All That You Should Know About Performance Budgeting
The linking of performance with the funds that is to be received by someone is known as performance budgeting
. More and better your perform more and better you get next time around. Performance budgeting is another fancy term used for performance appraisal. Here you link your pay with your performance. The only difference being that performance budgeting is a term used in the public sector to show links between funds provided by the people and the outcomes of services.
It becomes necessary to think logically in a planned economy in terms of budgeting in both the ways as in context of nearest link in a well-integrated system of planning programming and budgeting and also as a tool of management. It provides a system of information for decision-making, coordination, evaluation and control to the appropriate levels of the organisation
Outcomes and outputs are more important in this form of budgeting rather than inputs. In other words,allocation of funds and resources are based on their potential results (future based). Particularly in the public sector the performance budgets main priority is to look for employees commitment to produce positive results. It is also a useful tool for the government to evaluate itself. With public attention being increasingly focused on the Governments efforts, performance budgeting is a smart way to put their fears to rest.
The objective of performance budgeting is to improve expenditure control as well as public sector efficiency and performance.
Types of performance budgeting
Broadly performance budgeting is divided in to three types:
1. Presentational performance budgeting: The documents present the performance details. Its main use is just to extract information and it play no role in the activities which involves decision making. Stamped budget documents of government they are.
2. Performance informed budgeting: It plays an important role in budget decision making but it do not help anyway in allocating resources and the like. It is more or less related to future performance or past performance.
3. Direct performance budgeting: Here, the resource allocation takes place keeping in mind the past performance. But it limits itself to only some of the parts of the public sector.
How is performance information used for budgeting
Many countries include tons of non-financial data in their budget documents, but this doesnt imply that it is used to make budget decisions. But for this non-financial data to be translated to some budget decision, the performance information from the previous budget is needed.
To begin with the budget has to be drawn up in a way that looks at why and how money is allocated and whether its use produces the desired results or outcomes. Generally this can be gauged from public surveys. For quite a lot of countries, this has meant changing the entire budget preparation process.
How is performance budgeting put into practice
There are various approaches to the performance budgeting.
1. Top down: In developing and aiding reform central Government or ministries play the central role.
2. Bottom-up: Individual civil service societies or organizations act as agents of change.
3. Incremental changes In order to avoid lump sum benefit in one shot new reform is introduced step by step.
4. Big bang approach Most of the reforms are overnight institutionalized. These often have bigger chances of failure.
These performance budgeting norms are creating waves in many countries and are becoming an important part of the states institution.
by: IshanGoradiya
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