Budgeting System

Budgeting System Paper
Line-item Budget System
The major advantage of line-item budgeting is its simplicity. Any staff member, board member, volunteer or interested citizen can pick up the line-item budget of a human service agency and see (a) the source and amount of the agency’s revenues, (b) how the funds will be used in terms of staff, equipment, facilities, travel, and so on, and (c) if the budget is balanced.
The major disadvantages of line-item budgeting systems are twofold. First, line-item budgets say nothing about how much service a human service agency provides, the cost of that service, the number of outcomes the agency accomplished, or their attendant costs. The first major disadvantage of line-item budgeting leads directly to the second. Resource allocation discussions and decisions tend to be framed by the line-items themselves because no other information is available.
Performance Budgeting System The major advantages of performance budgeting systems are that (a) they provide information on the amount of service provided by a human service program and the attendant costs including determination of the cost per output or per unit of service and (b) they raise the level of debate from line-items to programs, program services, program costs, and program efficiency. The major disadvantage of performance budgeting systems and program budgeting systems as well is that human service agencies must employ sophisticated cost analysis techniques in order to determine the full cost of a program and to derive accurate unit costs. While describing this aspect of performance budgeting as a major disadvantage, the point should also be made that being able to fully cost one’s programs and derive accurate unit costs is nevertheless an essential component of the financial management of human service agencies today.
Program Budget System The major advantages of program budgeting systems are that (a) they provide information on the amount of (client) outcomes achieved by a human service program and the attendant costs, including determination of cost per outcome, and (b) they raise the level of debate from service and efficiency concerns to clients and effectiveness concerns. A major disadvantage of program budgeting systems is that good outcome performance measures are frequently hard to develop. Many human service programs still do not have generally accepted outcome measures because no agreement exists among stakeholders.