The Department of Management and Budget has legal authority under the Management and Budget Act, Public Act 431 of 1984, as amended. The department is the summation of the former Department of Administration, which was created by Public Act 51 of 1948, as well as functions that had been under the Office of the Governor, such as budgeting, that were transferred by Executive Order 1973-7.

The Department of Management and Budget is an interdepartmental service and management agency responsible for providing financial management, property management, capital facility development, procurement, retirement and related benefits, accounting and payroll functions, and office support services to state agencies. The State Budget Director prepares, presents, and executes the state budget on behalf of the governor. The director of the department and the state budget director are appointed by the governor. The directors, deputy directors, and staff provide program and policy direction for the department and monitor program execution to ensure efficiency and effectiveness of departmental operations.

Until recently, the director of the Department of Management and Budget had served concurrently as the department director and state budget director. In January 1998, the Governor named a separate state budget director. The scope of the management responsibilities and Michigan's position as one of the nation's leading industrial states necessitated that the responsibilities for the budget and management functions of the department be separated. Under the guidance of the two directors, the department of Management and Budget continues to focus on its commitment to meet the needs of the citizens of the State of Michigan, efficiently and effectively.