Performance budgeting is an alternative approach intended to remedy the shortcomings of traditional budgeting. It is a system of budgeting which attempts to integrate the processes of strategic planning, financial planning and performance management. However, there are several factors that undermine this process of performance budgeting system in health sector. REQUIRED You are required to briefly discuss how this process of budgeting system is being undermined that might affect resource allocations in health sector.
A common concern related to performance budgeting is that a healthcare organization's staff & executives may have dissimilar ideas regarding what is essential & where the monies should go. As this budgeting methodology is goal-oriented, there’s no qualitative assessment. Additionally, it can be tough to ascertain how well a particular department / team will be performing. What looks good on paper may not work in the real world.
Another drawback is that one division or another could manipulate info to reach specific targets & obtain funding. In this situation, an autonomous party may need to assess its performance, which further augments the expenses involved. Also, performance budgeting may not work for long run projects. Splitting the project into tinier parts can aid simplify the reporting procedure.
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