    Public Education: Commercial Activities in Schools (Letter Report,
    09/08/2000, GAO/HEHS-00-156).

    Pursuant to a congressional request, GAO provided information on
    commercial activities in public schools, focusing on: (1) laws,
    regulations, and policies that regulate commercial activities in
    schools; and (2) the nature and extent of these activities.

    GAO noted that: (1) state laws and regulations governing commercial
    activities in public schools are not comprehensive; (2) nationwide, only
    general laws and regulations that apply to all businesses or that govern
    school finance usually cover school-based commercial activities; (3)
    however, 19 states have statutes or regulations that address
    school-related commercial activities, but in 14 of these states,
    statutes and regulations are not comprehensive and permit or restrict
    only specific types of activities; (4) in most states, local school
    officials are responsible for making decisions about commercial
    activities; (5) no single source of information about local school board
    policies exists, and policies varied greatly in the districts GAO
    visited; (6) GAO found no policies that specifically addressed market
    research activities; (7) the visibility, profitability, and type of
    commercial activities varied widely, and the high schools GAO visited
    had more commercial activities than middle or elementary schools; (8)
    product sales--primarily the sale of soft drinks by schools or districts
    under exclusive contracts and short-term fundraising sales-- were the
    most common and lucrative type of commercial activity at the schools GAO
    visited although they represented a very small percentage of the
    districts' budgets; (9) the most visible examples of direct advertising
    appeared on soft drink vending machines and high school scoreboards;
    (10) although some high school sports facilities displayed banners and
    signs with the names of businesses that had contributed to sports
    programs, several placed these signs to acknowledge donations rather
    than in exchange for them; (11) advertisements were delivered through
    the media in some schools; (12) GAO observed indirect advertising in all
    the schools, yet its presence was usually limited and subtle; (13) none
    of the schools GAO visited reported engaging students in market
    research, although one principal said he has been approached about doing
    research; (14) often the values of school board members, district
    officials, and parents determine whether an activity is controversial or
    not, rather than the nature of the activity; and (15) because most of
    the decisions are made at the local level, varying preferences of local
    officials result in different levels of commercial activities across
    districts and across schools in the same districts.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  HEHS-00-156
         TITLE:  Public Education: Commercial Activities in Schools
          DATE:  09/08/2000
       SUBJECT:  Advertising
    	     Public schools
    	     School districts
    	     Marketing
    	     State law
    IDENTIFIER:  Albuquerque (NM)
    	     Grand Rapids (MI)
    	     Long Beach (CA)
    	     Los Alamos (NM)
    	     Oxnard (CA)
    	     Ludington (MI)

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Testimony.                                               **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO/HEHS-00-156

    GAO United States General Accounting Office

    Report to Congressional Requesters

    September 2000 PUBLIC EDUCATION Commercial Activities in Schools

    GAO/ HEHS- 00- 156

    Page 1 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Contents Letter 3 Appendixes Appendix I: Scope and Methodology 36

    Appendix II: Summary of Site Visit Information 38 Tables Table 1: Categories
    of Commercial Activities 8

    Table 2: State Statutes and Regulations Targeting Commercial Activities in
    Schools 12 Table 3: Sites Visited 36 Table 4: Summary of Key District
    Policies and Procedures Covering

    Product Sales, by School District 38 Table 5: Summary of Key District
    Policies and Procedures Covering

    Direct Advertising, by School District 40 Table 6: Summary of Key District
    Policies and Procedures Covering

    Indirect Advertising, by School District 42 Table 7: Summary of Key District
    Policies and Procedures Covering

    Market Research, by School District 43 Table 8: Comparison of Soft Drink
    Agreements at the High Schools

    We Visited 44 Figures Figure 1: Advertisements Can Be Found in and Around
    Schools 7

    Figure 2: Ads on Scoreboards 20 Figure 3: Ads on Calendars 21 Figure 4: Ads
    on Book Covers 24

    Page 2 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Page 3 GAO/ HEHS- 00- 156 Commercial Activities in Schools United States
    General Accounting Office

    Washington, D. C. 20548 Page 3 GAO/ HEHS- 00- 156 Commercial Activities in
    Schools

