What is "performance budgeting"?

Performance budgeting is a budgeting approach that emphasizes the effectiveness and outcomes of programs rather than merely focusing on the inputs or historical expenditures. This method aims to allocate funds in a way that directly correlates with the results produced by various programs, assessing how well they meet defined goals and objectives.

By prioritizing program effectiveness, performance budgeting encourages accountability among program managers and stakeholders, as it requires them to demonstrate how their programs contribute to overall organizational success. Decision-makers use performance data to inform budget allocations, ensuring that resources are directed towards those programs that are performing well or showing potential for improvement.

This contrasts with other budgeting methods, such as those based on historical spending or departmental requests, where the focus may be on past expenditures or fulfilling requests without a thorough evaluation of effectiveness or results. Performance budgeting thus fosters a more strategic and outcome-oriented allocation of resources, aligning budgeting processes with the broader goals of the organization.