Budgeting for Success

Performance-Based Budgeting (PBB) has been, and continues to be, implementedwithin developed and developing countries as part of a wider public sector reformprocess. The purpose is to embed accurate performance measurement within publicsector organisations (see Franklin, 2006, Aristovnik and Seljak, 2009, Schick, 2007)and provide a more efficient and effective approach to resource allocation (Shah andShen, 2007). PBB adoption and implementation has not been without criticism andthere is ongoing debate as to the real use and effectiveness of PBB. The historicalcontext within which PBB developed, and the justification for why countries decideto implement PBB, has been the subject of scant research, which has led to a lack ofunderstanding as to its purpose and effects.This thesis undertook an historical examination of PBB as part of fiscal reform withinthe public sector. It specifically used a case study regarding the adoption andimplementation of PBB within the Indonesian government as its central field ofanalysis. The study used qualitative research methodology, beginning with ahistorical review of the evolution of PBB as the new public budgeting system, usingthe Lüder FMR model (2002) as a conceptual framework. It then utilized newinstitutional sociology (NIS) theory as a theoretical framework to examine the extentto which isomorphism was evident during PBB implementation within theIndonesian central government. Finally, the Lüder FMR model (2013) was employedas a conceptual framework to investigate the motives that underpinned thedevelopment of PBB within Indonesian local government, and the factorsinfluencing its implementation.This study offers three conclusions about the historical context of PBB evolution andthe decision by countries to adopt. First, PBB was initially implemented in theUnited States in 1949 and expanded to developing countries through United States(US) and United Nations (UN) funded projects. Using the Lüder FMR model (2002),this study finds that the primary motive underpinning PBB implementation in theUS was public sector demand for more informative and measured budgets. Similarmotives were also found in the UK, Australia and Denmark. That theimplementation of PBB within the US and UK budgeting systems were largely seenas positive, was the primary stimulus for PBB implementation across the globe.Furthermore, this study found the outcome of budgetary reform varied betweencountries, from that of a single format that involved traditional budgeting methods,to ’old PBB’, to a dynamic approach involving multiple stages that culminated inPBB modification.