BUDGETING CONCEPTS:

ZERO BASE-BUDGETING
 ZBB: What is it?
Also known as Priority Base Budgeting Notable persons who
contributed to the
The agency justifies the entire appropriation request for development of ZBB:
the year as if the programs are entirely new, instead of 1. Peter Phyrr
2. U.S. President
justifying only the increase requested above the prior
Jimmy Carter
year’s appropriation

The agency ranks these decision packages in terms of Steps Involved:

priority using the cost-benefit analysis 1. Identify and define
decision
packages.
Provides opportunity for top management to re-evaluate 2. Evaluate and rank
the need for on-going programs, compare this with the packages
proposed and prioritized for implementation 3. Allocate resources
ZBB: Evaluating and Ranking Packages

Important Questions:
1. Is the activity
necessary?
2. Does the activity
add value?
3. Is the activity in-
line with the VMGO
of the
organization?
4. Is the activity cost-
effective?
Advantages and Disadvantages of ZBB
Advantages Disadvantages
Focuses management attention to Time-consuming in terms of management
organizational objectives input

Managers are concerned with the future Requires additional management training (at
rather than with the past a cost) and small organizations cannot afford
it
Assists in identifying inefficient and obsolete It takes time to show the real value-added
activities within the organization benefit of implementing such a system

Increases staff motivation It is paperwork-intensive

Establishes priorities in relation to resource ZBB decisions can be shaped by

allocation and optimum use of funding management perceptions and preferences
 THANK YOU!
-end of presentation-

Sources:
1. GFOA Research and Consulting Center. Zero Base Budgeting: Modern Experiences and
Current Perspectives (2011)
2. Deloitte. Zero-Based Budgeting: Zero or Hero?