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Programme budgeting,developed by U.S. president Lyndon Johnson, is the budgeting system that, contrary to conventional budgeting, describes and gives the detailed costs of every activity or programme that is to be carried out in a budget.
Objectives, outputs and expected results are described fully as are their necessary resource costs, for example, raw materials, equipment and staff. The sum of all activities or programmes constitute the Programme Budget. Thus, when looking at a Programme Budget, one can easily find out what precisely will be carried out, at what cost and with what expected results in considerable detail.
This programme budgeting system was first introduced by the United States Secretary of Defense Robert S. McNamara in the Pentagon in the 1960s. McNamara allegedly wanted to control the many costly weapons development programmes that were plagued by ever-increasing costs and delays. He called this new system the Planning, Programming and Budgeting System (PPBS). The system was taught at the John F. Kennedy School of Government of Harvard University but it evoked little interest except from critics.
This new approach introduced an unprecedented transparency into management operations together with a concomitant precise pinpointing of managers' responsibilities, and so was widely resisted throughout the entire public sector. However, in the eighties, the UN Inspectorate General picked up the idea and recommended that the United Nations use it to improve its performance. A few institutions tried half-heartedly but only the International Atomic Energy Agency (IAEA) went about it seriously and introduced a complete programme budgeting system that is still in place today.
However, over the years, strong opposition by managers and lack of interest by top management as well as member States have taken the sting out of the system and reduced its transparency. A few years later, the Government of New Zealand was the first to introduce it with great success: within a few years it had solved an intractable stagflation problem. More recently, the United Kingdom government discovered it and now, one government after another is following suit. The need to improve public sector and government performance has worked wonders for programme budgeting.
- Indonesia – The Challenges of Implementing a Performance-based Budget System, Ian Lienert, IMF, 2007
- Performance Budgeting: Linking Funding and Results, Marc Robinson (ed.), IMF, 2007
- More on IMF Annual Meetings Performance Budgeting, Seminar, Marc Robinson, IMF, 2007
- Program and Performance Budgeting Enthusiasm in India -- IMF Training Course, Holger van Eden, IMF, 2007
- From Line-item to Program Budgeting, John Kim, Seoul, 2007
- From Organ and History of Program Budgeting, David Novick, 1966
Program budgeting on a government level can be seen as early as the 1940s. The War Production Board started program budgeting with building materials rather than money. It was a way to ensure the government and the population were receiving all of the materials that they needed.