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Report to Congressional Requesters:

United States General Accounting Office:

GAO:

June 2003:

Flexibility Demonstration Programs:

Education Needs to Better Target Program Information:

GAO-03-691:

GAO Highlights:

Highlights of GAO-03-691, a report to Congressional Requesters 

Why GAO Did This Study:

The No Child Left Behind Act of 2001 (NCLBA) has focused national 
attention on increasing accountability for states and school districts 
to improve student achievement.  While increasing accountability, 
NCLBA also provided states and school districts with additional 
flexibility. The act established two flexibility demonstration 
programsState- and Local-Flexwhich allow up to 7 states and 80 
school districts to redirect up to 100 percent of certain NCLBA 
program funds.  

GAO was asked to determine factors that affect states and districts 
decisions whether or not to apply for the demonstration programs and 
to determine the extent to which the U.S. Department of Education 
publicized, provided guidance, and established a process to review and 
award flexibility demonstration programs.  To address these questions, 
GAO conducted a study, using telephone interviews with officials in 22 
states and 37 school districts, and site visits to 2 of the four 
applicants.

What GAO Found:

The one applicant for State-Flex and the three applicants for Local-
Flex cited two main reasons why they appliedthe commitment of 
leadership and the ability to develop goals and strategies to improve 
student achievement.  In contrast, states did not apply primarily due 
to few perceived benefits, as well as conflicting deadlines with other 
NCLBA requirements, while school districts did not apply primarily due 
to a lack of awareness about the program.  In particular, state 
officials said they were busy completing mandatory draft plans for 
measuring student achievement.  Additionally, these state officials 
indicated that they needed student achievement data based on these 
plans in order to apply for State-Flex.  Officials in other states 
said that less time-consuming options to transfer funds were 
preferable to State-Flex due to the time and effort required to 
complete the State-Flex application and develop agreements with school 
districts.  Finally, most school district officials GAO spoke with did 
not apply for Local-Flex because they were not aware of the program.  

Education publicized the flexibility demonstration programs in routine 
channels, such as the Federal Register, at conferences informing 
states and school districts about NCLBA, and in letters to nearly 200 
of the largest districts. However, Educations communication strategy 
did not target those potential applicants in the best position to 
applystates and districts that had developed goals and strategies to 
improve student achievement and narrow achievement gaps.  
Additionally, Education provided guidance on the application process 
and assisted interested applicants. However, the two applicants GAO 
visited said that more guidance was needed in some areas, such as how 
to demonstrate that funds would be used for allowable purposes. 
Finally, while Education has developed criteria and procedures for 
reviewing and awarding flexibility, it is too early to comment on its 
processes because it has not made awards under these two flexibility 
programs to any state or district.   

What GAO Recommends:

GAO recommends that the U.S. Department of Education better target 
information to states and districts in the best position to apply for 
additional flexibility.  

www.gao.gov/cgi-bin/getrpt?GAO-03-691.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Marnie S. Shaul  (202)-512-7215 or
shaulm@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Commitment of Leadership and Capacity Influenced Decisions to Apply 
While Conflicting Deadlines, Few Perceived Benefits, and Limited 
Awareness Influenced Decisions Not to Apply:

Education's Communications about Flexibility Demonstration Programs 
Not Targeted at Those Best Positioned to Apply:

Conclusions:

Recommendation for Executive Action:

Agency Comments:

Appendix I: Scope and Methodology:

Appendix II: Comments from the U.S. Department of Education:

Appendix III: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Acknowledgments:

Related GAO Products:

Tables:

Table 1: Percentage of NCLBA Program Funds Eligible for 
Transferability, State-and Local-Flex, and REAP Alternative Uses:

Table 2: Estimated Eligible Funds for Transferability, State-and Local-
Flex, and REAP Alternative Uses:

Table 3: Number of States and School Districts Included and Selection 
Criteria:

Abbreviations:

AYP: Adequate Yearly Progress:

ESEA: Elementary and Secondary Education Act:

NCLBA: No Child Left Behind Act:

REAP: Rural Education Achievement Program:

United States General Accounting Office:

Washington, DC 20548:

June 9, 2003:

The Honorable Edward M. Kennedy Ranking Minority Member Committee on 
Health, Education, Labor, and Pensions United States Senate:

The Honorable George M. Miller Ranking Minority Member Committee on 
Education and the Workforce House of Representatives:

The No Child Left Behind Act of 2001 (NCLBA) has focused national 
attention on increasing accountability for states and school districts 
to improve student achievement. Specifically, NCLBA requires that 
states define student proficiency in mathematics, reading or language 
arts, and science and establish goals for all students to achieve these 
proficiency levels by 2013-14. While increasing accountability, NCLBA 
also provided states and school districts with additional flexibility 
to use federal funds to better meet education needs. Specifically, the 
act expanded options for all states and school districts to transfer up 
to one-half of federal funds among several specified NCLBA programs. 
Additionally, the act created two flexibility demonstration programs--
State-and Local-Flex--in which up to 7 states[Footnote 1] and 150 
districts could participate. These programs give states and school 
districts additional flexibility to consolidate and redirect up to 100 
percent of certain NCLBA program funds. Of the approximately $23.8 
billion appropriated for NCLBA programs in fiscal year 2003, 
approximately $3.6 billion was allocated to districts for programs 
covered by Local-Flex and about $650 million is available to states 
under programs covered by State-Flex. Due to concerns over design and 
implementation of the demonstration programs, you asked us to determine 
(1) the factors that affect states' and districts' decisions whether or 
not to apply for the flexibility demonstration programs and (2) the 
extent to which the Department of Education publicized, provided 
guidance to interested applicants, and established a process to review 
and award flexibility demonstration programs.

To obtain this information, we interviewed officials in the 1 state and 
3 school districts that applied for the flexibility demonstration 
programs.[Footnote 2] We also interviewed officials from 12 states and 
8 districts that expressed intent to apply but did not apply and 
officials in 9 states and 26 districts that neither applied for nor 
expressed interest in the programs. We selected states and districts 
that did not apply or express interest based on geographic location and 
level of student enrollment. Additionally, we conducted a site visit to 
two applicants--the Florida Department of Education and Seattle Public 
Schools--to gain a better understanding of what was involved in 
applying for the programs and how they proposed to use additional 
flexibility. Finally, we reviewed Education's program documentation and 
interviewed Education officials. We conducted our work between January 
and May 2003 in accordance with generally accepted government auditing 
standards.