    Health, Education, and Human Services Division

    B- 284190 Lett er

    September 8, 2000 The Honorable Christopher J. Dodd United States Senate

    The Honorable George Miller House of Representatives Commercial activities
    in U. S. public elementary and secondary schools have been growing in
    visibility throughout the last decade, a period

    characterized by tightened school budgets. As visibility has increased, so
    have concerns about commercial activities that generate cash, equipment, or
    other types of assistance and their potential effects on students' learning
    and purchasing behavior. Commercial activities include (1) the sale of
    products, (2) direct advertising- for example, advertisements in school
    corridors or on school buildings, (3) indirect advertising- for example,

    corporate- sponsored educational materials or teacher training, and (4)
    market research. Despite the increasing concerns, little is known about the
    laws and policies that govern commercial activities and the nature of these
    activities in schools throughout the United States. In this context, you
    asked us to (1) identify laws, regulations, and policies that regulate
    commercial activities in schools and (2) describe the nature and extent of
    these activities. To do this work, we reviewed state laws and regulations,
    gathered detailed information during site visits to 19 elementary and
    secondary schools in seven school districts in three states, reviewed
    reports about commercial activities, and interviewed representatives of

    national education and business organizations. (See app. I for details on
    our methodology.) We performed our work from November 1999 through August
    2000 in accordance with generally accepted government auditing standards.

    Results in Brief State laws and regulations governing commercial activities
    in public schools are not comprehensive. Nationwide, only general laws and

    regulations that apply to all businesses or that govern school finance
    usually cover school- based commercial activities. However, 19 states
    currently have statutes or regulations that address school- related

    commercial activities, but in 14 of these states, statutes and regulations
    are not comprehensive and permit or restrict only specific types of
    activities. For example, New Mexico law permits advertising on and in school
    buses,

    B- 284190 Page 4 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    while Virginia regulations prohibit school bus advertising. Of the five
    states with comprehensive laws, two have laws that permit local officials to
    set policies covering various types of activities and three have laws that
    prohibit or limit various types of commercial activities. Therefore, in most
    states, local school officials are responsible for making decisions about
    commercial activities. No single source of information about local school
    board policies exists, and policies varied greatly in the districts we
    visited. Although policies on product sales in the districts we visited
    varied, most pertained to traditional fundraising activities, such as short-
    term candy or gift- wrap sales, that are sponsored by parent- teacher
    organizations, booster clubs, or student groups rather than to the sales
    covered by exclusive contracts that

    prohibit schools from selling products of competitors, such as soft drink
    contracts. Policies on direct advertising also differed, with some school
    boards delegating responsibilities for these activities to the
    superintendent or building principal. While some of the districts we visited
    had policies

    regarding indirect advertising in curricula or contests, others lacked
    formal guidance. We found no policies that specifically addressed market
    research activities. However, in some of the districts we visited, more
    general policies, such as those requiring the superintendent to approve
    student surveys and questionnaires, may serve to regulate at least some of
    these activities.

    The visibility, profitability, and type of commercial activities varied
    widely, and the high schools we visited had more commercial activities than
    middle or elementary schools. Overall, we found the following:

    ? Product sales- primarily the sale of soft drinks by schools or districts
    under exclusive contracts and short- term fundraising saleswere the most
    common and lucrative type of commercial activity at the schools we visited,
    although they represented a very small percentage of the districts' budgets.
    1 ? The most visible examples of direct advertising appeared on soft drink

    vending machines and high school scoreboards. Although some high school
    sports facilities displayed banners and signs with the names of businesses
    that had contributed to sports programs, several placed these signs to
    acknowledge donations rather than in exchange for them.

    1 In Grand Rapids, Mich., for example, the soft drink contract guaranteed
    the district a minimum of $30 per student, or about .4 percent of the
    district's budget of $206 million.

    B- 284190 Page 5 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Advertisements were delivered through the media in some schools. For
    example, schools in two districts had contracts with Channel One, a company
    that provides free televisions and videocassette recorders to

    schools that agree to air its news show and commercials, and two schools had
    signed up with ZapMe!, a company that provides free computer equipment and
    delivers ads through the Internet. Officials

    from participating schools said the benefits of having free technology
    outweighed any negative aspects of the advertisements that were shown.
    Officials from other districts, however, had decided not to participate in
    such programs.

