Title I of the Rehabilitation Act of 1973 authorizes a federal-state VR program to provide services to persons with disabilities so that they may prepare for and engage in gainful employment. Education provided an estimated $2.6 billion in fiscal year 2005 in grants to the states and territories based on a formula that considers the state’s population and per capita income. Grants to individual states ranged from about $9 million to nearly $250 million. Four of the five territories received less than $3 million each. The act generally requires states to match federal funds at a ratio of 78.7 percent federal to 21.3 percent state dollars. Each state and territory designates a single VR agency to administer the VR program, except where state law authorizes a separate agency to administer VR services for individuals who are blind. Education provides a single Title I grant to each state. States authorizing a separate blind VR agency decide how the grant will be apportioned between the general VR agency and the blind VR agency. Education tracks the performance of 80 state VR agencies—24 states have separate blind and general agencies; and 26 states, the District of Columbia, and five territories each have a single combined agency. The 80 state VR agencies are housed in various departments of state government, such as state departments of labor or education, or they may be free-standing agencies or commissions. State VR agencies also vary in their operations and locations. For example, some agencies provide services through several offices located throughout the state, while others provide services through one central location. Education collects information about all individuals who exit each state VR agency’s program during a particular fiscal year, as reported by the 80 state VR agencies. The record for each individual exiting the program includes information such as whether or not each individual became employed, the weekly earnings and hours worked for individuals if they exited the VR program with employment, the types and costs of services they received, and demographic factors, such as impairment type, gender, age, race and ethnicity, public benefits, and income from work at the time of application. Education also collects summary information on agency expenditures in a number of categories from each state VR agency. Education tracks individuals in terms of seven types of case closures, which can be collapsed into four categories, for individuals who exited without employment, during the application phase (including individuals who were found ineligible; individuals who could not be determined to be eligible or ineligible for various reasons such as they could not be located or contacted, they failed to cooperate or they refused services; and individuals who were found eligible, but were placed on a waiting list); exited without employment, with limited services (including individuals who were found eligible, but who left the program before an employment plan could be developed, or agreed to an employment plan, but left before receiving services under that plan); exited without employment, after receiving services under an employment exited with at least 90 days of employment, after receiving services under an employment plan. Education considers several types of work activities to meet its definition of employment. First, Education counts as employment the paid work activity of an individual, who may or may not require ongoing support services, in an integrated work setting, that is, a setting typically found in the community where individuals both with and without disabilities interact. Second, Education counts self-employment as employment, whether the business is managed by the eligible individual or the state VR agency. Finally, Education considers certain types of unpaid work activity to be employment, such as homemakers whose work activity is keeping house for themselves or others in their households and unpaid workers in a family business or family farm. While the total number of individuals exiting the VR program has increased slightly over the past several years, the number of individuals exiting with employment has remained relatively stable. (See fig. 1.) State VR agencies that determine they will not be able to serve all eligible individuals who apply for services are required to state the order in which they will select individuals for services. Agencies using an order of selection process must develop criteria for ensuring that individuals with the most significant disabilities will be selected first for services. Thirty- nine of the 80 state VR agencies were using an order of selection process in fiscal year 2003. Beginning fiscal year 2004, 42 of the agencies are using an order process. The Rehabilitation Act requires state VR agencies to enter into cooperative agreements with other entities that are part of the state’s workforce investment system. This workforce investment system includes a One-Stop system, which is required to provide a number of employment-related services to job seekers and employers at a single location. The act also requires state VR agencies to coordinate with public education officials to facilitate the transition of students with disabilities from school to work. Students with disabilities receive special education and related services from their school under an individualized education program (IEP). Beyond these required interactions, state VR agencies may also enter into third-party cooperative agreements with other state or local agencies to coordinate the services provided to their common program participants. Education must abide by several statutes and executive branch