Results in Brief:

Officials in the 1 state and 3 school districts that applied for the 
flexibility demonstration programs cited two main reasons why they 
applied: (1) the commitment of leadership to make full use of federal 
flexibility provisions as soon as possible and (2) the ability and 
willingness to develop goals and strategies demonstrating how 
additional flexibility would be used to improve student achievement 
even though it was possible they would have to revise these plans 
later. For example, 1 school district superintendent said his district 
was committed to participating in the Local-Flex program because it was 
important to demonstrate that additional flexibility could be used to 
better target federal program dollars to improve student achievement. 
According to district officials, the district was willing to go forward 
with its application using available data despite the possibility that 
it would need to revise its application to conform to final state 
student performance goals that had yet to be approved. In contrast, 
state officials we spoke with did not apply for State-Flex due to 
conflicts with other NCLBA requirements and few perceived benefits; 
while school district officials we spoke with did not apply primarily 
due to a lack of awareness about the Local-Flex program. Specifically, 
officials we spoke with in 8 states said they did not apply for State-
Flex by the February 28, 2003, application deadline because they were 
busy completing mandatory draft accountability plans and they needed 
the information in these plans in order to complete the State-Flex 
application. The primary reason cited by the other states for not 
applying was that State-Flex did not provide sufficient benefits to 
justify the effort involved in completing an application. Specifically, 
these state officials said that less time-consuming options to transfer 
funds were preferable to State-Flex due to the time and effort required 
to complete the State-Flex application and develop agreements with 
between 4 and 10 school districts. Finally, officials in 20 of 34 
districts that did not apply for Local-Flex said they were not aware of 
the program. Of the remaining 14 school districts that were aware of 
Local-Flex but did not apply, officials cited a variety of reasons, 
such as having sufficient flexibility through other provisions or being 
busy with other district-level initiatives.

Education publicized the flexibility demonstration programs in routine 
channels, such as the Federal Register, provided some guidance, and has 
begun reviewing program applications, but its communication about the 
programs was not targeted at those states and school districts in the 
best position to apply. Specifically, Education publicized the programs 
at conferences informing states and school districts about NCLBA, in 
letters to nearly 200 of the largest districts, and through the Federal 
Register. Also, in its 2002-07 Strategic Plan, Education established 
strategies to publicize flexibility provisions by aggressively 
communicating flexibility opportunities, including State-and Local-
Flex, to states and school districts. However, Education's 
communication strategy for these demonstration programs was not 
targeted at those potential applicants in the best position to apply--
states and districts that had developed goals and strategies to improve 
student achievement and narrow achievement gaps and as a result were 
more likely to be able to use flexibility provisions to achieve their 
goals. Additionally, Education provided guidance on the application 
process and assisted interested applicants. However, the two applicants 
we visited said that more guidance was needed in some areas, such as 
how to demonstrate that funds would be used for allowable purposes. 
Finally, while Education has developed criteria and procedures for 
reviewing and awarding flexibility, it is too early to comment on its 
processes because it has not made awards under these two flexibility 
programs to any state or district.

Given the information needed to apply for the flexibility programs and 
the general lack of awareness among school districts, we are 
recommending that Education better target information to states and 
districts in the best position to apply for additional flexibility.

Background:

NCLBA provides for increased accountability by requiring states and 
school districts to improve student achievement. Specifically, NCLBA 
requires states to establish definitions of proficiency for students in 
math, reading/language arts, and science. To measure student 
achievement, NCLBA requires states to establish student assessment 
systems and to annually test students in grades 3 through 8 and once in 
high school in math and reading/language arts by 2005-06 and once in 
elementary, middle, and high school in science by 2007-08. States must 
also establish Adequate Yearly Progress (AYP) goals, with the ultimate 
goal that all students achieve state standards for proficiency by 2013-
14. Additionally, the following subgroups must meet AYP goals: (1) 
students from major racial and ethnic groups, (2) students with limited 
English proficiency, (3) students with disabilities, and (4) 
economically disadvantaged students. Districts and schools failing to 
meet AYP for 2 consecutive years are designated as needing improvement 
and are required to take actions to address student achievement 
problems, with additional sanctions added to schools that continue to 
not meet AYP. Education required all states to develop and submit draft 
accountability plans by January 31, 2003, in order to assist them in 
having approved accountability plans in place prior to submitting their 
consolidated applications for NCLBA program funds. All states submitted 
draft accountability plans by January 31, 2003, and as of May 1, 2003, 
20 states had accountability plans approved.

To support the new accountability requirements, NCLBA established 
several options that permit states and school districts to redirect 
specified NCLBA program funds.[Footnote 3] First, NCLBA established two 
flexibility demonstration programs--State-and Local-Flex. These 
programs provide authority for up to 5 years to a maximum of 7 states 
and 150 school districts[Footnote 4] to consolidate 100 percent of 
specified federal funds and use those funds for any purpose under NCLBA 
in order to assist them in meeting AYP.[Footnote 5] Additionally, the 
act established a transferability option whereby states and school 
districts can transfer up to 50 percent of their federal funds among 
certain programs or into Title I - Part A.[Footnote 6] Such transfers 
do not require prior approval from Education. Finally, NCLBA expanded 
flexibility for rural schools under the Rural Education Achievement 
Program (REAP) in which rural school districts, after notifying their 
states, have greater flexibility in the use of their funds from four 
NCLBA programs, also without prior approval from Education. Table 1 
lists the programs that states and districts can consolidate or 
transfer funds from.

Table 1: Percentage of NCLBA Program Funds Eligible for 
Transferability, State-and Local-Flex, and REAP Alternative Uses:

NCBLA program: Eligibility: Teacher and Principal Training and 
Recruiting; Transferability: State transfers[A]: All states[C]: 50%; 
Transferability: District transfers: All districts[C]: 50%; 
State-Flex[B]: 7 states[D]: 100%; Local-Flex: 80 districts[D,E]: 100%; 
REAP alternative uses: 4,749 districts[F]: 100%.

NCBLA program: Eligibility: Enhancing Education through Technology; 
Transferability: State transfers[A]: All states[C]: 50%; 
Transferability: District transfers: All districts[C]: 50%; 
State-Flex[B]: 7 states[D]: 100%; Local-Flex: 80 districts[D,E]: 100%; 
REAP alternative uses: 4,749 districts[F]: 100%.

