Performance Budgeting

Performance budgeting presents government expenditure in relation to the functions, programmes and activities for which it is incurred, rather than only listing administrative objects of expenditure. It links financial inputs with specified outputs and outcomes, enabling assessment of what public money is expected to achieve and what it actually achieves.

The expenditure-results chain

Performance budgeting converts a policy objective into a logical chain that can be measured and reviewed.

• Inputs identify the money, personnel and other resources committed to a programme.
• Activities describe the work undertaken with those resources, such as constructing facilities or delivering services.
• Outputs are the immediate, measurable goods or services produced, while outcomes capture the resulting change in public welfare.
• Indicators, baselines and time-bound targets make planned and actual performance comparable.

Link with the budget cycle

The approach integrates financial information with non-financial performance information throughout budgeting and implementation.

• At budget preparation, departments state programme objectives, estimated costs and physical targets alongside proposed expenditure.
• During implementation, actual expenditure and achievement are monitored against approved financial and performance targets.
• Evaluation compares costs with results through measures such as unit cost, coverage, timeliness and service quality.
• The findings can support accountability, corrective action and the reallocation of funds towards more effective programmes.

Significance and limitations

Performance budgeting shifts attention from procedural spending compliance towards economy, efficiency and effectiveness. However, a performance indicator shows association, not necessarily that expenditure alone caused an outcome.

• It improves transparency by showing citizens and legislatures what expenditure is intended to deliver.
• It is easier to measure direct outputs than complex social outcomes affected by external factors and long time lags.
• Poorly designed indicators may encourage target gaming or neglect of service quality, so performance data require audit and evaluation.