(Sample Material) Gist of Important Articles from IIPA Journal

Topic: Zero Base Budgeting: Re-Emphasised in India - A Case of Research and Development Organisation Nand Dhameja

ZERO BASE BUDGETING: THE PROCESS

ZBB basically involves four-step process. The first step involves the division of the organization into ‘decision units’, or centres, or division, in terms of the determined objectives. A decision unit is headed by and executive who “makes significant decisions on the amount of spending and scope, direction, or quality of work to be performed”.

The next step is ZBB is that the decision unit manager, who is fully aware of the goals and objective of the decision unit, does planning for the coming year after surveying all plausible ways to a achieve objectives and then selects the best alternatives, presumably by using benefits-cost analysis, without any preference for on-going schemes; and thus on-going as well as new proposals are evaluated to select the best ones. In other words, the decision unit manager prepares a number of decision packages. Each decision package is a budget proposal at different levels of activity and different levels of funding without any reference to the previous year funding disregarding the principle of instrumentalism. The decision packages are the “building block” of zero-base approach and consist of a cluster of activities related to the accomplishment of the decision unit objectives. The first decision package is a bare bones or minimum level budget as any less funding would make it infeasible to continue next level decision package would reflect higher level activity and funding.

The decision packages are to be ranked in order of their utility. This ranking of decision packages constitute the third step in the process. Finally, the decision packages so ranked are sent to the higher level executive who after receiving the rankings and the decision packages from the executive who after receiving the rankings and the decision packages from the executives, would merge ‘the executives’ rankings and thus final budget allocation of resources to various packages would be achieved. By this process money could be reallocated from the lower priority packages to the higher ones.

Issues

ZBB exercise in research and development agencies, multi-division and multi-location giant scientific and technical organisation illustrates the emphasis attached to planning of on-going as well as new activities and prioritization of the same. However, it entails emphasis on the following:

• Scientist/technocrat as head of the centre or the lab has a dual role of specialists-cum-administrator, he should accept ZBB and its process involving evaluating and prioritizing the on-going and new activities. This is particularly so as scientists/technocrats are normally committed to their area of research: and the salary payments and other committed expenses accounting for a significant part of the total budget make it difficult to bring in modification in the existing rigid budgetary expenditure.

• Ranking of research programmes and administration/service programme would warrant determination of inter-se priority between the two categories. Should there be separate ranking for the two category programmes, or should these be ranked policy decisions and involvement of specialists and others,

• Research and development agencies normally have and elaborate review and monitoring mechanism and this would be required to be dovetailed with the necessitated under ZBB process. For example, Research Committee (RC) and Management Committee (MC) are the reviewing committees in each lab; whereas task force, and high Level Committee are set up for purposes of prioritization and finalization of ZBB: it necessitates coordination between the existing and the newly constituted commmittes. Simialarly, the existing appraisal an reviews mechanism would require integration with the ZBB mechanism.

• Information mechanism to ascertain cost for different programmes and that too at different levels of their funding is required for purposes of ZBB.

• The amount of time and spent in the initial years of installation of ZBB and the documents developed in the process should be made useful in the coming years. In other words, ZBB process should not merely confine to planning and preparation of budget document but also should be a step towards control and be useful for the successive years for allocation and control of expenses, whether by following a comprehensive system or a simpler version of the ZBB process.

• Budgetary exercise to encompass review of all activities should cover both plan and non-plan expenditure.

• Issue of surplus manpower and to bring in mobility in the existing personnel between the Labs/Divisions would require a policy decision.

What would be the role of ZBB vis-à-vis performance budgeting or other budgetary formats? How ZBB would be integrated with the other monitoring and control techniques used? As a tool of planning, control and fund allocation, ZBB process should not merely result in a separate budget document but be integrated with the prevailing budgeting system.

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