Zero-based budgeting (ZBB) is a different approach to creating a budget. While most strategies for budgeting account for the history of previous transactions, ZBB does not operate on financial history and automatically included payments (Coyte et al., 2020). Therefore, each period in the budget is planned from a clean slate, and every department has to justify the necessary resources to receive them. According to previous studies of ZBB, this process has been shown to save money in every type of cost and bring positive results regardless of the organization’s nature (Coyte et al., 2020). Moreover, even if the cost-effectiveness of this strategy does not improve much, ZBB also positively affects firms’ financial discipline and forces them to look at potentially inefficient parts of the business (Coyte et al., 2020). Thus, it can be argued that ZBB may bring a positive change to the federal budget process and should be implemented by Congress.
There exists some evidence supporting the use of ZBB in public organizations. Al-attara et al. (2020) demonstrate that the introduction of ZBB to government entities can be successful. The authors recommend implementing ZBB outside of the area under investigation and note the increased flexibility of their budget with the new strategy (Al-attara et al., 2020). Similarly, Ibrahim (2019) discusses using ZBB in public organizations and concludes that ZBB leads to better management decisions if the implementation process is planned well. Notably, in 2017, an act recommending the use of ZBB was introduced in the House of Representatives. Called Zero-based Budgeting Ensures Responsible Oversight (ZERO) Act of 2017, this bill suggested including the legal basis for each action in the federal budget (Library of Congress, 2017). It also proposed to describe the activity, alternative funding, priorities, and cost-effectiveness measures (Library of Congress, 2017). Therefore, one can see the potential for implementing this bill and moving toward ZBB to review the federal budgeting process.
References
Al-attara, H. A., Mashkourb, S. C., & Hassanc, M. G. (2020). Zero-based budget system and its active role in choosing the best alternative to rationalise government spending. International Journal of Innovation, Creativity and Change, 13(9), 244-265.
Coyte, R., Messner, M., & Zhou, S. (2020). The revival of zero‐based budgeting: Drivers and consequences of firm‐level adoptions. Accounting & Finance. Web.
Ibrahim, M. M. (2019). Designing zero-based budgeting for public organizations. Problems and Perspectives in Management, 17(2), 323-333. Web.
Library of Congress. (2017). H.R.507 – Zero-based Budgeting Ensures Responsible Oversight (ZERO) Act of 2017. Web.