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Management. Performance Based Budgeting - Essay Example

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The commonly known line item budget is associated with showing details of expense on may be office supplies, transport, accrued benefits, wages or salaries. This is the point of distinction between it and Performance Based Budgeting (PBB)…
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Management. Performance Based Budgeting
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"Management. Performance Based Budgeting"

Download file to see previous pages While traditional budget tends to attach budget based on expense on specific items, PBB is concerned with general event outcomes (Last, 2009 p.2456). The planned and actual performance are both evaluated in terms of efficiency and effectiveness and the assessment used to allocate resources rather than using blind resource allocation system which emphasizes on organizational units and line item expenses. PBB has an objective of improving efficiency and effectiveness in public expenditure by linking allocation of funds to public organizations to their actual and projected performance (Guajardo, 2001 p.457). A basic form of PBB has a design, which ensures that the participating decision makers provide a systematic consideration to the results achieved by the expenditures at various government units when formulating budget on government expenditure. Performance Based Budgeting needs the following essential elements for proper budgetary planning. First it requires a measurable quantity of inputs available for the given project. These include monetary value of all resources ready to be injected in the project. Another requirement is units of output from the project. This involves assessment of the outcome of the project (Hughes, 2012 p.1004). Next is calculation of efficiency. This involves assigning an amount of input to each unit produced in order to get productivity per unit unit or activity. Lastly is analysis of achievement of the predetermined level of performance. The organization must have set goals, which it wants to accomplish; hence, it is necessary to measure the effectiveness of the management system used in terms of objectives achieved. Policy objectives and organizational goal development is the starting point in the PBB process. The achievement of goal and objectives should be reflected using developed performance measures. In the process of budget preparation, the main considerations are, past performance, current performance and projected future performance information (Hood, 2009 p. 456). A detailed decisional analysis is undertaken in order to come up with the best and the most appropriate decision. The final decision should be the best in interlinking resources allocations to the measures, objective and goals. The outcome is a final report financial details and the recommended performance information. The report has a description of how the initiated measures taken influence the strategic plan and the projected result from the project. PBB is effective in Periodic project evaluation as regularcheckup is performed as the project proceeds. Financial information and performance information should be appropriately aligned and coincided during the duty execution in order to enhance efficiency in its implementation. Performances audit is done at the end of the financial period or project to determine the effectiveness of the PBB system used. PBB is beneficial in the sense that it raises accountability of an organization, as it sets targeted outputs that enable the organization to work hard towards achieving. It encourages proper decision-making that are aimed at reducing the gap between the desired level of output and the actual level of output. PBB ensures that government strategic decisions are carefully implemented in terms of financial analysis. It is a tool of trigger to policy makers, customers and service ...Download file to see next pagesRead More
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