NCBLA program: Eligibility: Safe and Drug Free Schools; (SEA funds); 
Transferability: State transfers[A]: All states[C]: 50%; 
Transferability: District transfers: All districts[C]: 50%; 
State-Flex[B]: 7 states[D]: 100%; Local-Flex: 80 districts[D,E]: 100%; 
REAP alternative uses: 4,749 districts[F]: 100%.

NCBLA program: Eligibility: Safe and Drug Free Schools (Governor's 
program); Transferability: State transfers[A]: All states[C]: 50%; 
Transferability: District transfers: All districts[C]: NA[G]; 
State-Flex[B]: 7 states[D]: 100%; Local-Flex: 80 districts[D,E]: NA; 
REAP alternative uses: 4,749 districts[F]: NA.

NCBLA program: Eligibility: 21st Century Community Learning Centers; 
Transferability: State transfers[A]: All states[C]: 50%; 
Transferability: District transfers: All districts[C]: NA; 
State-Flex[B]: 7 states[D]: 100%; Local-Flex: 80 districts[D,E]: NA; 
REAP alternative uses: 4,749 districts[F]: NA.

NCBLA program: Eligibility: Innovative Programs; Transferability: 
State transfers[A]: All states[C]: 50%; Transferability: District 
transfers: All districts[C]: 50%; State-Flex[B]: 7 states[D]: 
100%; Local-Flex: 80 districts[D,E]: 100%; REAP alternative uses: 4,749 
districts[F]: 100%.

NCBLA program: Eligibility: Reading First; Transferability: State 
transfers[A]: All states[C]: NA; Transferability: District transfers: 
All districts[C]: NA; State-Flex[B]: 7 states[D]: 100%; Local-
Flex: 80 districts[D,E]: NA; REAP alternative uses: 4,749 districts[F]: 
NA.

NCBLA program: Eligibility: Title I: Improving Academic Achievement of 
Disadvantaged Students--Section 1004 (state administration); 
Transferability: State transfers[A]: All states[C]: NA; 
Transferability: District transfers: All districts[C]: NA; 
State-Flex[B]: 7 states[D]: 100%; Local-Flex: 80 districts[D,E]: NA; 
REAP alternative uses: 4,749 districts[F]: NA.

NCBLA program: Eligibility: Transfer/use of funds; Transferability: 
State transfers[A]: All states[C]: Among these 6 programs or into Title 
I; Transferability: District transfers: All districts[C]: Among these 4 
programs or into Title I; State-Flex[B]: 7 states[D]: For any 
purpose under NCLBA; Local-Flex: 80 districts[D,E]: For any purpose 
under NCLBA; REAP alternative uses: 4,749 districts[F]: For any 
activity under these 4 programs, or Title I, 21st Century Learning 
Centers, or Language Instruction.

Source: GAO analysis.

[A] State transfers are allowed for nonadministrative state-level 
activities funds only.

[B] State-Flex authority applies to administrative and state-level 
activities funds only. Under State-Flex, districts with local 
performance agreements can consolidate funds in the same manner as 
districts receiving Local-Flex.

[C] Districts identified for improvement can only transfer up to 30 
percent of its funds.

[D] State-and Local-Flex are awarded by the Department of Education.

[E] Up to 80 school districts are eligible for Local-Flex. As many as 
70 other districts may receive flexibility authority, if 7 states are 
awarded State-Flex and all 7 select 10 school districts for Local 
Performance Agreements.

[F] To be eligible for combining funds a school district must have 
fewer than 600 students or be located in an area with a population 
density of fewer than 10 persons per square mile, and it must also be 
located in a community with fewer than 2,500 residents, or is located 
in a rural community. Education estimated the number of school 
districts eligible for REAP (4,749) for fiscal year 2002.

[G] N/A means not applicable, i.e., program funds are not authorized 
for transferability, Local-Flex, or REAP.

[End of table]

Of the approximately $23.8 billion appropriated for NCLBA programs in 
fiscal year 2003, roughly $18.6 billion, or about 78 percent, was 
appropriated for programs covered by the four flexibility provisions. 
For states, about $650 million of this $18.6 billion is available for 
state-level activities and state administration under programs covered 
by State-Flex. Additionally, one-half of the approximately $200 million 
available for state activities was eligible for transferability. The 
difference in the eligible amounts between these two programs is 
primarily because State-Flex allows for the consolidation of state-
level funds under a greater number of programs and includes both 
administrative and nonadministrative funds, whereas transferability 
only allows for transfers of nonadministrative funds. Approximately 
$3.6 billion flows to districts through the programs covered under 
Local-Flex, which is very near the approximately $3.7 billion available 
under transferability provisions.[Footnote 7] According to the most 
recent available estimates developed by the U.S. Department of 
Education, about $12 million was available for alternative uses under 
REAP in fiscal year 2001. Table 2 provides information on the amounts 
available under the various NCLBA flexibility provisions.

Table 2: Estimated Eligible Funds for Transferability, State-and Local-
Flex, and REAP Alternative Uses:

Dollars in millions:

NCBLA program: 

Eligible Funds: 

Teacher and Principal Training and Recruiting[F];  
Total Fiscal Year 2003 appropriation: $2,930.8; 
Transferability: State transfers[A]: State-level activities funds: 
$72.2; Transferability: District transfers[A]: Formula funds[E]: 
$2,715.2; State-Flex[B]: State-level activities and 
administrative funds: $68.7; Local-Flex[C]: Formula funds[E]: 
$2,598.7; REAP Alternative Uses[D]: Formula funds: [C].

Enhancing Education Through Technology[G];  Total 
Fiscal Year 2003 appropriation: 696; Transferability: State 
transfers[A]: State-level activities funds: 32.1; Transferability: 
District transfers[A]: Formula funds[E]: 305.4; State-
Flex[B]: State-level activities and administrative funds: 30.9; Local-
Flex[C]: Formula funds[E]: 292.5; REAP Alternative Uses[D]: Formula 
funds: [C].

Safe and Drug Free Schools (SEA funds)[H];  Total 
Fiscal Year 2003 appropriation: 468.9; Transferability: State 
transfers[A]: State-level activities funds: 18.3; Transferability: 
District transfers[A]: Formula funds[E]: 341.1; State-
Flex[B]: State-level activities and administrative funds: 28.5; Local-
Flex[C]: Formula funds[E]: 353.9; REAP Alternative Uses[D]: Formula 
funds: [C].

