What is a main characteristic of performance budgeting?

Performance budgeting is primarily characterized by its focus on allocating funds for discrete activities or specific programs rather than on a broader or less defined scale. This approach links budgeting directly to measurable performance outcomes, which allows organizations and departments to justify their expenditures based on the results they are expected to achieve. By allocating resources in this manner, performance budgeting ensures that financial decisions are informed by the effectiveness and efficiency of activities, promoting accountability and transparency.

In this context, funds are directed not merely to departments as a whole or based on expected long-term outcomes but to specific programs or activities that can be evaluated based on performance metrics. This strategic focus on discrete activities enhances an organization’s ability to assess the impact of its spending and make better-informed decisions in future budgeting cycles.