Flexibility Demonstration Programs: Education Needs to Better	 
Target Program Information (09-JUN-03, GAO-03-691).		 
                                                                 
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--State- and 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.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-691 					        
    ACCNO:   A07108						        
  TITLE:     Flexibility Demonstration Programs: Education Needs to   
Better Target Program Information				 
     DATE:   06/09/2003 
  SUBJECT:   Aid for education					 
	     Education program evaluation			 
	     Educational standards				 
	     Federal aid to states				 
	     Federal funds					 
	     State-administered programs			 
	     Strategic planning 				 
	     Locally administered programs			 
	     Accountability					 
	     Academic achievement				 

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GAO-03-691

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* State- and 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

This is a work of the U. S. Government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. It may contain
copyrighted graphics, images or other materials. Permission from the
copyright holder may be necessary should you wish to reproduce copyrighted
materials separately from GAO*s product.

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 states 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

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
districts 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. 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

transfers a District transfers State- Flex b Local- Flex REAP

alternative uses Eligibility All states c All districts c 7 states d 80
districts d, e 4,749 districts f

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% NA g 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- Flex b Local- Flex c

REAP Alternative

Uses d State transfers a District transfers a Eligible Funds

State- level activities funds Formula funds e

State- level activities and administrative funds Formula

funds e Formula funds

Teacher and Principal Training and Recruiting f $2,930.8 $72.2 $2,715.2
$68.7 $2,598.7 c Enhancing Education Through Technology g 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 NA m NA 2.7 NA NA 21st Century Community Learning Centers i 993.5
16.5 NA 26.5 NA NA

Innovative Programs j 382.5 57 322.8 55.9 315 c Reading First k 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

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. 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.

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.

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.

12 Under 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

(130215)

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