In the beginning of the 20th Century, the Second Philippine Commission, acting as a legislative body, enacted appropriations measures for the annual expenditures of the government. This was in accordance with the Philippine Bill of 1902, which decreed that disbursements from the National Treasury were to be authorized only in pursuance of appropriations made by law.

With the passage of the Jones Law in 1916, the Philippine Legislature was set up with two chambers: the Philippine Senate and the House of Representatives. The Governor-General was to submit within 10 days of the opening of the Legislature's regular session the annual budget. Two years later, the Council of the State was formed to prepare the budget that the Governor-General was required to submit to the Philippine Legislature.

A Budget Office was formed to assist in the preparation, enactment and implementation of such appropriations made by law. Four divisions made up the Office: A Budget Division took charge of agency regular budgets; an Expense-Central Division took care of special budgets; a Service Inspection Division screened appointments and requests for the creation of positions; and an Administrative Division handled routine administrative matters.

The Constitution of 1935 established both budget policy and procedure, which were amplified in a series of laws and executive acts over the years.

The Budget Commission was established by Executive Order (EO) No. 25 issued on April 25, 1936. It became a Ministry by virtue of Presidential Decree (PD) No. 1405, signed on June 11, 1978. Following the pattern in the United States Federal Government, the Budget Commission/Ministry of the Budget (now the Department of Budget and Management) is separate from other fiscal agencies of government like the Ministry/Department of Finance.

The first Budget Law was passed on December 17, 1937 as Commonwealth Act No. 246. It took effect on January 1, 1938 providing for a line-item budget as the framework of the government?s budgeting system. CA No. 246 called for a "balanced budget" emphasizing as a task of the Commission the tying up of proposed expenditures with existing revenues so that "no appropriations for the ordinary operating expenses of the Government may be proposed, unless the amount is covered by the estimated income from the existing sources of revenues or available current surplus "must" be supported by a proposal creating an additional source of fund sufficient to cover the same."

Seventeen years later, on June 4, 1954, Republic Act (RA) No. 992, otherwise called the Revised Budget Act, was enacted providing for an enhanced role of the Budget Commission as the fiscal arm and budgeting adviser of the President. The preparation of the budget was to include synthesizing the programs of the different departments and agencies of the Government "to see how their respective programs are related to each other and how they may be shaped into a harmonious program and fiscal policy for the executive branch as a whole." Thus performance budgeting system was introduced.

The Integrated Reorganization Plan of 1972, under Presidential Decree No. 1, implanted some re-organizational changes in the Budget Commission with four of its units retained: the Budget Operations Office; National Accounting Office; Management Office; and Wage and Position Classification Office (WAPCO). Five staff units were provided the Commission: for planning service; for financial and administrative services; or training and information services; a Legislative Staff; and a Data Processing Center.

The change to a parliamentary form of government was instituted by the 1973 Constitution. The legislative branch of the government, then referred to as the Batasang Pambansa, saw the minister in charge of the budget chairing the Committee on Appropriations and Reorganization. PD 1177 was issued as an enabling act to prescribe "the form, content and manner of preparation of the budget" in line with the provision of Article VIII of the said Constitution. Otherwise referred to as the Budget Reform Decree of 1977, it further strengthened the planning, programming and budgeting linkages.

The 1973 Philippine Constitution was superseded by the Provisional Constitution under Proclamation No. 3 of President Corazon C. Aquino. The legislative power was temporarily reposed on the President. Budgetary functions once more were exercised by the Office of Budget and Management.

EO No. 292, issued pursuant to the 1987 Constitution provided for major organizational subdivisions of the Department of Budget and Management.

From 1986 to 1991, the DBM made three important contributions towards the improvement of fiscal management: the rationalization of funding for resource-demanding area, such as Personal Services and budgetary support to government corporations; the institution of measures to better control the widening of the budget deficit; and the improvement of budget administration, systems and processes.

The government of the restored democracy had to surmount two daunting obstacles: a moribund economy and a vast social sector crying for immediate ameliorative measures. National budgeting took on a key role in promoting economic recovery and growth and in realigning government expenditures for social services and for its redistributive objectives. Subsequent modifications and changes in the organization and functions of the DBM, as with the rest of the government, were based on these twin considerations.

In 1992, Fidel V. Ramos was elected President and inaugurated his term with a new perspective in governance that found a finer focus on the fiscal directions taken in a resurging economy that, nonetheless, was still burdened with problems of the past administrations.

