The original motivation for this budget format (and still the greatest advantage of this type of budget) is that it opens to public exposure exactly what it is that money is used by organizations to acquire. The disadvantage of this budget format is that it makes no effort to assess the effectiveness or the efficiency of the expenditures included in it (Jensen, 2001).
For the organizational manager, an objects-of-expenditure budget requires that he or she justify things, as opposed to justifying what it is that an organization does, or is supposed to do. Thus, it is sometimes criticized as placing too much emphasis on minute detail. Conversely, however, many people think that this budget format tends to keep managers honest (Evans, 2002).
A performance budget is, like the objects of expenditure budget, an incremental budget. A performance budget, in contrast to the objects of expenditures budget, emphasizes the functions of the organization. It is these functions that are budgeted, as opposed to the items required to perform the functions, as is done in an objects of expenditure budget format. The functions of an organization are tied directly to its missions and objectives (Evans, 2002).
The advantage of the program budget format is that it places costs on functions. People are able to see exactly what it costs to have a specific function performed by the organization. The performance budget format provides both supporters and opponents of specific organizational functions with ammunition to either defend or oppose the performance of the function by an organization. The disadvantage of this budget format is that it makes no effort to state how specific functions will be carried out ...