Performance Budgeting – meaning.

Performance budget has been defined as a ‘budget based on functions, activities and projects.’ Performance budgeting may be described as ‘the budgeting system in which input costs are related to the performance, i.e., end results.’ According to National Institute of Bank Management, Performance budgeting is, “the process of analyzing, identifying, simplifying and crystallizing specific performance objectives of a job to be achieved over a period, in the framework of the organizational objectives, the purpose and objectives of the job.” From the above definitions, it is clear that budgetary performance involves the following:

  • Establishment of well defined centres of responsibilities:
  • Establishment for each responsibility centre- a programme of target performance is in physical units.
  • Forecasting the amount of expenditure required to meet the physical plan laid down.
  • Comparison of the actual performance with the budgets, i.e., evaluation of performance. 5. Undertaking periodic review of the programme with a view to make modifications as required.

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