What characterizes the zero-based budgeting (ZBB) approach?

The zero-based budgeting (ZBB) approach is characterized by starting from the premise that no previous budget is in place. In this method, every budget cycle begins with a "zero base," meaning that all expenses must be justified for each new period, regardless of what has been spent in the past. This approach contrasts with traditional budgeting methods that often use previous years’ expenditures as a starting point and make incremental adjustments based on those figures.

By requiring all programs and expenditures to be evaluated and justified, ZBB encourages departments to think critically about their goals and resource allocations, which can lead to more efficient use of resources. It emphasizes the importance of cost-effectiveness and prioritization of needs, as every function is reviewed at zero base. This method can lead to cutting unnecessary expenditures or reallocating resources to more critical services where needed.