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 
The one applicant for State-Flex and the three applicants for Local-Flex cited 

two main reasons why they applied—the 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, Education’s communication strategy did not target 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. 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. 

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 programs—Stateand Local-Flex—which 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. 

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. 

Highlights of GAO-03-691, a report to 

Congressional Requesters 

June 2003

FLEXIBILITY DEMONSTRATION 

PROGRAMS 

Education Needs to Better Target 

Program Information 
Page i GAO-03-691 Flexibility Demonstration Programs 

Letter 1

Results in Brief 2

Background 4

Commitment of Leadership and Capacity Influenced Decisions to 

Apply While Conflicting Deadlines, Few Perceived Benefits, and 

Limited Awareness Influenced Decisions Not to Apply 10

Education’s Communications about Flexibility Demonstration 

Programs Not Targeted at Those Best Positioned to Apply 13

Conclusions 14

Recommendation for Executive Action 15

Agency Comments 15

Appendix I Scope and Methodology 17 

Appendix II Comments from the U.S. Department of Education 19 

Appendix III GAO Contacts and Staff Acknowledgments 22 

GAO Contacts 22

Acknowledgments 22

Related GAO Products 23 

Tables 

Table 1: Percentage of NCLBA Program Funds Eligible for 

Transferability, State- and Local-Flex, and REAP 

Alternative Uses 5

Table 2: Estimated Eligible Funds for Transferability, State- and 

Local-Flex, and REAP Alternative Uses 7

Table 3: Number of States and School Districts Included and 

Selection Criteria 17

Contents 
Page ii GAO-03-691 Flexibility Demonstration Programs 

Abbreviations 

AYP Adequate Yearly Progress 

ESEA Elementary and Secondary Education Act 

NCLBA No Child Left Behind Act 

REAP Rural Education Achievement Program 

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Page 1 GAO-03-691 Flexibility Demonstration Programs 

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 states1

 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 

 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. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-03-691 Flexibility Demonstration Programs 

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.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. 

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, 

 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. 

Results in Brief 
Page 3 GAO-03-691 Flexibility Demonstration Programs 

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. 
Page 4 GAO-03-691 Flexibility Demonstration Programs 

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.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 

districts4

 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.5

 Additionally, the act established a transferability option 

whereby states and school districts can transfer up to 50 percent of their 

 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. 

Background 
Page 5 GAO-03-691 Flexibility Demonstration Programs 

federal funds among certain programs or into Title I - Part A.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 

 Transferability 

NCBLA program 

State 

transfersa

District 

transfers State-Flexb

Local-Flex

REAP 

alternative uses

Eligibility All statesc All districtsc 7 statesd 80 districtsd,e 4,749 districtsf 

Teacher and Principal Training and Recruiting 50% 50% 100% 100% 100%

Enhancing Education through Technology 50% 50% 100% 100% 100%

Safe and Drug Free Schools 

(SEA funds) 50% 50% 100% 100% 100%

Safe and Drug Free Schools (Governor’s 

program) 50% NAg

100% NA NA

21st Century Community Learning Centers 50% NA 100% NA NA

Innovative Programs 50% 50% 100% 100% 100%

Reading First NA NA 100% NA NA

Title I: Improving Academic Achievement of 

Disadvantaged Students—Section 1004 (state 

administration) NA NA 100% NA NA

Transfer/use of funds Among 

these 6 

programs or 

into Title I

Among 

these 4 

programs or 

into Title I

For any 

purpose 

under 

NCLBA

For any 

purpose under 

NCLBA

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. 

 6

Districts designated for improvement can only transfer up to 30 percent of the program 

funds. 
Page 6 GAO-03-691 Flexibility Demonstration Programs 

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. 

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.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. 

 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. 
Page 7 GAO-03-691 Flexibility Demonstration Programs 

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

Dollars in millions 

 

