Traditional line-item, or black box, budgeting that explains year-over-year incremental changes has resulted in diminished credibility and left more citizens questioning whether taxpayer dollars are being put to good work. Consequently, this type of budgeting is fast becoming a relic, giving way to a new, more strategic approach of budgeting called Performance-based Budgeting (PBB) and its variants - priority-based budgeting and budgeting for outcomes.
The benefits of PBB are many: greater efficiency, cost savings, accountability, transparency and improved services to citizens. PBB also introduces real transparency by increasing citizens’ understanding of how agencies spend money to turn strategic goals into action.
The philosophy of PBB is that resources should be allocated according to how effectively a program or service achieves the goals and objectives that are of greatest value to the community. Here’s how PBB works. A government organizational identifies its most important strategic goals and priorities, develops a balanced program inventory and a comprehensive set of performance measures to track the performance and effectiveness of those programs in support of strategic goals. Then through a collaborative and data-driven process, organizations ranks programs or services according to how well they perform, taking into consideration various criteria, like alignment with strategic priorities, responsiveness to increased funding, innovation, if the program is mandatory, etc. A special committee sometimes referred to as a “Results Team,” which may also include citizens, evaluates and ranks offers or bids received from organizational units to perform services under certain performance and funding levels. Finally, the government allocates funding in accordance with the program evaluation and ranking. Then this information is presented to citizens via web dashboards, budgeting 101 micro sites, budget publications and other methods.
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