    ? We observed indirect advertising in all the schools, yet its presence was
    usually limited and subtle. For example, the teachers we spoke with either
    used corporate- sponsored curricula only for specific purposes and for
    limited periods of time, such as for teaching a unit on dental hygiene, or
    did not use them at all. ? None of the schools we visited reported engaging
    students in market research, although one principal said he had been
    approached about doing research.

    Often the values of school board members, district officials, and parents
    determine whether an activity is controversial or not, rather than the
    nature of the activity. Because most of the decisions are made at the local
    level, varying preferences of local officials result in different levels of

    commercial activities across districts and across schools in the same
    districts. Background Spurred by limited budgets, an increased demand for
    educational services,

    and the growing purchasing power of American youth, schools and businesses
    have entered into a wide variety of commercial arrangements. Although the
    types of arrangements vary, their purposes are similar. In general, schools
    want cash, equipment, or other assistance in providing

    services and technology during a period when revenues from traditional tax
    sources are, for many school districts, essentially flat. Businesses want to
    increase their sales, generate product loyalty, and develop climates
    favorable to their products, although some businesses are involved with
    schools primarily to help local communities.

    Although American schools have historically engaged in product sales and
    advertising, commercial activities in today's schools are more noticeable
    and are moving in new directions. The use of corporate- sponsored
    instructional materials can be traced back to at least 1890, when a paint

    B- 284190 Page 6 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    company developed a handout on primary and secondary colors for schools to
    distribute in their art classes. In- school marketing has become a growing
    industry. Some marketing professionals are increasingly targeting children
    in school, companies are becoming known for their success in negotiating
    contracts between school districts and beverage companies, and both
    educators and corporate managers are attending conferences to

    learn how to increase revenue from in- school marketing for their schools
    and companies. Advertisements in schools- once found largely only in print
    and at sports facilities- are now on electronic message boards,

    televisions, and computers (see fig. 1). Commercial activities can be
    classified into four categories, as shown in table 1.

    B- 284190 Page 7 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Figure 1: Advertisements Can Be Found in and Around Schools

    B- 284190 Page 8 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Table 1: Categories of Commercial Activities

    Source: GAO analysis.

    Activities Examples Product sales

    Product sales benefiting a district, school, or student activity

    Exclusionary contracts or other arrangements between district consortia,
    school districts, or schools and bottlers to sell soft drinks in schools or
    on school grounds ? Contracts or other arrangements between districts or
    schools and fast food companies to sell food in schools or on school grounds
    ? Contracts or other arrangements between districts or schools and companies
    providing school pictures, yearbooks, class rings, caps and gowns, or gym
    uniforms

    Cash or credit rebate programs ? Programs that award cash or equipment to
    schools in proportion to the value of store receipts or

    coupons collected by the schools ? Credit or shopping card programs that
    award a percentage of the amount of customer charges to a school designated
    by the customer

    ? Internet shopping programs that donate a percentage of a customer's
    charges to a designated school Fundraising activities ? Short- term sales of
    candy, magazines, gift wrap, cookie dough, concession items, and the like by
    parents, students, or both to benefit a specific student population or club

    Direct advertising

    Advertising in schools, in school facilities, and on school buses

    ? Billboards and signs in school corridors, sports facilities, or buses ?
    Product displays ? Corporate logos or brand names on school equipment, such
    as marquees, message boards,

    scoreboards, and backboards ? Ads, corporate logos, or brand names on
    posters, book covers, and student assignment books Advertisements in school
    publications ? Ads in sports programs, yearbooks, school newspapers, and
    school calendars Media- based advertising ? Televised ads aired by Channel
    One or commercial stations

    ? Computer- delivered advertisements by ZapMe! and commercial search engines
    ? Ads in commercial newspapers or magazines

    Samples ? Free snack food or personal hygiene products

    Indirect advertising

    Corporate- sponsored educational materials ? Dental hygiene units that
    provide toothpaste and toothbrush samples and display brand names ?
    Materials on issues associated with particular industries that are developed
    by those industries, such as ecology units produced by oil and plastic
    companies and safety units produced by insurance companies ? Materials that
    promote industrial goals, such as energy conservation materials produced by
    power companies and nutritional information produced by dairy or meat
    associations

    Corporate- sponsored teacher training ? Training by computer or software
    companies on the use of hardware or software systems that they sell ?
    Training by companies on general subjects, such as management techniques or
    creativity

