Budget Absorption Rate
Percentage of approved departmental budget spent by end of the fiscal period
What is Budget Absorption Rate?
Budget absorption rate is the percentage of an approved public sector budget that has actually been spent. It shows how much of the allocated money is being used.
Very low absorption can mean projects are delayed and services not delivered, while spending too fast can mean poor control.
How this KPI is measured
- Function
- Finance
- Sub-function
- Budget Management
- Industry
- Government & Public Sector
- Type
- Lagging
- Impact
- Financial control
- Unit
- %
- Measurement frequency
- Quarterly / Annual
- Formula
- (Actual expenditure / Approved budget) × 100
How to calculate it
Divide actual expenditure by the approved budget, and multiply by 100.
For example, if 72,000,000 was spent out of an approved 90,000,000, absorption is 80%.
Compare with how far through the year you are, and look at capital and operating budgets separately.
Where it is used
Tracking delivery
See whether funds are being used.
Spotting delays
Find slow projects.
Reallocating funds
Move money to where it can be used.
How to improve it
Tips and common mistakes
- Spending the whole budget is not the goal. Spending it well is.
- Watch for a rush to spend at year end.
- Separate capital from operating budgets.
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