What is a 'Performance-Based Budget'?

A performance-based budget is a budgeting approach that focuses on allocating funds based on the effectiveness and outcomes of programs. This method emphasizes the achievement of specific performance objectives and the results that programs are expected to deliver, rather than merely historical spending patterns. By aligning funding with measurable outcomes, organizations can enhance accountability and ensure that resources are directed towards initiatives that demonstrate effectiveness and generate meaningful impact.

This approach encourages the evaluation of program performance through metrics and outcomes, which can lead to more informed decision-making regarding resource allocation. When budgeting is linked to performance, it helps to prioritize funding for programs that provide the best return on investment in terms of achieving desired results.

In contrast, other options describe budgeting processes that do not focus on performance metrics and outcomes, thus differentiating them from a performance-based approach. A budget that allocates funds based on historical spending does not necessarily consider current effectiveness, while one designed solely for emergency response is not oriented around program performance at all. Similarly, a budget that focuses on administrative costs ignores the outcome-based principles inherent in a performance-based budgeting framework.