Learning Unit - 3
Reading materialZERO BASE BUDGETING
- Meaning :
Zero base budgeting means starting from zero: it means viewing the funding/
budgeting required for an entire scheme or a programme or an item of a scheme
or programme afresh.1.3 In the case of a proposal involving fresh expenditure, zero base budgeting
enables the planner to examine its necessity from various angles with a view to
taking a final decision for approving or rejecting the same.
1.2 In the case of ‘on-going expenditure’ zero base budgeting helps examine the
necessity of continuance of that expenditure from various angles with a view to
enabling planners to take final decisions on whether to continue or stop that
expenditure.
1.3 In the case of recurring expenditure, zero base budgeting help view every item of
the recurring costs afresh in order to help planners decide as to whether to allow
the recurrence of the expenditure or to stop it.
1.4 If the initial examination indicates that the existing level of expenditure of any
item is inevitable, zero base budgeting will help question the incremental
expenditure of that item.
- Methodology:
To prepare Zero Base Budgeting, it is necessary to follow the steps given below:
ó Identify and list the decision units
ó Breakdown the decision units into a number of specific decision packages
ó Design each decision package
ó Evaluate each decision package
ó Prioritise the decision package based on evaluation