    Corporate- sponsored contests and incentives ? McDonald's poster contests,
    Pizza Hut's Book- It program, Duracell Battery Company's invention contest
    Corporate grants or gifts ? Corporate gifts to schools that generate
    commercial benefits to the donor

    Market research

    Surveys or polls ? Student questionnaires or taste tests Internet panels ?
    Use of the Internet to poll students' responses to computer- delivered
    questions Internet tracking ? Tracking students' Internet behavior and
    responses to questions at one or more Web sites

    B- 284190 Page 9 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Distinguishing between commercial and noncommercial activities can be
    difficult because commercial activities are an intrinsic part of U. S.
    society. Not all ventures between schools and businesses are totally
    commercial: Many businesses donate cash or assistance to schools for
    philanthropic purposes, yet these donations may have commercial payoffs. For
    example, a business may donate cash or equipment to schools for altruistic
    purposes but may also mention this support in its advertising and use this
    donation as a tax deduction. Local school officials, parents, and others,
    including the U. S. Department of Education, applaud businesses that support
    schools, often without commercial motivation, by donating free or low- cost
    goods

    and services. However, many individuals are concerned about the potential
    effects of lost instructional time and biased materials on students when
    companies provide goods, services, or money to schools in return for access
    to students for sales, advertising, or market research purposes.

    Because advertising is ubiquitous in America, it is difficult- if not
    impossible- to distinguish between the effects of advertising to which
    students are exposed inside and outside of school. Many displays of
    corporate logos and brand names in schoolssuch as those emblazoned on
    students' clothing, sports uniforms, crayons, and milk cartonsyield no
    tangible commercial benefit to the schools, although they do yield benefit

    to the advertiser. Advertisements are also pervasive on the Internet. Not
    only are ads a part of many products, but they are often seen as status
    symbols, decorations, and even art. Because of this, students and teachers
    often display advertisements, such as posters, on walls for stylish or
    aesthetic purposes, rather than commercial purposes.

    B- 284190 Page 10 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Certain commercial activitieslarge soft drink contracts, electronic
    advertising in classrooms through Channel One or ZapMe!, sports uniforms
    emblazoned with corporate logos, and market research conducted by

    tracking students' Internet behavior- have received extensive media
    coverage, and several groups organized to limit commercial activities in
    schools have received national attention. Furthermore, some Members of the
    Congress have raised concerns about commercial activities in schools

    and possible infringements of students' rights to privacy. Congressional
    hearings have been held 2 and legislation has been drafted 3 to explore and
    deal with these issues.

    State and Local Laws and Policies Vary Although commercial activities in
    schools are covered by general federal and state laws that apply to all
    businesses or that govern school finance, we

    identified 19 states that currently have statutes or regulations targeting
    specific commercial activities in schools. In 14 of these states, laws are
    not comprehensive and pertain only to some types of activities; in some
    states,

    laws prohibit or restrict activities, while in other states, laws authorize
    activities. For example, of the states we visited, California laws restrict
    many commercial activities, Michigan laws do not address commercial
    activities, and New Mexico laws allow advertising in and on school buses. As
    a result of this piecemeal approach to regulation, in most states, local
    school boards have the authority to make policy decisions about

    commercial activities or to delegate these decisions to district officials.
    In the districts we visited, local school board policies differed in terms
    of the number and types of activities they addressed, but most delegated
    responsibility to superintendents and principals, who often make decisions
    on a case- by- case basis.

    2 The Senate Committee on Health, Education, Labor, and Pensions heard
    testimony about Channel One on May 20, 1999. 3 H. R. 2915, introduced in the
    House of Representatives on Sept. 22, 1999, and S. 1908, introduced in the
    Senate on Nov. 10, 1999, seek to protect children from commercial
    exploitation by protecting student privacy. Both bills (1) prohibit programs
    from using funds authorized under the Elementary and Secondary School Act to
    allow a third party to

    monitor, receive, or gather information intended for commercial purposes
    from any student under 18 years of age without parental consent and (2)
    require schools, local educational agencies, or state agencies to inquire if
    an individual or organization intends to gather or store information on
    students and to determine the nature of the information to be gathered; how
    the information will be used; whether the information will be sold,
    distributed, or transferred to others; and how much class time, if any, will
    be consumed by such activities before entering into a contract with the
    individual or organization.

