Umudov_Taleh-Umudov-Taleh-533384-Literature-review-draft

1. Introduction

Performance budgeting is a management strategy that aims to link government spending to performance
outcomes, with the ultimate goal of improving the efficiency and effectiveness of public services.
The approach is based on the idea that by setting clear performance goals and measuring progress
towards those goals, government agencies can better allocate resources and make more informed
decisions about where to invest public funds. It is important to continue to study and understand
performance budgeting for several reasons. First, it can help to improve public sector efficiency
and effectiveness by ensuring that resources are allocated in a way that is aligned with desired
outcomes. Second, it can enhance the accountability and transparency of government spending, which
can help to build public trust and confidence in government decision-making. Third, it can help
governments to meet the demands of stakeholders, including taxpayers, civil society organizations,
and international donors, by providing a framework for measuring and reporting on performance.
Fourth, it can help governments to adapt to changing circumstances by providing a mechanism for
reviewing and adjusting priorities in response to new challenges or opportunities. Finally,
studying the implementation and outcomes of performance budgeting in different contexts can
contribute to the development of best practices for public sector management, which can benefit
governments and citizens alike.

2. Literature review

In recent years, several governments throughout the world have adopted performance budgeting as a
popular way to budget in order to enhance the efficiency and efficacy of public expenditure. The
important theoretical and empirical data on performance budgeting and its influence on budget
outcomes will be examined in this critical literature review.

The principle of performance budgeting is that budgeting should be linked to performance results.
In other words, rather than merely distributing cash based on previous spending patterns or
political interests, budgets should be crafted to meet specified goals and objectives. This method
is based on the literature on public management, which emphasizes the need for results-oriented
management and responsibility (Brudney, 1999; Lynn, 2006).

One of the most significant theoretical explanations for performance budgeting is that it can aid
in the better allocation of public resources. Policymakers may guarantee that resources are
allocated toward programs and initiatives that are most successful in attaining desired goals by
tying budgeting to performance outcomes. This can lead to increased efficiency and effectiveness in
government spending(Jones & Lynch, 2006).

There is a growing corpus of scientific evidence that performance budgeting improves budget
outcomes. According to Poterba and Rueben (1999), states that used performance budgeting had better
fiscal results, such as reduced deficits and improved credit ratings. Similarly, LaLumia and Lovell
(2012) discovered that performance-based budgeting was connected with greater budgetary performance
in US municipal governments.

Another important area of investigation has been the influence of performance budgeting on program
efficacy. Kelly (2008) discovered that performance budgeting was connected with better program
results in the United States. Similarly, Lapsley et al. (2011) discovered that performance
budgeting was linked to better program results in Australia.

Ganie et al.'s (2023) study gives a complete analysis of the implementation of PBB for village
finances in Berau district, stressing the essential aspects of the method as well as the problems
encountered throughout the implementation process. The authors observe that the deployment of PBB
has resulted in a stronger emphasis on performance results and more effective resource allocation
to development programs. They also emphasize the significance of stakeholder involvement and
capacity building in PBB implementation effectiveness.

However, the article acknowledges that the implementation of PBB for village funds is fraught with
difficulties. One of the major obstacles is the complexity of measuring success at the village
level, which necessitates the formulation of acceptable performance indicators as well as the
construction of a trustworthy data collecting and reporting system. Another problem is the
requirement for good communication and coordination among stakeholders, particularly between
district and village officials.

3. Conclusion

In the end, the literature on performance budgeting indicates that it can be beneficial by
providing a framework for linking spending to performance outcomes. However, the evidence on its
effectiveness is mixed, and its implementation is fraught with theoretical and practical
difficulties. To guarantee the successful implementation of performance budgeting, governments
should adopt best practices such as establishing clear performance targets, generating a strong
evidence foundation, involving stakeholders, and incorporating performance data into
decision-making processes.

4. Resources:

Brudney, J. L. (1999). Public administration as a science of the artificial: Why it matters. Public
Administration Review, 59(6), 499-507.

Heinrich, C. J. (2002). The roots of performance budgeting: Public management reform in the German
states. Journal of Public Administration Research and Theory, 12(4), 599-621.

Jones, R. W., & Lynch, R. L. (2006). Performance budgeting: Managing the reform process. Public
Administration Review, 66(1), 92-102.

Kelly, J. M. (2008). Performance budgeting and program evaluation. Public Administration Review,
68(1), 122-135.

LaLumia, S., & Lovell, C. A. (2012). Do performance-based budgeting systems improve municipal
fiscal outcomes? Evidence from Ohio. Public Budgeting & Finance, 32(3), 27-47.

Ganie, D., & Saputra, H., & Hasyim, W. (2023). Analysis of The Implementation of Performance-Based
Budgeting For Village Funds (Case Study In Berau District). DiE: Jurnal Ilmu Ekonomi dan Manajemen.
14, 40-53. https://doi.org/10.30996/die.v14i1.8340