Programme budgeting is a means of providing a systematic method for allocating the resources in ways most effective to meet the goals of the programmed.
By emphasising goals and the programmes to meet them, it overcomes the common weakness of being too tied down to the accounting periods.
By concentrating on goals and programmes in the light of available resources, it puts stress on assessing costs against benefits in selecting the best course towards accomplishing programme goals.
Programme budgeting can be defined as a techniques for reaching strategic decisions on the institution’s programme structure, as well as on achieving a balance between the allocation of resources and the facility’s goals.’
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For example, if an institution’s programme structure includes day surgery, management develops a budget for the identified problem and evaluates the relative costs and benefits of the several programme (day surgery) elements.
After identifying the activities needed for each programme element, the management is in a position to allocate resources to achieve the goals.
Used primarily in government but applicable to any kind of enterprise, programme budgeting has not proved to the great tool it was meant to be.
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The first reason for this is that many executives do not understand the philosophy and theory of the techniques; they only follow directives without really knowing what the system entails.
The second hurdle has been the lack of clearly defined goals. The third difficulty is the lack of attention to planning premises; even with clear programme goals, the budgeter is in the dark without knowledge of critical planning premises.
And lastly, accounting data are seldom consistent with programme budgeting, and there is lack of information in many areas to make meaningful cost- effective analyses. Accounting systems need modifications to fit programmes rather than line activities.