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

A Primer on Performance Budgeting 145
programs and, therefore, facilitates more informed budgetary decision making.
A performance budget offers greater managerial flexibility by providing the
program or department manager a fixed lump-sum allocation that may be
used for various needs in order to achieve the agreed-on results in service
delivery. Public managers enjoy increased managerial discretion but are held
accountable for what they achieve in service delivery performance.
Considerations in Performance Budgeting Reforms
For performance budgeting reforms to achieve their objectives, a number of
considerations must be kept in mind while implementing such reforms.
Budget Classification
Performance budgeting shifts the focus on resource allocation from the
objects of expenditure to the public programs that are 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. Central
budget control focuses on the achievement of program goals by each agency,
rather than by the detailed line itemization of the agency’s budget.
Performance Measurement and Reporting
An effective performance budgeting system depends on reliable performance
measurement and reporting. Because performance measurement and
reporting do not directly affect budgetary allocations, the initiative does not
immediately incur financial risks for public managers and therefore serves
as a good entry point for reform. The construction of a performance measurement
and reporting system provides a channel for public officials to reach
agreement on program goals and objectives, to discuss and compromise on
the selection of performance measures, to address their questions and concerns,
and to overcome misgivings about performance budgeting.
A performance budgeting system requires a basket of measures that
assess public programs through a variety of filters (McGill 2001; Wang 1999),
such as inputs; outputs (quantity and quality of goods and services produced);
efficiency (unit cost to produce outputs); service quality (measures of service
such as timeliness, accessibility, courtesy, accuracy, and satisfaction); and
outcomes (progress in achieving program objectives). Different measures
assess different aspects of budgeting practice. The use of a basket of indicators