Performance Budget Technique


Budgeting is a management tool. In order that it should be effective it should combine in it the various processes viz. planning and programming, execution, control, review and evaluation. Traditional budgeting system is essentially designed to facilitate financial and legal accountability of the ‘Executive’ to the ‘ Legislature’. In order that the budget should go beyond these two aspects, and provide a comprehensive picture of Government efforts in terms of functions, economics of different programmes, the output and the relationship between the resource provided and the results achieved, and also provide an effective reporting system, the concept of performance budgeting took shape. Performance budget can, therefore, be defined as a comprehensive operational document conceived and presented in terms of functions, programmes and activities with their financial and physical aspects interlinked.

After understanding the contents of the traditional budget of any department, the study of its performance budget would make the budget more comprehensible. The important feature of the document is the Programme-Workload Summary and the explanation of financial requirements. In this summary, attempts are made to relate expenditure provisions in terms of programmes and activities to be carried out and the services to be rendered, targets to be reached, and provide jusification based on past performances and present trends. Usefulness of the performance budget of any Department depends on the extent to which the Programme - Workload Summary part of the document is adequately developed.

There are, however, certain limitations to the usefulness of the performance budget technique. Some Government operations are not susceptible to any satisfactory system of physical measurement. Many outputs cannot be precisely quantified. The usefulness of the technique is, therefore, limited to only those projects which lead to physical achievements which are quantifiable. In short, the performance budget would serve a very useful part in respect of departments handling developmental activities, while in other cases, their usefulness is very limited.

Thursday, 04th Feb 2016, 11:38:12 AM

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