Safe and Drug Free Schools (Governor's program)[H]; Dollars in 
millions: Total Fiscal Year 2003 appropriation: Total included in SEA 
funds total above; Transferability: State transfers[A]: State-
level activities funds: NA[M]; Transferability: District transfers[A]: 
Formula funds[E]: NA; State-Flex[B]: State-level activities 
and administrative funds: 2.7; Local-Flex[C]: Formula funds[E]: NA; 
REAP Alternative Uses[D]: Formula funds: NA.

21st Century Community Learning Centers[I];  Total 
Fiscal Year 2003 appropriation: 993.5; Transferability: State 
transfers[A]: State-level activities funds: 16.5; Transferability: 
District transfers[A]: Formula funds[E]: NA; State-Flex[B]: 
State-level activities and administrative funds: 26.5; Local-Flex[C]: 
Formula funds[E]: NA; REAP Alternative Uses[D]: Formula funds: NA.

Innovative Programs[J];  Total Fiscal Year 2003 
appropriation: 382.5; Transferability: State transfers[A]: 
State-level activities funds: 57; Transferability: District 
transfers[A]: Formula funds[E]: 322.8; State-Flex[B]: State-
level activities and administrative funds: 55.9; Local-Flex[C]: Formula 
funds[E]: 315; REAP Alternative Uses[D]: Formula funds: [C].

Reading First[K];  Total Fiscal Year 2003 
appropriation: 993.5; Transferability: State transfers[A]: 
State-level activities funds: NA; Transferability: District 
transfers[A]: Formula funds[E]: NA; State-Flex[B]: State-
level activities and administrative funds: 321.6; Local-Flex[C]: 
Formula funds[E]: NA; REAP Alternative Uses[D]: Formula funds: NA.

Title I: Improving Academic Achievement of Disadvantaged Students--
Section 1004 (State Administration)[L];  Total 
Fiscal Year 2003 appropriation: 12,128.4; Transferability: 
State transfers[A]: State-level activities funds: NA; Transferability: 
District transfers[A]: Formula funds[E]: NA; State-Flex[B]: 
State-level activities and administrative funds: 116.2; Local-Flex[C]: 
Formula funds[E]: NA; REAP Alternative Uses[D]: Formula funds: NA.

Total;  Total Fiscal Year 2003 appropriation: 
$18,593.6; Transferability: State transfers[A]: State-level 
activities funds: $196.1; Transferability: District transfers[A]: 
Formula funds[E]: $3,684.5; State-Flex[B]: State-level 
activities and administrative funds: $651.0; Local-Flex[C]: Formula 
funds[E]: $3,560.1; REAP Alternative Uses[D]: Formula funds: $12.

Source: GAO analysis.

Note: Estimates for transferability and State-and Local-Flex were based 
on Education's March 14, 2003 estimates of state budget allocations. 
Allocations may change when final data become available. Estimate for 
REAP Alternative Uses is Education's estimate for FY 2001.

[A] The 50 states, the District of Columbia, and Puerto Rico and their 
school districts are eligible to use transferability.

[B] Hawaii, Puerto Rico, and outlying areas such as Guam and America 
Somoa are not eligible to apply for State-Flex because they do not have 
the minimum number of school districts required for State-Flex. 
Consequently, their allocations are not included in these totals.

[C] The District of Columbia, Hawaii, Puerto Rico, and outlying areas 
are ineligible to apply for Local-Flex. School districts entering into 
local performance agreements with their state as part of a State-Flex 
agreement would be allowed to consolidate and transfer the funds listed 
here.

[D] The most recent available data for REAP were developed by Education 
for fiscal year 2001. The department was not able to provide a break 
down by program.

[E] Transferability and Local-Flex are only available for formula funds 
that school districts receive under each program. Formulas for each 
program are provided in NCLBA and the general distribution of program 
dollars is described in the following notes.

[F] A state can use up to 2.5 percent of its Teacher and Principal 
Training and Recruiting grant for state activities. School districts 
receive 95 percent of the state grant by formula.

[G] Under the Enhancing Education through Technology Program, a state 
can use no more than 5 percent of its grant to carry out state 
activities. Of the remaining 95 percent, one-half must be distributed 
by formula to school districts and the remainder is awarded to school 
districts on a competitive basis.

[H] Under the Safe and Drug Free Schools Program, a state can elect to 
reserve up to 20 percent of its grant for a Governor's program to award 
grants to school districts on a competitive basis. Up to 3 percent of 
the Governor's program funds can be used for administrative purposes. 
Of the remaining amount not used for the Governor's program, not less 
than 93 percent must be distributed to school districts. Once funds are 
set aside for the Governor's program and funds are allocated to school 
districts, a state may use up to 3 percent of remainder for 
administrative purposes and up to 5 percent for state activities. These 
estimates assume all states elect to use the maximum amount, 20 
percent, for the Governor's program.

[I] States can use not more than 2 percent of their 21st Century 
Community Learning Centers grant for administration and not more than 3 
percent for state activities. States must allot at least 95 percent of 
their grant to school districts.

[J] States must award 85 percent of Innovative Program funds to school 
districts based on a formula and can use the remaining 15 percent for 
state administration.

[K] States can use up to 25 percent of their Reading First allocation 
to provide technical assistance to school districts and up to 10 
percent for planning, administration, and reporting.

[L] Under Section 1004 of the NCLBA, states can use up to the greater 
of $400,000 or 1 percent of their grants received under Title I Part A-
-Improving Basic Programs Operated by Local Education Agencies, C--
Education of Migratory Children, and D--Neglected and Delinquent 
Programs for administrative purposes.

[M] Not applicable.

[End of table]

State-and Local-Flex provide various mechanisms to assist states and 
school districts in their efforts to improve student achievement. 
First, State-Flex allows states to consolidate NCLBA state 
administrative and state-level activities funds--that are to be used 
for such activities as technical assistance and professional 
development--and use them for any purpose under NCLBA. Second, states 
that are awarded State-Flex would also have the authority to specify 
how all school districts in the state use Innovative Program 
funds.[Footnote 8] Finally, as part of a State-Flex agreement, a state 
must enter into local performance agreements with 4 to 10 school 
districts in the state, at least half of which must have 20 percent or 
more of its student population living in poverty. Districts with Local-
Flex or operating under local performance agreements can consolidate 
administrative and programmatic funds for four NCLBA programs and use 
them for any purpose under NCLBA.

