- iii. based budgeting: This means that performance information has vital role in resource iii. based budgeting: This means that performance information has vital role in resource allocation, but does not assess the amount of resource allocated.
- iv. determined budgeting: In this budgeting procedure allocation of resources directly iv. determined budgeting: In this budgeting procedure allocation of resources directly and explicitly related to units of performance.

Stages of performance budgeting: of performance budgeting: The implementation of performance budgeting involves the following important steps:

- i. a meaningful functional programme and activity and classification of government i. a meaningful functional programme and activity and classification of government operations (for example education is a classification and elementary education is a programme, training of elementary teachers is an activity and the construction of a school to impart educational service is a project).
- ii. the system of accounting and financial management in accordance with the ii. the system of accounting and financial management in accordance with the classification made.
- iii. the quality of physical resources like personnel materials, services etc. iii. the quality of physical resources like personnel materials, services etc.
- iv. standard norms for work units of performance and unit costs. iv. standard norms for work units of performance and unit costs.

Factors in performance budgeting: in performance budgeting: The success of performance budgeting is conditioned by a number of factors. Some of them are:

- i. of suitable yardsticks, for an objective measurement of work and performance. i. of suitable yardsticks, for an objective measurement of work and performance.
- ii. setting up of a system of reporting on the progress of each activity or programme. Such a ii. setting up of a system of reporting on the progress of each activity or programme. Such a system should be established in each government department to monitor the work performance.
- iii. development of an appropriate and scientific accounting system is another prerequisite for iii. development of an appropriate and scientific accounting system is another prerequisite for the successful functioning of performance budget. For this there should be a proper integration of budgeting and accounting classification.
- iv. requirement for the success of performance budgeting is the proper classification of iv. requirement for the success of performance budgeting is the proper classification of public expenditure of each major activity or project, and
- v. all, an efficient organisation for programme management is also needed to take full v. all, an efficient organisation for programme management is also needed to take full advantage of the benefit of performance budgeting.

Thus, performance budgeting is a tool, which ensures, efficiency in government financial operation. In modern times performance budgeting is recognized as an efficient tool of fiscal management. Performance budgeting is rather a fiscal tool to review the efficiency of existing operations and provides vital information for planning future operations. It provides a sense of accountability and transparency in government expenditure programmes. Merits (advantages): (advantages): A performance budget becomes a very sensitive tool of planning control management. The most important advantages of performance budgeting is as follows:

- i. can be judged from a performance budget what was done in the previous year and what cost i. can be judged from a performance budget what was done in the previous year and what cost both unit wise and programme wise.
- ii. budgeting renders performance audit more purposeful and effective. Performance ii. budgeting renders performance audit more purposeful and effective. Performance budget helps a better understanding and review of the budget by the legislature.
- iii. makes control and policy making more meaningful and makes budget more informative and iii. makes control and policy making more meaningful and makes budget more informative and understandable to the tax payer.
- iv. performance budgeting, we can fix the responsibility very precisely. From this budget one iv. performance budgeting, we can fix the responsibility very precisely. From this budget one knows very clearly who is responsible for what.
- v. performance budget provides a clear and true picture of spending and revenue alternatives. v. performance budget provides a clear and true picture of spending and revenue alternatives.
- vi. performance budget presents more clearly the purpose and objectives for which the funds are vi. performance budget presents more clearly the purpose and objectives for which the funds are sought.
- vii. budgeting serve as a convenient tool of management. Because it helps vii. budgeting serve as a convenient tool of management. Because it helps administrators to prepare their budget on the basis of what they hope to accomplish.
- viii. budgeting is an excellent instrument for translating long-term programmes and plans viii. budgeting is an excellent instrument for translating long-term programmes and plans into reality.
- ix. is a better means to exercise control over Financial Administration. ix. is a better means to exercise control over Financial Administration.