Under President Ramos, government budgeting took on an added mission -- to make the National Budget an instrument for breaking the boom-and-bust cycle that had characterized the Philippine economy in the past.

Beyond sustaining the operations of government and its projects, the budget became an economic stimulus and a means to disperse the gains of economic development.

At the outset of Joseph Estrada?s presidency, the Asian financial crisis that characterized the period prompted the national leadership to take a second look at the country?s economic policies and strategies. To maintain macroeconomic stability in the light of the effects of the economic turmoil, the government had to raise domestic demand by sustaining expenditures and pump-priming in the areas of public infrastructure and social services. It had to adopt an expansionary fiscal policy by allowing a reasonable level of cyclical deficit to be financed largely through foreign borrowing while offsetting the negative impact of deficit by introducing structural reforms in the budget process.

During this period, from mid 1998 to end of 2000, the DBM continued to introduce budgeting reforms that were meant to improve cash management, reduce uncertainty in allotment and cash flow, and enhance transparency and accountability.

A more simplified system of fund release was put in place which made the General Appropriations Act (GAA) as the final spending authority without the need for agencies to wait for DBM to issue any other document. Agency heads could immediately plan and contract out projects by just looking at the GAA, which is available in print and at the DBM website, without waiting for the issuance of an allotment authority.

The procedures for payment of accounts payable and terminal leave/ retirement gratuity benefits were revised in view of two objectives: (1) to speed up payment of accounts payable to contractors and suppliers in order to avoid the build-up of accounts payable and restore private sector confidence on the government?s ability to honor its contractual obligations; and (2) to assure prompt payment of retirement gratuities to government retirees who deserve to be compensated after working so hard for the government for many years at lower compensation compared to their private sector counterparts.

The system involves the issuance of separate NCAs for APs and retirement gratuity and terminal leave benefits to ensure that funds released for the purpose are not used by the agencies for other expenditures. The release of cash allocation has also been made direct to the bank accounts of specific creditors.

During this period, the DBM initiated a performance?based approach to budgeting aimed at rationalizing accountability of public officers and employees over government resources and promote client-orientation. In preparing the budget for FY 2002, the DBM required agencies to specify strategic outcomes consistent with the Medium-Term Philippine Development Plan (MTPDP), develop appropriate performance indicators, and prioritize major final outputs as bases for allocation of funds.

To facilitate the release of the Internal Revenue Allotment (IRA) shares of local government units (LGUs), the funding release was centralized and made direct to the depository banks of LGUs following the Direct Credit System (DCS) in the release of IRA.

Also during this period, the DBM was able to operationalize a central e-commerce facility, particularly on government procurement system, in line with the thrust of the government.

Under President Gloria Macapagal-Arroyo, the DBM focused its efforts on deepening fiscal responsibility, enhancing the efficiency of public expenditures, and promoting good governance. Along with these major areas of concern, it intensified efforts at strengthening intergovernmental relations, eliciting increased participation from the private sector in the overall budget process and in intensifying public information on the administration?s fiscal policy, thrusts, and budget policies and procedures. It likewise stepped up efforts at enhancing internal management in line with its vision to be seen as an organization that influences the spending behavior and management of resources of agencies towards transparency, equity and accountability.

• Through prudent spending and vigorous revenue generation formulated by the DBM at the beginning of the Macapagal-Arroyo administration, the government was able to maintain a healthy fiscal position by containing a deficit level of P147 billion, which is within the target 3.8 % of GNP.
  
• An output-oriented approach to budgeting was developed and instituted to enhance the efficiency of public expenditures. The system requires agencies to focus on strategic outcomes and outputs consistent with the MTPDP, prioritize major final outputs and develop appropriate performance indicators as part of budget submission of agencies.
  
• The procedure for the release of Congressional initiatives was rationalized by tightening existing procedures in the use of the Priority Development Assistance Fund (PDAF).
  
• As a component of the Medium-Term Expenditure Framework (MTEF) which was formulated in 2000, the DBM along with the NEDA, conducted a Sector Effectiveness and Efficiency Review (SEER) which subjected agency expenditure proposals to tests for consistency with government priorities for funding purposes.

The present administration is steadfast in achieving the goals it has set for the country. With 66 years of hardwork and experience, achieving a healthy fiscal position is not so far a distance.