Both State-and Local-Flex programs limit which states and school 
districts can apply. For example, in order to be eligible to apply by 
the February 28, 2003, deadline for State-Flex, a state must have 
submitted a draft accountability plan to Education by January 31, 2003. 
To be eligible to apply for Local-Flex, a district cannot be located in 
a state that expressed its intent to apply for State-Flex by May 8, 
2002, or in a state that has been awarded State-Flex authority. Also, 
no more than 3 districts in any state may be awarded authority under 
the Local-Flex program. However, because Education initiated the Local-
Flex application process before the State-Flex application process, it 
has ruled that if any school districts in a state have been awarded 
Local-Flex authority then that state can apply for State-Flex only if 
those school districts agree to become part of the State-Flex 
application.

As part of their application for the flexibility programs, states and 
school districts had to show how consolidated funds would be used to 
meet AYP goals for improving student achievement and narrowing 
achievement gaps and provide several assurances on how they would use 
flexibility. To demonstrate how AYP goals would be met, states and 
districts were required to provide baseline student achievement data 
from the most recent available school year. Also, to the extent 
possible, data were to be disaggregated by (1) each major racial and 
ethnic group; (2) English proficiency status; (3) disability status; 
and (4) status as economically disadvantaged, in order to demonstrate 
the existence of achievement gaps between these groups and the general 
student population. On the basis of this information, states and 
districts were to develop goals and strategies that demonstrated how 
they would use flexibility to meet AYP goals, including goals for 
addressing achievement gaps. Additionally, states and districts were 
required to provide several assurances as part of their application, 
including that adequate fiscal controls were in place to ensure the 
proper disbursement of and accounting for federal program funds and 
that federal funds would be used to supplement the amount of funds 
that, in the absence of federal funds, would be made available from 
nonfederal sources.

Commitment of Leadership and Capacity Influenced Decisions to Apply 
While Conflicting Deadlines, Few Perceived Benefits, and Limited 
Awareness Influenced Decisions Not to Apply:

Officials in the 1 state and 3 school districts that applied for the 
flexibility demonstration programs did so because of the commitment of 
leadership to make full use of federal flexibility provisions as soon 
as possible, and the ability and willingness to develop goals and 
strategies demonstrating how additional flexibility would be used to 
improve student achievement even though it was possible they would have 
to revise these plans later. Officials in states and districts we 
contacted that did not apply cited conflicting deadlines, too few 
benefits, or limited awareness of the programs as key reasons they did 
not apply.

Applicants Cite Commitment of Leadership and the Presence of Strategies 
to Improve Student Achievement as Key Factors Influencing Their 
Decisions to Apply:

According to applicants we spoke with, one key factor that influenced 
their decision to apply was leadership's commitment to gaining greater 
flexibility. For example, the Superintendent of the Seattle Public 
Schools said he was committed to participating in the Local-Flex 
program for his district because it was important to demonstrate that 
additional flexibility could be used to better target federal program 
dollars to improve student achievement. According to district 
officials, the district was willing to go forward with its application 
using available data despite the possibility that it would need to 
revise its application to conform to final state student performance 
goals that had yet to be approved. Similarly, officials in Florida said 
that it was important to state leaders that Florida apply as part of 
its effort to be "first and best in education." Officials representing 
the other district applicants--Bangor, Michigan, and Traverse City, 
Michigan--also reported that district leadership took an active role in 
developing the application.[Footnote 9]

State and district officials we spoke with said that a second factor 
influencing their decision to apply was that the added flexibility 
afforded through the demonstration programs would allow them to better 
coordinate federal funds to fit with their strategies to improve 
student achievement and narrow achievement gaps. These applicants were 
able to disaggregate student achievement data by subgroups (such as 
economically disadvantaged and limited English proficiency), which 
facilitated their ability to identify achievement gaps and develop 
strategies to use consolidated funds in ways they could not under 
original program restrictions. For example, the Seattle school district 
had implemented local initiatives to address achievement gaps between 
minority and nonminority groups and was able to narrow achievement gaps 
for some groups, but not sufficiently for Hispanic students. The 
district wanted to use authority under Local-Flex to transfer federal 
Teacher and Principal Training and Recruiting program funds to other 
programs specifically targeted to improve the performance of Hispanic 
students.

Conflicting Deadlines, Few Perceived Benefits, and Limited Awareness of 
Flexibility Demonstrations Were Cited as Key Factors in Decisions Not 
to Apply:

For the State-Flex program, officials in 8 states said they did not 
apply for State-Flex because they were busy completing accountability 
plans and that they needed the information in these plans in order to 
complete the program application. First, state officials told us that 
the accountability plans--due to Education by January 31, 2003--took a 
lot of time and effort to complete and left them with only 1 month to 
complete the State-Flex application, due February 28. Second, these 
state officials said they did not apply because they preferred to wait 
until their accountability plans were approved. The accountability 
plans included AYP definitions needed to develop baseline data on 
student achievement required for the State-Flex application. In order 
to be eligible to apply for State-Flex, Education required states to 
have submitted draft accountability plans by the January 31, 2003, 
deadline. Education reviews these draft accountability plans and may 
require states to make changes before final approval. As a result, 
states could be required to revise their State-Flex applications based 
on changes Education required states to make to their accountability 
plans.

Of the other 13 states, 10 did not apply for the program because of 
concerns that State-Flex did not provide sufficient benefits to justify 
the effort involved in completing an application.[Footnote 10] In 
particular, these state officials said the availability of other 
transferability options that allowed states to transfer up to 50 
percent of state-level activities funds provided them with adequate 
flexibility (see table 1), or that the program's requirements for 
completing an application were excessive, especially having to complete 
4 to 10 local performance agreements with school districts. The Office 
of Management and Budget estimated that it would take 640 hours to 
complete an application. Officials we spoke with in Florida confirmed 
that the process of identifying school districts for local performance 
agreements and developing those performance agreements took 
considerable time and effort.

