Program Budgeting

This article focuses on the divergence between the principle and the reality of program budgeting. The principle is that program budgeting is based on the “output” classification of expenditure. In reality, however, program budgets are more like hybrids between the organisational and functional classifications of expenditure. The reasons for this divergence between principle and reality are analysed by examining the costs and benefits of the output classification of expenditure, contrasted to organisational/functional classification, for the key purposes of budgeting—namely control, estimation and expenditure review and appraisal. It is concluded that, although the output classification of expenditure offers significant benefits from the standpoint of expenditure review and appraisal, it is inferior to the organisational/functional classification from a cost benefit point of view. This is essentially because of the very substantial costs of obtaining reliable information on actual expenditure in terms of output categories, relative to the lower costs of obtaining organisational/functional information. With respect to the other purposes of budgeting, two conclusions are drawn. First, output categories are much less suited to the estimation of forward expenditure than are organisational/functional categories. Second, the use of output categories for control (i.e. expenditure instruction) purposes is inappropriate, principally because it is unnecessary and creates unwarranted expenditure inflexibilities. It is argued, however, that this deficiency of the output categories for control purposes is a reflection of the general inappropriateness of prescriptive program budgets (whether based on output or organisationa/functional categories)

Actuarial science · Control (management · Divergence (linguistics · Economics · Estimation · Management · Point (geometry · Public economics · Fiscal Policy and Economic Growth · Local Government Finance and Decentralization · Mathematics · Public-Private Partnership Projects

• Budgeting

  Aaron Wildavsky•Budgeting•1975

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