Planning and Budgeting

One of the major challenges higher education sector has encountered is the increase of demand for getting access to higher education, which in turn has imposed numerous aftereffects on universities. More and more attention is focused on the intensification of competition between the economic agents of higher education systems and the responsiveness of these systems to the social needs. Nowadays, adjustment or even transformation of financial resources allocation is regarded as a crucial instrument for higher education policy-making or management. Therefore, higher education policy-makers and managers attempt to devise appropriate mechanisms in a way to fit dual purposes besides funding the necessary financial resources of education institutes, i.e. to accomplish higher educational goals as well as to meet the needs of society and applicants of higher education services. This paper argues for the superiority of performance-based financial resources allocation approach higher education, i.e. “performance budgeting” and tries to explain the relationship of such an approach to responsiveness in higher education system. Accordingly, performance indicators pertaining to financial resources allocation are introduced, followed by universities performance evaluation models and conclusions of findings and researches conducted in developed countries. The paper concludes that applying “performance budgeting” is a suitable reformist method directly related to accountability of financial resources in higher education system. Moreover, it was concluded that performance budgeting approach turns out to be highly effective in changing the behavior of higher education institutes especially in the areas such as educational improvement, making intelligent financial choices, increase of incentives, boosting of managers’ creativity, and improvement of accountability and performance of educational institutes