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A true Performance Budget is not simply a Line-Item (or object class) budget with some
program goals attached. It tells you much more than just that for a given level of funding a
certain level of result is expected. A real Performance Budget gives a meaningful indication
of how the dollars are expected to turn into results. Certainly not with scientific precision, but
at least in an approximate sense, by outlining a general chain of cause and effect. The most
effective governmental Performance Budget does this by showing, for each program area,
how dollars fund day-to-day tasks and activities, how these activities are expected to generate
certain outputs, and what outcomes should then be the result.
Several performance budget examples are illustrated on this web site, including on other
pages. See the illustration of a local government performance budget on the page Local
Government Illustration of PBB.
The first group of tables below illustrate the relationship between a higher-level, outcome-
oriented goal in an agency's Performance Budget and the next lower-level goals of the
supporting programs necessary to meet that goal, as well as an alternative view of the same
costs as shown in the agency's Line-Item Budget (known as an Object Class Budget in the US
Federal Government). Note that the budget figures highlighted in gold are identical, while
the figure in blue can be followed down to the next level of supporting goals and activities.
The tables below illustrate the relationship between measurable performance goals in the
Performance Budget and the program activities necessary to meet those goals, as well as an
alternative view of the same costs as shown in the program's Line-Item Budget. Note that the
budget figures in blue are identical.
This program Performance Budget and its Line-Item Budget are then cascaded down to the
next sub-unit level, as illustrated in the following tables. Here, Activity 3 from the
Performance Budget above is shown as cascaded down to the sub-activity level. Note that
the budget figure in red for Activity 3 above is identical to the figures in red in both the
Performance Budget and its Line-Item Budget shown below. Also note that in both of these
examples, only the program (or sub-program) goals and results are shown on a multi-year
basis, in order to keep the examples simple. However, an organization might find value in
also tracking the multi-year trends in unit costs of an output.
The lead design architect of CASCADE is John Mercer, the Senior Consultant for
Government Performance at Capital Novus and internationally recognized as a
“foremost expert in performance-based budgeting.”
The managerial cost accounting concepts and standards contained in this statement are aimed
at providing reliable and timely information on the full cost of federal programs, their
activities, and outputs. . . . In July 1993, Congress passed the Government Performance and
Results Act (GPRA) which mandates performance measurement by federal agencies. In
September 1993, in his report to the President on the National Performance Review (NPR),
Vice President Al Gore recommended an action which required the Federal Accounting
Standards Advisory Board to issue a set of cost accounting standards for all federal activities.
Those standards will provide a method for identifying the unit cost of all government
activities.
More information about this cost accounting reform may be found on this web site's pages on
Activity Based Costing/Management and on ABC/M Compliance.