible results from their tax dollars, it fosters increased public trust in government operations and promotes a culture of responsible fiscal management.

Related terms

Outcome-based budgeting: A budgeting method that allocates funds based on the expected outcomes or results of programs, emphasizing the impact of spending.

Budget accountability: The responsibility of government officials to justify their budget decisions and demonstrate the effective use of public funds.

Program evaluation: A systematic method for assessing the design, implementation, and outcomes of government programs to determine their effectiveness and inform budgeting decisions.