Considering the ratification of Higher Education Ministrys organizational structure law and Irans Fifth Development Plan, it becomes a must to make changes in universities management system. The most crucial part of such changes is related to universities financial system. In the current budgetary system of the higher education institutes, budgeting is done according to various factors such as numbers of students, faculty members and staff. In other terms, allocation of expenditures is done according to the volume criteria hence, no distinction is deemed among the expenses of different fields of study. Moreover, the expenditures of some courses are financed through extra resources of other courses this, in turn, requires improvement of financial resources management and supervision. This may lead to more efficiency and effectiveness in the universities. The only way to materialize these goals is to establish performance budgeting system in higher education institutes.