Government Budgeting

Performance Budgeting

Performance budgeting, as described by Lee, Johnson, & Joyce (2008), is aimed at developing workload and unit cost measures of activities for the purpose of budget preparation. Performance budgeting was an outcome of a conscious effort in the 1940s and 1950s to include quantifiable information into the budget decision-making process. The measurement of job activities performed by United States postal employees is identified by Lee et al. (2008) as an example of performance budgeting usage. The amount of work that could be accomplished by postal employees was measured and used to estimate the total number of employees needed for the upcoming budget year. Although the significance of this approach to budget decisions is considered minimal by scholars, e.g., Lee et al. (2008), some lasting effects are evident. “Performance budgeting did introduce on a wide scale the use of program information in budget documents as well as the use of performance information for various purposes” (Lee et al., 2008, p. 149).

Performance budgeting is particularly suitable for local government budgeting efforts because of limited organizational scope and employee functions. The workload and unit of cost measures of activities need to be identified, measured, and interpreted in order to apply performance budgeting. The workload and unit cost measures of activities are difficult to assess in federal and state organizations because of the large size and nature of immeasurable activities performed by employees. Local governments, however, are smaller and may benefit from performance budgeting. Furthermore, employee functions at the local level may be easier to identify, measure, and interpret; therefore producing meaningful unit cost measurements. Despite its potential value, Lee et al. (2008) stated that only 2% to 3% of local governments use performance budgeting in its pure form.

It is important to note that Lee et al. (2008) made a clear distinction between performance budgeting and performance-based budgeting. The latter budgeting system emphasizes the use of strategic planning and performance measurement in the development of organizational budgets. Performance-based budgeting differs from performance budgeting in that it focuses on results rather than on workload or activity (Lee et al., 2008).

Additional Resource

Schick, A. (1966). The road to PPB: The stages of budget reform. Public Administration Review, 26 (4), 243-258.

This article examines the history of budgetary reform in the United States. Emphasis is given to the third and final stage of budgetary reform; identified as contemporary planning-programming-budgeting. This budgeting system is evaluated and its contributions to management orientation are assessed.

Assignment Overview

This week’s readings and assignments aim to provide an understanding of budget execution, as well as the financial management elements of accounting, reporting, and auditing. Critical sections within the assigned readings that you should focus on when preparing to complete the discussion board forums and the written assignment include those with information on budget authorization and performance budgeting. It may be helpful to use an example in your initial response to the second discussion board prompt. Your written assignment should assess a public policy of your choice and provide a determination of the effects, both positive and negative, on the local government’s operational budget. Please keep in mind the selected public policy should have an impact on a local government in the area where you reside. Remember to support the positions established in your post with scholarly research and literature. Please refer to the grading criteria provided in the ‘About Discussions’ and ‘Course Grading’ sections of the online classroom when composing your responses to the discussion board forums and the written assignment.  Carefully review the grading rubric for the criteria that will be used to evaluate your assignment.

References

Lee, R. D., Johnson, R. W., & Joyce, P. G. (2008). Public budgeting systems (8th ed.). Sudbury, MA: Jones and Bartlett. ISBN: 9781449611538