Zero Based Budgeting

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Zero Based Budgeting

A system of budgeting where each department or division of a company must justify all expenditures and allocations rather than simply increases over the previous fiscal year. That is, the budget is made with every department starting at zero dollars to spend, and each department must demonstrate need for what it wants to receive. Zero-based budgeting is advantageous because it is more detail-oriented than other forms of budgeting; among other things, it makes it easier to detect and eliminate over-inflated budgets. On the other hand, zero-based budgeting is more difficult and time consuming to put together and often has a bias toward departments that directly produce revenue instead of departments like R&D.

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When ZBB goes wrong, the company will usually face three undesirable outcomes:

ZBB governance gap: when zero-based budgeting, boards can safeguard value

ZBB on the other hand looks at every requirement at every organization every year.

Best practices: making the good great

Some believe that could mean more short- term agency/client relationships and agency business coming under threat as so-called ZBB sparks more pitches by clients seeking to drive down costs.

What impact will zero-based budgeting have on agencies?

At least some of the intuition behind ZBB was later affirmed by some of the behavioral economics literature discussed earlier.

Basing budget baselines

The government started to use ZBB in 2010 and according to the 2011 Sona Technical Report, it enabled the government to identify and terminate programs that were no longer delivering intended outcomes.

Sona promises: Has Aquino prosecuted the corrupt?

Solar Power Incorporated (OTCBB: SOPW), a vertically-integrated photovoltaic developer, is planning to sign a strategic partnership with ZBB Energy Corporation (NYSE MKT: ZBB), a developer of energy management systems solutions serving the utility, commercial and industrial building markets.

Solar Power signs strategic partnership with ZBB Energy

"Our recognition of impact evaluation's vital role in governance was instituted in 2010 with zero-based budgeting (ZBB), a performance management and results-oriented system to ascertain if key government programs and projects are achieving the desired outcomes," said Balisacan.

NEDA cites importance of impact evaluation in gov't programs

Renewable company ZBB Energy (NYSE MKT:ZBB) said on Friday that it has priced its public offering of 11,520,000 common shares at USD1.12.

ZBB Energy prices public offering of 11.52m common shares

ZBB has been helpful in facilitating a more fundamental sense of challenge in the public sector.

Performance management and performance strategy: traditionally, management accountants have been the ones to encourage other functions to make efficiency savings. Today, they are under growing pressure to practise what they preach and cut their own operating costs

For example, ZBB has produced an energy storage unit that can deliver 25kW power and store up to 50kWh of energy.

Whatever the weather

Consultants were responsible for so many of the fashions of the last fifty years: PPBS, MBO, ZBB, Theory Z, the Search for Excellence, Reinventing Government and what Paul Thomas (1996) called the "buzzwords" and Pollitt (2011: 5293) the "magic concepts" of the field.

Speaking what truth to whom? The uneasy relationship between practitioner and academic knowledge in public administration

The City of Garland, Texas, has a long and interesting history with zero-base budgeting, often referred to as ZBB. In the 1970s, Garland was not trying to deal with a stagnant or declining economy or revenue base; in fact, at the time, it was in a very good financial position and was experiencing growing revenues.