The key reason why school districts did not apply for Local-Flex was a 
lack of awareness about the program, while districts that were aware of 
the program cited various other reasons for not applying. Specifically, 
20 of 26 districts in our study that had not applied for or expressed 
intent to apply for Local-Flex did not apply because they were unaware 
of the program. The other 6 districts were aware of Local-Flex but did 
not apply because they said they had either enough flexibility without 
Local-Flex or other priorities. For the 8 districts that expressed 
intent to apply for Local-Flex, 3 said they did not apply because 
Education did not provide follow-up information, 2 cited insufficient 
resources to complete the application, 1 decided not to apply due to 
the small amount of resources that could be consolidated, 1 did not 
apply because the expression of intent to apply was done in error, and 
1 did not apply because it was advised by Education that it would be 
unlikely to be awarded flexibility because the school district was 
under state control for poor academic performance.

Finally, some school districts were not eligible to apply for Local-
Flex because their states indicated the intent to apply for State-Flex, 
thereby locking school districts out from applying for Local-Flex. 
Specifically, under NCLBA, only districts in states not receiving 
State-Flex authority are eligible to apply for Local-Flex. Also, 
districts in states that notified Education of their intent to apply to 
the State-Flex program by May 8, 2002, would not be eligible to apply 
for Local-Flex. Eleven states--Alabama, Arizona, Colorado, Delaware, 
Florida, Illinois, Massachusetts, Nebraska, Pennsylvania, Tennessee, 
and Texas--signaled their intent to apply by the deadline thereby 
making districts in their states ineligible to apply directly for 
Local-Flex.[Footnote 11] Instead, 4 to 10 districts in these states 
would be eligible for flexibility under Local Performance Agreements 
included in their state's State-Flex agreement, if these states 
applied.

Education's Communications about Flexibility Demonstration Programs 
Not Targeted at Those Best Positioned to Apply:

Education took steps to publicize the programs, provided some guidance, 
and has begun reviewing program applications. However, its 
communication strategy was not targeted at those states and districts 
in the best position to apply--that is, where the states had approved 
accountability plans or established student assessment systems. 
Additionally, according to the 1 state and 3 districts that applied, 
more guidance was needed on program procedures and documentation 
requirements. Finally, while Education has developed criteria and 
procedures for reviewing and awarding flexibility, it is too early to 
comment on its processes because it has yet to award flexibility to any 
state or district.

As part of the application process for these two programs, Education 
publicized and sought feedback through the Federal Register. Education 
also disseminated information about the programs to state and school 
district officials at Title I conferences and mailed program 
information about Local-Flex to about 200 large school districts.

While Education did provide information about the flexibility programs 
through routine channels, it did not pursue departmental goals to 
aggressively publicize the programs. Specifically, in response to the 
new flexibility provisions in NCLBA, Education, in its 2002-07 
Strategic Plan, established a strategic objective to provide increased 
flexibility and local control. To accomplish this, Education set goals 
to publicize flexibility provisions by aggressively communicating 
flexibility opportunities, including State-and Local-Flex, to states 
and school districts. However, by providing information primarily 
through routine channels, Education did not make use of available 
information to identify and target potential applicants that would have 
been in the best position to apply. Specifically, Education 
acknowledged that it did not focus its communications on the 5 states 
that had accountability plans approved prior to the State-Flex 
application deadline or the 17 states that had approved statewide 
assessment systems as of February 12, 2003.[Footnote 12] While these 17 
states technically did not have approved accountability plans at the 
time State-Flex applications were due, these states and their school 
districts were in a better position to develop and use data on student 
achievement needed for State-and Local-Flex applications.

While all 11 states and 2 of 3 school districts that received and 
reviewed program applications reported that the guidance for completing 
the application was clear, officials from the state and districts that 
applied believed more guidance would have been helpful to clarify 
documentation requirements once the program is implemented. For 
example, officials in both Seattle and Florida said that more guidance 
was needed on what the requirements were for drawing down consolidated 
grant funds. Typically, a school district would draw down funds for a 
specific grant program, such as Innovative Programs--and then report 
back to the state on how those funds were used. However, officials in 
both Seattle and Florida said that more guidance was needed on what 
procedures and documentation were required to draw down combined State-
and Local-Flex funds and how districts were to report on the use of 
those funds. Applicants also wanted more guidance about what 
information they needed to provide to Education to demonstrate that 
federal funds they sought to consolidate were not going to be used to 
supplant state and local funds. Education officials acknowledged that 
accounting for consolidated funds was a challenge that varied from 
state to state, but they would be willing to work with states to 
develop a system to track federal funds.

Education has developed criteria and procedures for reviewing and 
awarding the programs, but it is too early to comment on its processes 
because, as of May 2003, it has not made any awards to any state or 
district. Specifically, the criteria for awarding the programs under 
these flexibility provisions include (1) identification of achievement 
gaps, (2) quality of strategies for making AYP and narrowing 
achievement gaps, (3) quality of management plans to implement and 
monitor the programs, and (4) adequacy of resources. To award these 
programs, Education will use a panel of external peer reviewers 
representative of parents, teachers, state educational agencies, and 
who are familiar with educational standards, assessments, 
accountability, curriculum, instruction, and staff development.

Conclusions:

The 1 state and 3 school districts that applied for the flexibility 
demonstration programs did so because they had the leadership and 
capacity to identify ways they could use additional flexibility to 
improve student achievement. However, Education may have discouraged 
applications from other interested states by establishing application 
deadlines for the State-Flex demonstration program that conflicted with 
other requirements of NCLBA. Not only were states busy completing 
accountability plans, but the states needed student achievement data 
developed as part of these plans in order to apply for the flexibility 
programs. Consequently, by establishing the State-Flex application 
deadline near the deadline for draft accountability plans, Education 
placed most interested parties in the position where they could only 
apply using unapproved information and might be required to spend 
additional time redoing their application if Education were to require 
changes to their accountability plan.

Also, states and school districts in the best position to apply (i.e., 
that had met or are close to meeting accountability requirements) may 
not have applied because, among other reasons, Education's 
communication and guidance was not strategically targeted. Education 
has acknowledged that its communications were not targeted at those 
states and districts in the best position to apply. Without increased 
awareness of the programs and their benefits, states and districts that 
may have benefited from additional flexibility may miss opportunities 
to participate. Given that the flexibility demonstration programs are 
in the early phases of design and implementation and that they are 
linked critically to other new NCLBA accountability requirements, it is 
clear that Education faces a challenge to find eligible applicants with 
the time and information needed to participate. Thus, targeting 
information at potential applicants and ensuring that they have the 
time and information needed to apply for the flexibility programs are 
important.

