What does performance budgeting primarily categorize?

Performance budgeting primarily categorizes budget allocations based on function or activity. This approach focuses on the outputs and outcomes of various programs rather than just the financial inputs. By linking expenditures to specific activities, performance budgeting allows for a clearer understanding of how funds are being utilized to achieve certain goals and objectives.

This method emphasizes evaluating the efficiency and effectiveness of programs, which helps in making informed decisions about resource allocation. It encourages accountability and performance measurement, ensuring that spending is aligned with desired results. In this context, performance budgeting aids organizations in making strategic choices that contribute to overall operational success and public value.

This approach differs from simply categorizing expenditures by historical costs, which does not provide insights into performance or outcomes. It also contrasts with methods focused primarily on revenue sources or training effectiveness, as those aspects do not necessarily reflect the functional application of budget allocations in achieving organizational goals.