Question

Question 1

Performance Management Budgeting; What is performance budgeting and why do we need it? Discuss in detail the following:

1. Linkage of funding and results          

B. Using Performance Information

Answer 1

Budgeting;-

In simple term budget is a blue print of a plan expressed in quantitative terms. Budgeting is a technique for formulating budgets. In other means budgeting is a procedure for planning, co-ordination and control of business enterprise.

Performance budgeting :-

Performance budget has been defined as a budget based on functions, activities and projects. In other it may be described as the budgeting system in which input costs are related to the performance or end result. It is a system of budgeting which provides for appraisal of performance as well as follow up measures. The performance budget is a budget based on functions, activities and project which focus attention on the accomplishment, the general and relative importance of the work to be done and the services to be rendered rather than upon the means of accomplishments such as personnel, service, supplies, equipment etc.

Need of Performance Budgeting:-

Performance Budgeting can improve communication between budget factors, improve public management in terms of effectiveness, help more informed budgetary decision-making and accomplish high transparency and accountability. The major aim of performance budgeting is to improve the efficiency of public expenditure, by linking the funding of public sector organizations to the results they deliver. It adopts organized performance information (indicators, evaluations, program costing) to make this link. There is a good impact of performance budgeting on organizations in terms of improved prioritization of expenditure, and in improved service effectiveness. Performance Based Budgeting tries to resolve issues related to decision making problems. Performance may be judged by certain programs ability to attain objectives that contribute to a more abstract goal as calculated by that programs ability to use resources efficiently by linking inputs(funding) to outputs(results).

A .Linkage of Funding and Results ;-

Performance Budget focuses on the linkage of ''Funding'' and “Results”.

Performance Budgeting Provides-

• The purpose and objectives for which funds are required
• Costs of project or related activities proposed to accomplish those objectives
• The output or result that will be produced under each activity
• The cost and benefit analysis of each activity are analyzed for decision making

Performance budgeting modifies the focus on resource allocation from the objects of expenditure to public programs designed to serve strategic objectives of the government. Funds are allocated to various objectives (results) and spending agencies manage the lump sum allocation in seeking more cost-effective and innovative ways of achieving results, and central budget control focuses on the achievement of program goals by each department rather than by the detailed line itemization of the department’s budget.

B. Using Performance Information ;-

Performance information helps in-

(A)Development of performance criteria for various programmes

(B)Assessment of performance of each programme and by each responsibility unit

(C)Comparison of the actual performance with the budget

(D)Undertaking periodic review of the programme with a view to make modifications as required