Recommendation for Executive Action:

We recommend that the U.S. Department of Education better target 
information to states and districts in the best position to apply for 
additional flexibility. This could include follow-up with states and 
districts expressing interest in the programs and providing information 
to states and districts that have met or are close to meeting 
accountability requirements.

Agency Comments:

The Department of Education provided written comments on a draft of 
this report, which we have summarized below and incorporated in the 
report as appropriate. (See app. II for agency comments.) Education 
generally agreed with what we presented in the draft report and with 
the thrust of the recommendation that it better target information to 
states and districts in the best position to apply for additional 
flexibility. Education noted its continued commitment to better 
targeting information to states and school districts and stated that it 
would continue its efforts to refine strategies for informing potential 
applicants about the new flexibility authorities and their benefits. 
Education also said that once state accountability plans are approved, 
the timing of flexibility competitions should no longer be an issue.

In its comments, Education pointed out that "burdens" cited by 
potential applicants as a reason for not applying were created by 
statutory, not administrative, requirements. In our report we did not 
attempt to trace the source of the perceived burdens to either 
statutory or administrative provisions. Rather, we attempted to portray 
state and school district officials' views on the reasons why they 
chose not to apply. Education officials also provided technical 
comments that we incorporated into the report where appropriate.

We are sending copies of this report to the Secretary of Education and 
other interested parties. In addition, the report will be available at 
no charge on GAO's Web site at http://www.gao.gov.

If you or your staffs have any questions or wish to discuss this 
material further, please call me on (202) 512-7215 or Harriet Ganson on 
(202) 512-7042. Other GAO contacts and staff acknowledgments are listed 
in appendix III.

Marnie S. Shaul 

Director, Education, Workforce, and Income Security 
Issues:

Signed by Marnie S. Shaul:

[End of section]

Appendix I: Scope and Methodology:

To identify factors that influenced officials' decisions to apply or 
not to apply for the programs, we contacted officials from the 1 state 
and 3 school districts that applied for the programs, all the states 
and school districts that expressed intent to apply for the programs 
but did not apply, and a selection of those that neither expressed 
intent to apply nor applied for the programs. For those that did not 
express intent to apply we selected 11 states and 26 districts. The 11 
states were selected from the Census geographic regions, divided into 
large and small states in terms of total student enrollment. We 
selected the 26 districts from across the country to include large and 
small districts--in terms of student enrollment--located in urban and 
suburban areas and small districts located rural areas. (See table 3.) 
For those that did not apply, we were able to contact and conducted 
structured interviews with officials from 12 states and 8 school 
districts that signaled their intent to apply and officials from 9 
states and 26 school districts that did not signal their intent to 
apply. For applicants, we reviewed copies of the four applications 
submitted for the programs and conducted site visits to two applicants-
-Florida and Seattle.

Table 3: Number of States and School Districts Included and Selection 
Criteria:

Group: Applicants; States: 1; School districts: 3; Selection 
criteria: All applicants.

Group: Those that expressed intent to apply but did not apply; States: 
13; School districts: 8; Selection criteria: All of those who 
expressed interest but did not apply.

Group: Those that neither expressed interest nor applied; States: 11; 
School districts: 26; Selection criteria: For states, we 
selected large and small states based on total student enrollment and 
geographic locations.; For school districts, we divided districts into 
five groups: rural, suburban small, suburban large, urban small, and 
urban large. We selected districts randomly from within each group.

Total; States: 25; School districts: 37; 

Source: GAO analysis.

[End of table]

To review the extent to which the Department of Education publicized, 
provided guidance to interested applicants on, and established a 
process to review and award flexibility demonstration programs, we 
conducted structured interviews with Education officials and reviewed 
Education's documentation. We also discussed Education's guidance with 
states and school district officials. We conducted our work between 
January 2003 and May 2003 in accordance with generally accepted 
government auditing standards.

[End of section]

Appendix II Comments from the U.S. Department of Education:

UNITED STATES DEPARTMENT OF EDUCATION:

THE UNDERSECRETARY:

June 2, 2003:

Ms. Marnie S. Shaul 

Director:

Education, Workforce, and Income Security Issues:

United States General Accounting Office Washington, DC 20548:

Dear Ms. Shaul:

This is in response to your draft report entitled "Flexibility 
Demonstration Programs: Education Needs to Better Coordinate Deadlines 
and Target Program Information" (GAO-03-691). We have carefully 
reviewed the document and appreciate this opportunity to provide 
comments to you.

Coordination of Deadlines:

Your report recommends that the U.S. Department of Education better 
coordinate deadlines related to the No Child Left Behind Act (NCLB) so 
that potential flexibility applicants have the time and information 
needed to prepare an application. We appreciate the concerns that you 
have expressed conceming the timirn.g of the State-Flex and Local-Flex 
competitions, especially in light of the Title I accountability 
deadlines.

During the early implementation stages of the NCLB, we considered 
various options for scheduling and conducting the State-Flex and Local-
Flex competitions. We recognized that States and districts were working 
to meet the new Title I accountability requirements and other new 
requirements, and that many might not be prepared to apply for the 
flexibility authorities at that time. However, some States and 
districts were ready to take advantage of these authorities and we 
wanted to ensure that they had an opportunity to do so at the earliest 
possible date. We determined that the most reasonable solution would be 
to conduct multiple State-Flex and Local-Flex competitions over a 
period of time and held. our first competitions in 2002. We announced 
that policy in Federal Register notices. States and districts that were 
ready to take advantage of. the new flexibility authorities were given 
an early opportunity to do so; those that needed additional time were 
not penalized and will be able to submit applications at a later date.

As your report indicates, States were required to submit their Title I 
accountability workbooks to the Department by January 31, 2003. Their 
accountability plans were due by May 1, 2003. We are very hopeful that 
all States will have their accountability plans approved shortly, so 
the timing of the flexibility competitions should no longer be an 
issue.

Outreach Strategies:

Your report recommends that the Department target information to States 
and districts in the best position to apply for additional flexibility. 
You have suggested that we follow up with States and districts 
expressing an interest in the flexibility authorities, and that we 
provide information to those that have met or are close to meeting the 
Title l accountability requirements.