    B- 284190 Page 11 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    States' Statutes and Regulations Differ in Purpose and Comprehensiveness
    Nationally, 19 states have statutes or regulations targeting commercial
    activities in schools, but the specifics of the statutes vary.

    ? Laws and regulations in seven states cover product sales. For example,
    Florida law permits school boards to establish policies about fundraising,
    while New York law prohibits commercial activities on school grounds. ? Laws
    and regulations in 18 states address direct advertising. In eight of these
    states, laws pertain to advertisements on or in school buses and on bus
    shelters: laws in seven states permit school bus advertising, with
    restrictions, but laws in one state prohibit it.

    ? Laws in only two states address indirect advertising in schools.
    California law prohibits schools from using instructional materials
    containing commercial advertisements unless local school boards comply with
    state- mandated procedures, while North Carolina law allows the use of such
    materials.

    ? State educational codes do not target school- based market research, but
    student privacy laws prohibit many activities, such as selling students'
    names and addresses, that fall under this category. The level at which
    decision- making about commercial activities takes place also varies by
    state. For example, Florida, Illinois, and Maine laws place responsibility
    for decision- making at the local level, but California and New York laws
    prohibit or restrict districts from engaging in many types of commercial
    activities. However, in most of the states that have them, such laws pertain
    to specific categories of activities (see table 2).

    B- 284190 Page 12 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Table 2: State Statutes and Regulations Targeting Commercial Activities in
    Schools State Statute/

    regulation Product sales Advertising

    Market research Direct Indirect

    Arizona Statute Permits advertising on school buses under certain
    restrictions California Statute Allows school boards to

    negotiate contracts granting exclusive rights to sell carbonated beverages
    under certain restrictions

    Allows school boards to negotiate contracts granting exclusive advertising
    rights and the dissemination of ads electronically under certain
    restrictions

    Prohibits state and local school boards from adopting instructional
    materials

    that provide unnecessary exposure to brand names, products, or company logos

    Regulation Allows minors under 16 to engage in door- todoor sales under
    certain restrictions

    Florida Statute Permits school boards to set policies regarding fundraising

    Permits school boards to set policies regarding advertising

    Permits school boards to set policies regarding advertising Illinois Statute
    Requires all solicitations

    to be approved by the superintendent Requires advertising to be approved by
    the

    superintendent Requires advertising to

    be approved by the superintendent

    Kansas Statute Permits student editors to determine advertising content in
    student

    publications Louisiana Statute Permits donor decals on school buses to
    acknowledge donations of cellular telephone

    service Maine Statute Permits school districts

    to raise money for their benefit

    Permits school districts to raise money for their benefit

    Permits school districts to raise money for their benefit

    Permits school districts to raise money for their

    benefit Maryland Statute Permits advertising on school bus shelters under
    certain

    restrictions Minnesota Statute Permits advertising on school buses under

    certain restrictions

    B- 284190 Page 13 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Source: GAO analysis. Mississippi Statute Authorizes school

    boards to offer protective textbook covers to commercial entities for
    advertising

    Nevada Statute Permits advertising on and in school buses New Mexico Statute
    and

    regulation Permit advertising on and in school buses

    New York Regulation Prohibits commercial activities on school premises but
    permits commercial sponsorships of school activities

    Prohibits commercial activities on school premises but permits commercial
    sponsorships of school activities

    Prohibits commercial activities on school premises but permits commercial
    sponsorships of school

    activities Prohibits commercial activities on school premises but permits

    commercial sponsorships of school activities North Carolina Statute Requires
    that materials presented during the school day relate to the

    curricula Permits school boards to adopt books

    containing commercial advertising North Dakota Statute Requires school
    boards to approve fundraising

    involving students Rhode Island Statute Prohibits teachers from engaging in
    commercial activity unless activity is authorized by the state

    department of education Prohibits teachers from engaging in commercial
    activity unless activity is authorized by the state

    department of education Prohibits teachers from engaging in commercial
    activity

    unless activity is authorized by the state department of education

    Prohibits teachers from engaging in commercial activity unless activity is

    authorized by the state department of education

    Tennessee Statute and regulation Require schools to adopt policies
    regulating school bus advertising and restrict the size,

    location, and appearance of school bus advertisements

    Texas Regulation Permits commercially sponsored high school athletic
    programs Virginia Regulation Prohibits advertising on and in school buses
    (Continued From Previous Page)