directives to measure and monitor the performance of the VR program. The 1998 amendments to the Rehabilitation Act required that Education establish and publish evaluation standards and performance indicators for the VR program. The standards and indicators were supposed to include outcome and related measures of program performance that facilitate the accomplishment of the purpose and policy of the act. The act also gave Education the authority to reduce or suspend payments to state VR agencies that have performance falling below a certain level and fail to enter into a program improvement plan or substantially comply with the terms and conditions of such a plan. The act also directed Education to conduct annual review and periodic on-site monitoring of state VR agencies to determine, in part, whether they were complying with the standards and indicators. Education performs this monitoring function through the 10 regional offices of its Rehabilitation Services Administration (RSA). In response to the 1998 amendments, Education established new performance measures in June 2000 that consisted of two standards for evaluating the performance of the state VR agencies, one relating to the agencies’ performance in assisting individuals in obtaining, maintaining, or regaining high-quality employment and the other relating to the agencies’ performance in ensuring that individuals from minority backgrounds have equal access to services. In addition, Education published performance indicators that establish what constitutes minimum compliance with these evaluation standards and required performance targets for each indicator. Six performance indicators were published for the employment standard, and one was published for the minority service standard. State VR agencies must meet or exceed performance targets in four of the six categories for the first standard and meet or exceed the performance target for the second standard in order to have passing performance. Table 1 provides details on these standards and indicators. The Government Performance and Results Act of 1993 (GPRA) also requires federal executive branch agencies such as the Department of Education to set goals, measure their performance, and report on their accomplishments. Agencies are required to develop annual performance plans that use performance measurement to reinforce the connection between the long-term strategic goals outlined in their strategic plans and the day-to-day activities of their managers and staff. Among its performance goals for fiscal year 2005, Education is assessing its performance in assisting state VR agencies to achieve required performance targets on one performance target—1.2. In 2002, the Office of Management and Budget (OMB) directed that the performance of a range of federal job training and employment programs be measured consistently to allow for the comparison of results across these programs. These common measures would be consistent with the common goals of these programs, that is, to improve participants’ employment and earnings and focus on measures of outcomes and efficiency. OMB identified the VR program as one of the federal programs that would be targeted for using the common measures. Using its Program Assessment Rating Tool (PART), OMB assessed the effectiveness of the VR program in 2003 as part of its effort to hold federal agencies accountable for accomplishing results. The PART evaluation looks at four areas of assessment—program purpose and design, strategic planning, management, and results and accountability. Programs are rated in one of five categories: effective, moderately effective, adequate, ineffective or results not demonstrated. OMB will use the rating and relating findings to make decisions about budget and policy. OMB rated the effectiveness of the VR program as adequate and made recommendations to Education for improving program management and performance measures. As part of its assessment, OMB reviewed Education’s performance indicators 1.2, 1.3, and 1.5. More than 217,000 individuals with disabilities exited the state VR programs with employment in fiscal year 2003 after receiving customized services. This group represents one-third of the 650,543 individuals who left the program nationwide in fiscal year 2003 after submitting an application for services. The most common reasons that the remaining two-thirds of the individuals left the program without a job were that the individual refused services, failed to cooperate, or could not be located or contacted. State VR agencies collectively purchased more than $1.3 billion in services for all individuals who exited the program in fiscal year 2003, two-thirds of which was used to provide services to individuals exiting with employment. Employment, earnings, and the amount of purchased services received while in the VR program varied significantly by individuals’ type of disability and other characteristics. In addition, the state VR agencies varied substantially in the employment rates they achieved, the characteristics of individuals they served, their frequency of providing certain services, and their service expenditures. Of the more than 650,000 individuals exiting the VR program in fiscal year 2003, one-third (217,557) obtained a new job or maintained their existing job for at least 90 days after receiving customized services. (See fig. 2.) Most of these individuals (94 percent) exited the program with jobs that paid at least their state’s minimum wage, but about half of them worked less than 40 hours per week. Overall, individuals who exited the VR program with employment earned a median income of $271 per week, or the equivalent of $14,092 per year.