## (6) Zero-Based Budgeting (ZBB)

The ZBB also originated in the USA and was created in 1969 by Peter A. Pyhrr, a manager of a private industry. It was introduced in the USA by President Jimmy Carter in 1978. Like the performance budgeting, the ZBB is also a rational system of budgeting. Under this system, every scheme should be reviewed critically and re-justified totally from zero before being included in the budget. Thus, it involves a total re-examination of all schemes afresh instead of following the incremental approach to budgeting which begins with the estimation of the current expenditure. The budget making for the ensuing year should be started from zero instead of treating the current budget as the base or the starting point.

## Advantages:

- i. ZBB ensures that every apartment is catered with the exact amount of resources and funds i. ZBB ensures that every apartment is catered with the exact amount of resources and funds they need.
- ii. approach eliminates or minimizes the low priority programmes. ii. approach eliminates or minimizes the low priority programmes.
- iii. improves the programme effectiveness dramatically. iii. improves the programme effectiveness dramatically.
- iv. makes the high impact programmes to obtain more finances. iv. makes the high impact programmes to obtain more finances.
- v. reduces the tax increase and facilitates critical review of schemes in terms of their cost- v. reduces the tax increase and facilitates critical review of schemes in terms of their cost- effectiveness and cost benefits.
- vi. provides for quick budget adjustments during the year. vi. provides for quick budget adjustments during the year.
- vii. increases the participation of the line personnel in the preparation of budget. vii. increases the participation of the line personnel in the preparation of budget.

## Disadvantages:

- i. approach can be an extremely time-consuming approach; so many companies only use this i. approach can be an extremely time-consuming approach; so many companies only use this approach occasionally.
- ii. ZBB falls short when it comes to determining the budget for activities or departments having ii. ZBB falls short when it comes to determining the budget for activities or departments having intangible outcomes such as Marketing and Research & Development, an issue that remains unresolved.
- iii. preparation of ZBB and its execution is a cumbersome work and resource consuming. It is iii. preparation of ZBB and its execution is a cumbersome work and resource consuming. It is concerted effort of manpower, substantial investment money, besides endless paperwork and reports, making the practice an intimidating nuisance.

## (7) Performance Budgeting

Performance based budgeting is another advanced approach where budget and funds are associated with specific objectives. It is said that performance budgeting is of recent origin. Although performance budgeting is of recent origin it has become an integral part of modern budgeting. It has brought about reformation in the Financial Administration which has a profound significance. The concept of performance budgeting has originated in the USA. It was first experimented in the Municipal Government in the United States. In fact, the term performance budget was originally coined by the 'Hoover Commission' in the United States in 1949. Since then the USA Government adopted performance budgeting. As a result, many countries of Asia, Africa and Latin America opted for it in their Financial Administration. In India, the movement for performance budgeting gained momentum in the mid-50s. The rd Estimate Committee for the first time recommended for the adoption of performance budget in its 73 report in 1960. The Administrative Reforms Commission (ARC) Report submitted in 1968 also recommended the adoption of performance budgeting. In 1968, the Central Government agreed to accept the recommendations. In 1977-78 about 38 Development Department in the central Government adopted performance budgeting. Subsequently, several states government has also introduced it in their selected departments. Meaning: The term 'Performance Budgeting' is known by different names. Earlier it was called 'functional budgeting' or 'activity budgeting'. The most popular and extensively used term is 'programme budgeting'. The meaning of the performance budgeting becomes clear from the following definitions: