Introduce Zero Based Budgeting

There is no question that Council needs to address the excessive expense growth that has been happening for some time. Council needs to take specific concrete steps to reverse the tendency for excessive annual expense growth and eliminate the possibility of padding budgets. First and foremost Council needs to introduce a Zero-Based Budget preparation process and not be intimidated by staff who will argue vigorously that it is just too difficult and time consuming

In management accounting, when a budget is prepared from scratch with its base as zero, it is called Zero-Based Budgeting (ZBB). It promises to move organizations away from incremental budgeting, where last year’s budget is the starting point for the next. Instead, the starting point becomes zero, with the implication that past patterns of spending are no longer taken as a given. Essentially it is a method of budgeting in which all expenses must be justified for each new period.

During the traditional budgeting process, managers often view it as a bit of a contest to ensure their department has the largest budget possible, as this is often seen as a sign of the importance of their area. Zero-based budgeting forces managers to understand the cash flows and expenditures of their department and to be able to articulate why their department should be funded to a particular level in the context of the organization's goals and objectives.