As your report reflects, we have disseminated information about the 
flexibility programs through various means - not only in Federal 
Register notices, but also in guidance documents, at Title I and other 
conferences, and in correspondence to States and the larger school 
districts. We made a concerted effort to contact the Nation's 200 
largest school districts because we believe that districts that receive 
large concentrations of funds under the programs affected by Local-Flex 
are most likely to benefit from that authority.

As they have implemented programs under the NCLB - including the new 
Title f accountability provisions - States and districts have gained a 
greater appreciation of. bow Federal programs can best be used to 
address their particular needs. We will continue to refine our 
strategies for informing them about the new flexibility authorities and 
how they can. serve as important tools in tailoring Federal resources 
to facilitate State and local efforts to improve student academic 
achievement.

Additional Comments:

We suggest that the report highlight more clearly a major difference 
between "transferability" and the other flexibility provisions cited 
(State-Flex. Local-Flex, and REAP). Under transferability, funds are 
considered to be transferred from one program. to another and, as a 
result, are subject to all. of the requirements of the receiving 
program Under the other flexibility provisions, however, the funds are 
not considered to be transferred. Rather, the grantee is permitted to 
spend the affected funds on a broader range of activities without 
having to comply with all of the requirements of the program under 
which those activities are authorized. Consequently, there is 
significantly more flexibility in how the funds can be spent under the 
flexibility demonstration programs than under transferability.

We also recommend that the report note that some of the referenced 
"burdens" faced by entities seeking to implement the flexibility 
authorities are actually statutory requirements. For example, the 
report notes that some States indicated that the time and effort 
required to complete the State-Flex application and develop agreements 
with four to ten districts exceeded the anticipated benefits. We 
suggest that the report reflect that the legislation mandates that each 
applicant propose to enter. into local performance agreements with four 
to ten of its districts, at least half of which must be high-poverty 
districts. This is, in other words, not a "burden" created 
administratively or one that we can alter.

Finally, we suggest that Table 1 of the report indicate that a total of 
up to 150 districts (70 districts under the State-Flex authority and 80 
districts under Local-Flex) have the opportunity to enter into 
performance agreements under which they may consolidate certain Federal 
education funds. We have already transmitted some additional 
suggestions for technical changes to the report to make it more 
accurate.

In light of the progress that States have made in meeting the Title 1 
accountability requirements and the increased knowledge that they have 
gained concerning NCLB .requirements and opportunities, we are hopeful 
that many more States and districts will apply for State-Flex and 
Local-Flex authority in. the next round of competitions to be held in 
the upcoming school year.

Again, we appreciate your efforts in preparing this report and 
providing us with an opportunity to submit these comments. Please feel 
free to contact us if you would like to discuss any of these matters 
further.

Sincerely,

Eugene W. Hickok:

Signed by Eugene W. Hickok:

[End of section]

Appendix III: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Bryon Gordon, (202) 512-9207, gordonb@gao.gov:

Jason Palmer, (202) 512-3825, palmerjs@gao.gov:

Acknowledgments:

In addition to those named above, Patrick DiBattista and Lynn Musser 
made key contributions to the report.

[End of section]

Related GAO Products:

Disadvantaged Students: Fiscal Oversight of Title I Could Be Improved. 
GAO-03-377. Washington, D.C.: February 28, 2003.

Elementary and Secondary Education: Flexibility Initiatives Do Not 
Address Districts' Key Concerns About Federal Requirements. GAO/T-HEHS-
00-51. Washington, D.C.: January 25, 2000.

Ed-Flex Program: Increase in Flexibility Useful but Limited by Scope of 
Waiver Authority. GAO/T-HEHS-99-67. Washington, D.C.: February 25, 
1999.

Elementary and Secondary Education: Ed-Flex States Vary in 
Implementation of Waiver Process. GAO/HEHS-99-17. Washington, D.C.: 
November 13, 1998.

Elementary and Secondary Education: Flexibility Initiatives Do Not 
Address Districts' Key Concerns About Federal Requirements. GAO/HEHS-
98-232. Washington, D.C.: September 30, 1998.

Regulatory Flexibility in Schools: What Happens When Schools Are 
Allowed to Change the Rules? GAO/HEHS-94-102. Washington, D.C.: April 
29, 1994.

Regulatory Flexibility Programs. GAO/HRD-94-51R. Washington, D.C.: 
November 3, 1993.

FOOTNOTES

[1] State-Flex requires participating states to have Local Performance 
Agreements with 4 to 10 school districts. A Local Performance Agreement 
is similar to Local-Flex, but school districts apply for flexibility 
authority through the state rather than directly to the U.S. Department 
of Education. 

[2] Two districts applied that had not previously signaled their intent 
to apply. The other district and the state that applied both had 
previously signaled their intent to apply.

[3] These options allow approved states and districts to consolidate or 
redirect specified federal funds and do not provide additional funds.

[4] Of the school districts, 150 represent the sum of 80 school 
districts eligible for Local-Flex plus 70 school districts entering 
into Local Performance Agreements under State-Flex--the maximum number 
possible if 7 states are awarded State-Flex and enter into Local 
Performance Agreements with 10 school districts, the maximum allowed 
under NCLBA. 

[5] States and districts failing to meet AYP for 2 consecutive years 
will have their flexibility authority removed. 

[6] Districts designated for improvement can only transfer up to 30 
percent of the program funds.

[7] This difference is due to the fact that the District of Columbia, 
Hawaii, and Puerto Rico would be eligible to use transferability at 
their school districts, but could not apply for Local-Flex.

[8] Innovative Programs established under Title V, Part A of NCLBA is a 
formula grant program to school districts through states. Innovative 
Program funds may be used for various activities, including developing 
high-quality assessments, programs to recruit high-quality teachers, 
and programs for pre-kindergarten students. 

[9] Bangor and Traverse City school districts found out about the 
Local-Flex program from a consultant to the school districts.

[10] Two did not apply due to a change in administration, one was 
ineligible to apply because it was under a compliance agreement, and 
one did not apply because it did not have an approved assessment 
system.

[11] Three more states--Georgia, North Carolina, and South Carolina--
indicated interest in State-Flex after the deadline, which did not have 
the effect of preventing school districts in their state from applying 
for Local-Flex. 

[12] Under Elementary and Secondary Education Act (ESEA) states were 
required to establish statewide assessment systems and standards for 
Title I students. 

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