Line-Item Budgeting (Traditional/Incremental)
Line-item budgeting categorizes expenditures by the specific objects of expense, such as salaries, travel, office supplies, and fuel.
- Mechanics: It heavily relies on incrementalism, where the current year’s budget is simply adjusted upward or downward by a small percentage to form the next year’s budget.
- Strengths: It is simple to prepare, easy to understand, and provides rigid control over inputs.
- Weaknesses: It focuses strictly on what the government buys rather than what it achieves, which often protects inefficient programs from scrutiny.
Program and Performance-Based Budgeting (PBB)
Performance-Based Budgeting shifts the focus from inputs (what is bought) to outputs and outcomes (what is achieved). Funds are allocated to specific programs with defined objectives.
- Mechanics: Every program includes Key Performance Indicators (KPIs) and measurable targets. For instance, instead of approving a line item for “medical supplies,” PBB allocates funds to a “Maternal Healthcare Program” with a target to reduce infant mortality by a specific percentage.
- Strengths: It links funding directly to public policy goals, improves operational efficiency, and enhances public accountability.
- Weaknesses: It demands highly sophisticated data collection systems and requires subjective performance metrics that can be easily manipulated.
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