Things you must know about performance budgeting The linking of performance with the funds that is to be received by someone is known as performance budgeting. The better you perform the better funding you will get next time round. It is another fancy term for what we generally call performance appraisals. It is but linking your pay to your performance. In public sector performance budgeting is used to show the definite link between outcomes of services and funds provided by the people. In a planned economy, it is logical to think in terms of budgeting both as the nearest link in a wellintegrated system of planning, programming and budgeting and as a tool of management. For organisation it provides a system of information for decision making, coordination, evaluation and control to the appropriate levels Outcomes and outputs are more important in this form of budgeting rather than inputs. Potential future based results decide the allocation of funds and resources. Performance budgets place priority on employees' commitment to produce positive results, particularly in the public sector. It is also a useful tool for the government to evaluate itself. Performnce budgeting is the smart way to put the fears of public on rest as they are nowadays focusing more on government’s efforts. The objective of performance budgeting is to improve expenditure control as well as public sector efficiency and performance. Types of performance budgeting There are broadly three types of performance budgeting: 1. Presentational performance budgeting: This means that performance details are presented in the form of documents. 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: In this you allocate resources based on past performance. But this is limited only to a few parts of the public sector. How the information on performance is put use for budgeting Many countries include tons of non-financial data in their budget documents, but this doesn’t imply that it is used to make budget decisions. In order to translate non-financial data to some budget decision the information of performance from the previous budget is needed. To make a start budget should be put up in a way that will look into how and why money is allocated and does it produce desired outcomes or results. 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 Performance budgeting has various aspects. 1. Top down: In developing and aiding reform central Government or ministries play the central role. 2. Bottom-up: The agents of change is acted by individual civil service societies or organizations.
3. Incremental changes Every new reform is introduced step by step, so there is no lump sum benefit in one shot. 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 state’s institution.