    State Statute/ regulation Product sales

    Advertising Market research Direct Indirect

    B- 284190 Page 14 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Policies of School Governing Boards Vary Because most states do not regulate
    commercial activities in schools or

    have laws that govern many of these activities, applicable policies and
    practices are usually locally based. Although no central source of
    information on school policies exists, discussions with representatives of
    national education associations and other experts indicate that policies
    across districts are not consistent and that many school boards place
    responsibility for decisions about commercial activities with school
    officials. 4 In the school districts we visited, both written and unwritten
    policies are

    used in making decisions about commercial activities. For example, written
    policies in these districts do not prohibit market research activities such
    as taste tests or product preference polls. However, none of the schools we
    visited participate in them because district and school officials and school
    board members believe these activities are inappropriate. In these
    districts, school boards' written policies vary considerably, do not address
    all types of commercial activities, and generally delegate responsibility
    for many decisions to superintendents and principals. (Written policies are
    summarized in tables 4 through 7, app. II.)

    Product Sales Policies in six districts assign responsibility for approving
    fundraising activities to the superintendent or his or her designee, a
    principal, or both and in three districts place limits on these activities
    by restricting door- todoor sales and limiting the number or length of
    fundraisers. However, most policies leave decisions to the discretion of
    school officials.

    Direct Advertising Policies in five districts identify the school official
    responsible for approving some types of direct advertising. Four delegate
    this responsibility to the superintendent, and one delegates it to the
    superintendent and, in some cases, the principal. Although several policies
    address coupon distribution and ticket sales, none are targeted toward newer
    forms of media- based advertising, such as those delivered by Channel One
    and ZapMe!

    4 The associations we spoke with include the National School Boards
    Association, the Association of School Business Officials International, and
    various centers and organizations concerned with commercial activities in
    schools.

    B- 284190 Page 15 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Indirect Advertising Policies in five districts restrict advertising in
    commercial instructional materials, and policies in two restrict contests or
    exhibits. Market Research None of the districts have policies that
    specifically address market research, taste tests, or product trials. Two
    districts have policies requiring all surveys and questionnaires that
    address students and families to be approved by the superintendent, and two
    districts require the same for surveys and questionnaires that address
    students and staff. However, we found no policies that apply to activities
    such as Internet shopping games or contests, which require the disclosure of
    personal information.

    Commercial Activities Are Widespread, but Nature and Intensity Vary

    Commercial activities in the 19 schools we visited have been increasing in
    visibility, but their type, frequency, and monetary value vary widely. We
    found examples of commercial activities in all the schools we visited,
    although high schools had more commercial activity than elementary or middle
    schools. Also, in many schools, returns from longer- term contracts have
    outpaced returns from short- term product sales. At all the schools, product
    sales were very lucrative and the most prevalent activities. The

    most visible forms of direct advertising we observed were soft drink
    advertisements on beverage vending machines and high school scoreboards. In
    middle and high schools in two districts, advertisements were shown in
    classrooms on Channel One's televised news program, and a middle school and
    a high school in two districts were awaiting the

    installation of ZapMe! computers that will carry advertisements over the
    Internet. We identified examples of indirect advertising in all the schools,
    yet its presence was usually limited and subtle. None of the schools we
    visited reported engaging students in market research, but one principal
    reported being approached by a market research firm. Although no

    national data describing the prevalence of these activities are available,
    our findings are consistent with findings of research studies and articles
    in the popular press that have reported that commercial activities in U. S.
    schools have increased over the last decade.

    Product Sales Are Pervasive; Use of Soft Drink Contracts Is Growing

    Product salesprimarily exclusive soft drink contracts in secondary schools
    and fundraising sales in elementary schoolswere the most prevalent form of
    commercial activity at all the schools we visited, but the extent of
    activity varied. For example, a beverage contract in one district has the
    potential to generate up to $1.5 million per year to help fund

    projects and activities, but in another district, the 10- year contract
    calls for

