Note: Melissa Junge and Sheara Krvaric, lawyers at the Federal Education Group, will be guest posting this week.

Yesterday we talked about how the supplement not supplant rule can work against federal policy goals by impeding comprehensive school reform efforts and encouraging poor educational spending decisions. Today we will look at how another rule - known as “time and effort” - also inhibits comprehensive educational approaches.

Time and effort, a rule that requires employees paid with federal funds to document the time they spend on specific activities, is not unique to Department of Education (ED) programs. In fact, these rules cannot be found in federal education laws such as NCLB or IDEA. Instead, time and effort rules (also known as time distribution rules) are contained in “cost principles” developed by the Office of Management and Budget (OMB), and apply to all federal grant recipients regardless of which federal agency is giving out the grant money.

The concept behind time and effort is completely understandable; namely, the federal government wants its grant recipients to be able to demonstrate that people paid with federal funds actually worked on the federal programs that paid them. However, because time and effort rules are confusing, compliance oriented, and easy to audit, they encourage defensive spending -spending that is safe from an audit perspective rather than effective.

As we noted in our first post, ED’s OIG has questioned hundreds of millions of dollars because of time and effort non-compliance. Understandably, this creates tremendous pressure to avoid time and effort related audit findings which discourages districts from designing comprehensive programs.

Comprehensive programs typically use multiple funding sources to carry out a variety of related activities to accomplish a particular goal. The more activities a federally funded employee works on, the harder it is to comply with time and effort requirements. Working on more than one activity triggers a lengthier form that requires different signatures and must be completed more often. Add to this mix the fact that there is very little clarity about what an “activity” is in the K-12 context, which causes widespread misunderstanding, even among auditors, about what time and effort records should look like.

This all means that it is easiest to comply with time and effort requirements when an employee works exclusively on one activity supported by one funding source. If a school implements a comprehensive improvement initiative that is supported by multiple funding sources, the time and effort reporting can become far more burdensome.

Given the millions of dollars at stake, it is little wonder that school districts (typically with the backing of their state) feel compelled to design their programs to minimize the risk of time and effort noncompliance. As we discussed with supplement not supplant yesterday, this often means school districts shy away from comprehensive approaches, instead taking the “silo” approach to federal funds which is far less risky from a compliance perspective.

The irony is that while time and effort requirements were designed to protect federal funds, compliance with time and effort requirements does little to ensure federal funds are spent appropriately.

For example, a state or district could have compliant time and effort records, but have weak core systems such as payroll and human resources (HR). Good payroll and HR information is generally far more critical to preserving the integrity of federal funds (as well as state and local funds) and accomplishing the mission of an organization than time and effort records. Unfortunately, federal rules can incentivize states and districts to focus on time and effort reports instead of core systems like payroll and HR.

There is good news on the time and effort front too. For one, OMB permits institutions of higher education, but not states or districts, to use their existing payroll and HR systems to meet time and effort requirements in lieu of specific time and effort forms. While states and districts can apply to implement alternative time and effort systems under current law, we think they should have the same flexibilities available to institutions of higher education as a matter of course without the need for prior approval.

In addition, ED’s Administrative Flexibility Pilots are a great opportunity to develop more meaningful time and effort systems. It is fantastic that ED is recognizing that traditional time and effort records do not promote good outcomes. There are many options available to states and districts, and we are hopeful that those with on-the-ground experience with the unintended consequences of time and effort come forward with flexibility proposals. Reducing the burden and risk of complying with time and effort requirements will go a long way towards unlocking the potential of federal funds.

So, in the end, what do supplement not supplant and time and effort have in common? Both are largely unknown, administrative rules that force states, districts, and schools to think about their various funding streams in silos. Rules that force entities to manage their money in silos ultimately encourage them to deliver educational services in silos. If policymakers want to encourage more comprehensive approaches to improving schools, it is vital to remove the administrative barriers confronting the field.

--Melissa Junge and Sheara Krvaric