Performance Budget
Purpose:
To motivate the employees about commitments to produce positive results
Salient features:
Cost & Benefit of each activity is analysed regarding allocation of funds.
Involves work measures, benchmarking & unit cost.
Consists of:
Identify the targets and methods of evaluating performance of each unit of an Organization.
Taking into account of Inputs - Resources and Outputs - Services
To be completed within a particular Time frame
Allocation of Funds based on specific goals
Advantages:
Improves Performance in continuous manner
Makes clear Program Goals/Objectives/Fixing targets for performance
Justifies - Reallocation of Resources on the basis of Performance.
Higher transparency & accountability to Taxpayers
Better Cost estimation enables to allocate Funds to various projects by their importance.
Limitations:
Focus more on Targets, not on means of achievement
Focus more on Quantity, not on Quality.
Data may be manipulated to reach targets to get Funds
Becomes ineffective without a Proper system of Accounting & Reporting
In Govt Organizations like Indian Railways with multiple agencies, disagreement may arise on Spending priorities.
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