What best describes performance budgeting?

• A. Allocates a fixed amount of money to each program
• B. Allocates funds based on specific activities' costs
• C. Allocates all funds as a lump sum
• D. Commonly used by schools

Answer: (B)

Performance budgeting is characterized by allocating funds based on the costs of specific activities. This budgeting approach emphasizes the relationship between the funds provided and the outcomes expected from those expenditures. In essence, it requires programs to demonstrate how effectively they are utilizing their fiscal resources to achieve set performance objectives. This method supports accountability by linking financial resources directly to measurable results and outcomes, promoting efficiency and effectiveness in program execution.

The other options contain elements that do not fully capture the essence of performance budgeting. Allocating a fixed amount of money to each program ignores the varying costs associated with different activities and does not incentivize performance. Allocating all funds in a lump sum can lead to inefficiencies and a lack of accountability since it doesn't distinguish the specific costs or expected outcomes tied to those funds. While performance budgeting can be adopted in educational settings, it is not exclusive to schools, which makes the choice that highlights the cost-based allocation of funds the most accurate description of the concept.