    B- 284190 Page 16 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    one payment of $12,000 plus a commission of about $4, 800 per year. (See
    table 8, app. II, for comparisons of the soft drink agreements at the high
    schools that we visited.) On the national level, exclusive soft drink
    contracts were the fastest growing activity of all product sales, but
    traditional fundraisers remained popular. Soft drinks were sold in all the
    districts we visited, but the arrangements under which the sales were
    conducted differed. Except for sales in several elementary schools and one
    high school, sales were conducted under

    contracts. Some of the contracts covered sales within a school, a district,
    or consortium of districts; generated both monetary and in- kind donations;
    and varied in length up to 10 years. For example, in one district in
    California where state law restricted exclusionary contracts on a
    districtwide basis, the business officer negotiated contracts ranging in
    length from 3 years to 10 years for each high school, with each school

    receiving different amounts of up- front and commission payments. But in
    Michigan, where exclusionary contracts were not restricted, a multidistrict,
    exclusive 10- year contract with one payment schedule covered sales in all
    schools, and both the district and the schools received payments. Although
    all contracts covered the sale of carbonated beverages, most included sports
    drinks, juice, iced tea, or fruit drinks produced by the beverage company.
    Although most soft drinks were sold in high schools, elementary and middle
    schools also sold them, but machines there were less available

    and the level of sales was much lower. Despite the revenue these contracts
    could generate, soft drink contracts remained controversial in some of the
    districts we visited. Some objections concerned the effects of carbonated
    beverages on students' nutrition or the perception that the school was
    endorsing a particular corporate brand. In some districts, however,
    contracts were not controversial. For example, one school board member told
    us that exclusive soft drink agreements had been in his district since

    the 1950s and the only difference between then and now was that schools have
    learned to make money from them. Most of the school and district officials
    we interviewed appeared to be less concerned about earning profits and more
    concerned with obtaining reasonable prices and covering up- front expenses
    when contracting for school- related services for students, although some
    arrangements were used to make money for schools. For example, schools had
    contracts with photographers; yearbook companies; gym uniform suppliers;
    fast food

    providers; student planner distributors; and, at the high school level,
    companies providing caps and gowns, graduation invitations, and class rings.
    These contracts were not controversial in the districts we visited.

    B- 284190 Page 17 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    The benefits schools received from the agreements varied, and most generated
    only modest funds. Every school we visited participated in some traditional
    fundraising activities and sold merchandise in schools and communities to
    make moneyfrom the sale of pickles to popcorn to pizzas- whether sales were
    run by parent- teacher organizations, booster clubs, or student groups,
    although the extent of activity varied. Parent- teacher organizations
    usually raised funds to benefit all students in the elementary and middle
    schools by

    funding such activities as assembly programs, field trips, and teacher
    training. In one school, the parent- teacher association raised the funds to
    pay the salary for a part- time teacher. Booster clubs and student
    organizations in the middle and high schools ran sales whose proceeds
    usually went to a particular sport or activity. In addition to the more
    common types of sales, some fundraising efforts took advantage of special
    aspects of a school's location. For example, one large district in an area
    with a competitive local radio station market sold broadcasting rights to
    high school football games. In another district, a school rented its
    softball field to a production company shooting an

    episode of “Melrose Place.” All of the elementary schools and
    some middle and high schools participated in cash or credit rebate programs.
    Some of these programs give schools cash or equipment in proportion to the
    value of store receipts or proof- of- purchase coupons the school collects.
    Other programs give

    credit to a school designated by a customer on the basis of a proportion of
    that customer's credit, charge, or shopping card or long distance charges,
    with the corporate sponsor electronically tracking the award. Although
    Internet shopping programs that provide cash rebates to schools are growing,
    none of the schools we visited participated in them. Some of the school
    officials and parents we interviewed were not aware of their existence and,
    consequently, had not encouraged people to register.

    Although national data are limited, available information indicates that
    exclusive agreements between soft drink vendors and schools or school
    districts have become one of the fastest growing types of commercial

    B- 284190 Page 18 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    activities in U. S. schools, particularly in the last 2 years. 5 Although
    high schools have had vending machines for decades, the terms and coverage-
    for example, districts or consortia of districts- are new, and contracts
    granting exclusive sales and advertising rights appear to be replacing
    informal arrangements between vendors and school officials, a finding that
    is consistent with information from our site visits. Also, the results of a
    survey of nearly 700 administrators suggest traditional fundraisers have

    increased over the last decade. 6 Moreover, the survey found that 8 percent
    of elementary schools receive funds from Internet shopping programs. Direct
    Advertising Takes Many Forms, and MediaBased Advertising Is Growing

