{"id":19041,"date":"2024-12-16T16:19:52","date_gmt":"2024-12-16T09:19:52","guid":{"rendered":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/?p=19041"},"modified":"2024-12-16T16:19:52","modified_gmt":"2024-12-16T09:19:52","slug":"why-are-performance-budgets-necessary","status":"publish","type":"post","link":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/2024\/12\/16\/why-are-performance-budgets-necessary\/","title":{"rendered":"WHY ARE PERFORMANCE BUDGETS NECESSARY?\u00a0"},"content":{"rendered":"<p><span data-contrast=\"auto\">The traditional, and most commonly prepared, budget is referred to as an <\/span><b><span data-contrast=\"auto\">object classification budget <\/span><\/b><span data-contrast=\"auto\">because it is characterized by the expenditure classification that categorizes objects\u2014<\/span> <span data-contrast=\"auto\">such as the type of goods or services to be acquired. The primary virtue of an object classification<\/span> <span data-contrast=\"auto\">budget is that it facilitates control. The managers who prepare the budget, and the legislators who<\/span> <span data-contrast=\"auto\">pass it, establish rigid spending mandates and thereby direct, in detail, how every dollar should<\/span> <span data-contrast=\"auto\">be spent. But this strength may also be a shortcoming:<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:0,&quot;335559740&quot;:360}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"auto\">By expediting control, an object classification budget discourages planning. It encourages toplevel decision makers to focus on specific line items rather than on overall entity objectives, strategies, and measurable performance targets. Thus, the officials of a school district may focus on the need for increased appropriations for salaries, fuel, supplies, and food while failing to consider how the additional outlays will affect the school\u2019s primary educational mission.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559685&quot;:284,&quot;335559739&quot;:0,&quot;335559740&quot;:360,&quot;335559991&quot;:284}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"auto\">It promotes bottom-up rather than top-down budgeting, with each unit presenting its fiscal requirements for approval in the absence of coordinated sets of goals and strategies.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559685&quot;:284,&quot;335559739&quot;:0,&quot;335559740&quot;:360,&quot;335559991&quot;:284}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><span data-contrast=\"auto\">It overwhelms top-level decision makers with details. As a consequence, the decision makers are induced to take budgetary shortcuts\u2014such as increasing all expenditures by a fixed percentage.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559685&quot;:284,&quot;335559739&quot;:0,&quot;335559740&quot;:360,&quot;335559991&quot;:284}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" aria-setsize=\"-1\" data-aria-posinset=\"4\" data-aria-level=\"1\"><span data-contrast=\"auto\">By failing to relate specific <\/span><i><span data-contrast=\"auto\">inputs <\/span><\/i><span data-contrast=\"auto\">(factors used to provide goods and services) to <\/span><i><span data-contrast=\"auto\">outputs <\/span><\/i><span data-contrast=\"auto\">(units of service) or <\/span><i><span data-contrast=\"auto\">outcomes <\/span><\/i><span data-contrast=\"auto\">(accomplishments in terms of organizational objectives), it limits post budget evaluation to whether spending mandates were observed.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559685&quot;:284,&quot;335559739&quot;:0,&quot;335559740&quot;:360,&quot;335559991&quot;:284}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">Owing to these deficiencies, many governments and not-for-profits have adopted performance budgets in place of, or as a supplement to, object classification budgets. Performance budgets focus on measurable units of efforts, services, and accomplishments. They are formulated so that dollar expenditures are directly associated with anticipated units of outputs or outcomes.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:0,&quot;335559740&quot;:360}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">They enable managers to define goals, plan their resource needs, and measure the achievement of their various objectives.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:0,&quot;335559740&quot;:360}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Comprehensive performance budgeting systems require managers to specify objectives, consider alternative means of achieving them, establish workload indicators, and perform cost\u2013 benefit analyses.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:0,&quot;335559740&quot;:360}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">To be sure, other sound managerial approaches can overcome the limitations of object classification budgeting. Performance budgets, however, institutionalize effective decision processes and help ensure that they are carried out.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:0,&quot;335559740&quot;:360}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Referensi<\/span><\/b><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Granof, Michael H., Saleha B. Khumawala, Thad D. Calabrese, and Daniel L. Smith.\u202fGovernment and not-for-profit accounting: Concepts and practices. John Wiley &amp; Sons, 2016.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Otley, D. T. (1978). Budget use and managerial performance.\u202f<\/span><i><span data-contrast=\"none\">Journal of accounting research<\/span><\/i><span data-contrast=\"none\">, 122-149.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The traditional, and most commonly prepared, budget is referred to as an object classification budget because it is characterized by the expenditure classification that categorizes objects\u2014 such as the type of goods or services to be acquired. The primary virtue of an object classification budget is that it facilitates control. The managers who prepare the [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-19041","post","type-post","status-publish","format-standard","hentry","category-articles"],"featured":false,"_links":{"self":[{"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/posts\/19041","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/comments?post=19041"}],"version-history":[{"count":1,"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/posts\/19041\/revisions"}],"predecessor-version":[{"id":19042,"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/posts\/19041\/revisions\/19042"}],"wp:attachment":[{"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/media?parent=19041"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/categories?post=19041"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/binus.ac.id\/bekasi\/accounting-technology\/wp-json\/wp\/v2\/tags?post=19041"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}