Public Sector Governance and Accountability Series: Budgeting and ...

Budget Methods and Practices 121
Despite evaluations of the system in the United States that raised concerns
about information overload, and despite problems with performance
measurement in the early 1960s, the U.S. methodology was adopted almost
wholesale by the United Nations and exported to developing countries. Implementation
did not proceed smoothly. Typically, countries lacked trained staff
members with the necessary experience and skills to undertake the reclassification
of budgeting and accounting systems or to develop performance
indicators. Coupled with institutional factors such as bureaucratic resistance,
entrenched practices of rent-seeking that fed off traditional budgeting systems
and uninterested legislatures, performance budgets were prepared in an
additional layer of futile activity. Underneath, agencies and finance ministries
continued to budget as previously, incrementally and by line item.
Planning-Programming-Budgeting System
A narrow application of program budgeting emerged in the 1970s in the
United States. The PPB approach to budgeting was applied by Robert S.
McNamara, U.S. secretary of defense and former president of the Ford
Motor Company, to budgeting in the U.S. Department of Defense. Presented
with a budget that specified the proposed allocations to the department by
administrative unit and line items, McNamara insisted that it be reorganized
in line with what the money would be used for. Spending that applied to a
defense objective had to be grouped in one program, whether funds were to
be spent by the Navy, the Air Force, or the land forces. Although part of the
purpose of this exercise was to get the spending plans to make sense, the
process also increased the leverage of the secretary in relation to the individual
armed services (Nathan 2000).
In 1965, President Lyndon Johnson directed all federal agencies to apply
the PPB approach to the entire budgetary process. Agencies were asked to
identify their objectives and different methods of achieving the objectives.
The different methods were then costed and submitted to systematic
comparison of their efficiency and effectiveness. Three kinds of reports were
to be submitted to the Bureau of the Budget:
1. Program memoranda describing the agency’s strategy and comparing the
cost and effectiveness of major alternative programs
2. Special analytic studies that looked at selected current and long-term
issues
3. Program and financial plans that summarized program choices in terms
of their outputs and costs over a five-year period.