The genesis of performance budgeting
Of the very broad field of New Public Management, performance budgeting constitutes only one single part of it. Performance-based payment systems base the salary of an organisation’s employee on the fulfillment of predefined aims, benchmarks or outputs. Similarly, performance budgeting links the budget of a ministry or program to its performance and outcome. Within the New Public Management paradigm, the government seeks a possibility to make better decisions that lead to higher efficiency in the public sector. As mentioned in chapter 2, the public sector may not have enough control organisms, but the voters and tax payers still demand that the government uses their money for the best measures. In this sense, politicians with their decisions are in a certain way committed to the public. Key (1940) asked himself first what the rationale behind the allocation of means is: “On what basis shall it be decided to allocate x dollars to activity A instead of activity B?” (the ‘Key-question’, p.1138). Information and facts should be the basis for decisions. In order to make decisions more rational, the decision makers need to be better informed. The common belief and motivation for performance budgeting is to provide information about the performance of programs and projects in order to decide how much budget should efficiently be allocated to them. Performance in this context is measured by the degree to which the predefined outputs and outcomes were achieved by the program or project manager. In chapter 4.3 I will refer to a more conclusive description of performance information, that is used for budget allocation decisions. When performance information is gathered, efficiency is not only reached by using it for the next year’s budget allocation. It also includes reallocating funds from one badly performing project to a better performing one. It might also be efficient to eliminate programs which show minor performance and do not seem to reach desired outcomes in a certain time period. reallocation or elimination may be a shift in priorities.
KeywordsPublic Sector Budget Allocation Performance Information Budget Process Budget System
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