Wednesday, September 16, 2009

PERFORMANCE BUDGET






PERFORMANCE BUDGETTING
1 The performance budgeting came into effect in Railways in 1979-80 and has been gradually stabilizing for purposes of management control over the costs in relation to the physical activity. Before discussing the merits and advantages of P.B, it is nccessary to have an understanding the form of budget which was in existance prior to the introduction of Performance Budgetting.
in one of the reports the World Bank Study team has described Budget as prepared in the Past as a "routine and dogged exercise, undertaken and produced by the bureaucratic elite" The form in which the Railway Budget was presented to Parliament till 1979-80 provided for appropriaition of funds for certain items of expenditure falling under each demand without correlating expenditure to the quantum of service to be rendered with the aid of the funds sanctioned. For all practical purposes the Budget was a potrayal or record of cash transactions and their anticipations; it did not at all serve as a tool for management or as a device for evaluation performance-
The Conventional Budget was more ‘appropriation oriented’ than 'performance oriented’. There were in all 22 demands for grants not strictly representing homnogenous functional groups or activities though the demands for grants’ are supposed to basicaly represent the estimated expenditure in a 'Single' or ‘homogenus’ group of functions. The other defects in the old system of budgetting were;-
i) The Accounts heads under the detailed heads of accounts did not correlate with the Budget heads. The expenditure under demands had to be eolleccted from different revenue abstracts.
ii) Budget had liltle relevance to performance.
iii) When Parliament sanctioned the budget, it was not aware of the quantum of services that would be rendered in Ihe various aspects of Railway activities,
i5.2 Based on the recommendations of a Task Force appointed for the purpose the demands for grants have been restructured with the approval of the Estimates Committee. It was therefore considered necessary that the budget as a document must be capable of fulfilling the following objectives:-
i) to present more clearly the purpose and objectives for which funds are sought and to bring out the programmes and accomplishments in financial and physical terms.
ii) to help in the better understaniding and review of the budget
iii) to improve the formulation of the budget and to aid the process of decision making at all levels of Govt., and
iv) to incorporate an element of accountability,
3 Performance budgetting therefore, implies fixing in advance performance, targets, under each activity, in acceptable and feasible measures of output, fixing corresponding finance outlay for achieving these physical outputs and monitoring and comparing the actual performance both in physical and financial terms.
The steps involved in Performance Budgetting, are identification of functions, programmes and activities. In order to achieve the objectives of P.B, the demands for grants have been restructured to spell out the functions, activities and objects. Each demand has 3 sub­divisions -
i) Sub Heads of Demands representing major functions,
ii) Detailed Heads representing further break-up of the activity classification i.e. identifying 'Why' the expenditure is incurred,
iii) Primary Units identityfying 'what' the expenditure denotes (objects of expenditure, i.e salary, allowances, material etc)
An example of concordance between the Sub-Heads of Demands for Grants and Main Heads of Accounting Classification is given below :-



1 comment:

  1. An example of concordance between the Sub-Heads of Demands for Grants and Main Heads of Accounting Classification is given below ???????
    Where is that example sir?

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