According to Lee and Johnson (2008), Performance budgeting is a type of budgeting that focuses on the final results. The budget is prepared after the evaluation of an organization's activities as a guideline for the process. Those operations which result in the highest profits are allocated the greatest share of resources for the organization to attain the optimum level of returns for all its inputs, acting as a motivational tool for the staff.
Performance Budgeting at the Local Government
Performance budgeting has several benefits which have made it particularly useful for the local government including accountability, clear purpose, performance improvement and transparency. It helps in setting accountability for the public sector since each department has to report on its performance. Government officers are required to quantify all the goals according to their importance as well as the taxpayer’s money. As such, it ensures that the taxpayer and the donors know the source of funds and where their money got spent. This process also ensures that there is a clear definition of the objective for which money will be spent. It thus enables easy evaluation for favorable and unfavorable variances for corrective measures. It also continuously improves the performance of the programs leading to efficiency in organization operations, eliminating the disadvantages of traditional budgeting. Performance budgeting helps in instilling transparency in the process through the undertaking of those projects that lead to the maximum output for the organization and regularly reviewing how efficient they are. As a result, it successfully integrates planning, implementation as well as evaluation, leading to effective management (Shea, 2008).
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Performance Budgeting at the Federal Level
Americans expect the Federal government to provide them with national security as well as other critical services. As such, there is a need for the initiation and implementation of effective programs for these objectives to be achieved. It is the right of the taxpayer that their money should be put into programs that result in the maximum benefit for the public. This can only be possible if there is a clear purpose for the programs and there is a way through which the public can hold the Federal government accountable for its actions. Performance budgeting ensures that departments are self-reporting, enabling the public to access the relevant information about program performance. With this knowledge, they will be in a position to hold the executive accountable for the reported results. The Federal government also needs to ensure that these programs are continuously evaluated for improvements so that the federal dollars are utilized in an optimum manner, which can only be achieved through the adoption of this type of budgeting. Transparency in the budgeting process will enable all the federal agencies as well as the Office of Management and Budget (OMB) to take part in identifying projects that are viable and those that are not (Lee & Johnson, 2008).
Conclusion
Performance budgeting is a type of budget that considers the result of operational units, allocating resources in priority of those that generate the highest returns. The local government adopted this type of budgeting and has benefitted through greater accountability, clarity of purpose, performance improvement and transparency. For the same reasons, the Federal Government stands at an advantage if it adopts the same process, to eliminate the weaknesses of the traditional budgeting process.
References
Lee, R.D. & Johnson, RW. (2008). Public budgeting systems (8th ed.). Sudbury, MA: Jones and Bartlett.
Shea, R.J. (2008). Performance Budgeting in the United States. OECD Journal on Budgeting, 8(1), 1608-7143. Retrieved from https://www.oecd.org/unitedstates/43411061.pdf