NCBLA program 

Total Fiscal 

Year 2003 

appropriation Transferability State-Flexb Local-Flexc

REAP 

Alternative 

Usesd

 State transfersa District transfersa

Eligible Funds 

 State-level 

activities funds Formula fundse

State-level 

activities and 

administrative 

funds 

Formula 

fundse

Formula 

funds

Teacher and 

Principal Training 

and Recruitingf

$2,930.8 $72.2 $2,715.2 $68.7 $2,598.7 c

Enhancing Education 

Through Technologyg

 696 32.1 305.4 30.9 292.5 c

Safe and Drug Free 

Schools (SEA funds)h

468.9 18.3 341.1 28.5 353.9 c

Safe and Drug Free 

Schools (Governor’s 

program)h

Total included in 

SEA funds total 

above NAm

NA 2.7 NA NA

21st Century 

Community Learning 

Centersi

993.5 16.5 NA 26.5 NA NA

Innovative Programsj 382.5 57 322.8 55.9 315 c

Reading Firstk 993.5 NA NA 321.6 NA NA

Title I: Improving 

Academic 

Achievement of 

Disadvantaged 

Students—Section 

1004 (State 

Administration)l

12,128.4 NA NA 116.2 NA NA

Total $18,593.6 $196.1 $3,684.5 $651.0 $3,560.1 $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 StateFlex. 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 LocalFlex. School districts entering into local performance agreements with their state as part of a StateFlex 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. 
Page 8 GAO-03-691 Flexibility Demonstration Programs 

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. 

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.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 

 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 highquality teachers, and programs for pre-kindergarten students. 
Page 9 GAO-03-691 Flexibility Demonstration Programs 

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. 
Page 10 GAO-03-691 Flexibility Demonstration Programs 

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. 

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.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 

 9

Bangor and Traverse City school districts found out about the Local-Flex program from a 

consultant to the school districts. 

Commitment of 

Leadership and 

Capacity Influenced 

Decisions to Apply 

While Conflicting 

Deadlines, Few 

Perceived Benefits, 

and Limited 

Awareness Influenced 

Decisions Not to 

Apply 

Applicants Cite 

Commitment of 

Leadership and the 

Presence of Strategies to 

Improve Student 

Achievement as Key 

Factors Influencing Their 

Decisions to Apply 
Page 11 GAO-03-691 Flexibility Demonstration Programs 

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. 

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.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 

 10Two 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. 

Conflicting Deadlines, Few 

Perceived Benefits, and 

Limited Awareness of 

Flexibility Demonstrations 

Were Cited as Key Factors 

in Decisions Not to Apply 
Page 12 GAO-03-691 Flexibility Demonstration Programs 

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 LocalFlex, 3 said they did not apply because Education did not provide followup 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.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. 

 11Three 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. 
Page 13 GAO-03-691 Flexibility Demonstration Programs 

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. 12 While these 17 states 

technically did not have approved accountability plans at the time StateFlex 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. 

 12Under Elementary and Secondary Education Act (ESEA) states were required to establish 

statewide assessment systems and standards for Title I students. 

Education’s 

Communications 

about Flexibility 

Demonstration 

Programs Not 

Targeted at Those 

Best Positioned to 

Apply 
Page 14 GAO-03-691 Flexibility Demonstration Programs 

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. 

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 

Conclusions 
Page 15 GAO-03-691 Flexibility Demonstration Programs 

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. 

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. 

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 

Recommendation for 

Executive Action 

Agency Comments 
Page 16 GAO-03-691 Flexibility Demonstration Programs 

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 
Appendix I: Scope and Methodology 

Page 17 GAO-03-691 Flexibility Demonstration Programs 

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 States

School 

districts Selection criteria 

Applicants 1 3 All applicants. 

Those that expressed 

intent to apply but did not 

apply 

13 8 All of those who expressed interest 

but did not apply. 

Those that neither 

expressed interest nor 

applied 

11 26 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 25 37 

Source: GAO analysis. 

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 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 18 GAO-03-691 Flexibility Demonstration Programs 

and May 2003 in accordance with generally accepted government auditing 

standards. 
Appendix II: Comments from the U.S. 

Department of Education 

Page 19 GAO-03-691 Flexibility Demonstration Programs 

Appendix II: Comments from the U.S. 

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

Department of Education 

Page 20 GAO-03-691 Flexibility Demonstration Programs 
Appendix II: Comments from the U.S. 

Department of Education 

Page 21 GAO-03-691 Flexibility Demonstration Programs 
Appendix III: GAO Contacts and Staff 

Acknowledgments 

Page 22 GAO-03-691 Flexibility Demonstration Programs 

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

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

In addition to those named above, Patrick DiBattista and Lynn Musser 

made key contributions to the report. 

Appendix III: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Acknowledgments 
Related GAO Products 

Page 23 GAO-03-691 Flexibility Demonstration Programs 

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/THEHS-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. 

Related GAO Products 

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