    At the schools we visited, we saw many types of direct advertisingfor
    example, corporate logos on athletic scoreboards, sponsorship banners in a
    gymnasium, and ads in high school publications. The most visible and
    prevalent advertisements we saw were soft drink advertisements and corporate
    names and logos on scoreboards. However, many of the product promotions and
    ads we saw in school facilities were displayed in exchange for free
    equipment, shown on educational posters, or initiated by schools to thank
    corporate donors. Schools in two districts aired Channel One, and

    two schools had recently signed contracts with ZapMe! agreeing to show
    advertising in exchange for equipment. Traditional Forms of Advertising
    Predominate

    Most of the advertising we saw was in high schools. Several high schools had
    traditional forms of advertisements, such as ads purchased by local
    businesses and printed in high school sports programs and schedules. Also,
    many high school yearbooks and newspapers sold advertisements to offset
    production costs. One high school replaced its newspaper with an Internet
    Web page and then sold ads on its Web page to help support the journalism

    program. None of the elementary or middle schools we visited sold ads in
    their publications. Ads on beverage vending machines were present in all the
    schools we visited, and soft drink or corporate logos appeared on
    scoreboards in athletic facilities used by all the high schools (see fig.
    2). None of the schools sold advertising space in or around their
    facilities,

    5 Alex Molnar, Cashing in on Kids: The Second Annual Report on Trends in
    Schoolhouse Commercialism (Milwaukee, Wisc.: University of Wisconsin-
    Milwaukee, Center for the Analysis of Commercialism in Education, Sept.
    1999). 6 A survey conducted by the National Association of Elementary School
    Principals in 2000 found that 76 percent of respondents saw an increase in
    fundraisers in the past 10 years, but because the survey was not nationally
    representative, results cannot be generalized to schools nationwide.

    B- 284190 Page 19 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    except for advertising rights that were included in exclusive beverage
    contracts, and none sold advertising space in or on school buses. Several
    schools showed ads on electronic message boards, sports schedules, and
    schedules of school events (see fig. 3).

    B- 284190 Page 20 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Figure 2: Ads on Scoreboards

    B- 284190 Page 21 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Figure 3: Ads on Calendars

    B- 284190 Page 22 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Many of the schools distributed promotional materials, including book
    covers, free samples, and coupons, to students. For example, most of the
    middle and high schools received cartons of unsolicited book covers with
    colorful ads for a wide range of products, including milk, toiletries,
    television shows, sports drinks and clothing, and snack food (see fig. 4).

    Schools made the book covers available to teachers and students in such
    places as school libraries, textbook distribution rooms, and faculty lounges
    unless a school official felt the content was inappropriate. For example,
    one district did not distribute book covers sponsored by a tobacco company.
    In addition, the schools reported receiving, and in some cases distributing,
    unsolicited free product samplessuch as shaving cream,

    feminine hygiene products, and snack food- and coupons, usually for local
    sports events and fast food restaurants. One district refused to accept free
    gym uniforms that contained the manufacturer's brand name and logo, and one
    reported receiving offers of free shoes for sports teams.

    B- 284190 Page 23 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    B- 284190 Page 24 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Figure 4: Ads on Book Covers

    B- 284190 Page 25 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    B- 284190 Page 26 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    According to numerous accounts, the amount and types of direct advertising
    in schools nationwide have increased and changed over the last decade. For
    example, schools and districts have become more aggressive in selling
    advertising space on school grounds and school buses to generate money.
    After one state instituted a new school funding formula under which some
    schools received more money per student and others less, a school near a
    major airport covered its funding decrease by selling space on its roof to a
    soft drink bottler for an advertisement that would be visible to airplane
    passengers. The same school district sold ads on school buses and at arenas,
    generating a few hundred thousand dollars. According to one

    media report, 45 of the nation's approximately 16, 000 school districts have
    sold advertisements on their buses. 7 In 1995, a study by Consumers Union,
    which publishes Consumer Reports,

    identified a number of firms that specialize in conducting promotional
    activities in schools. 8 One company reported it distributed its book covers
    carrying paid advertisements to 30, 000 schools and 25 million students, but
    no data exist on the number of students who actually used the book covers.
    Also, sportswear manufacturers are reported to be providing free uniforms
    and athletic shoes decorated with brand names and logos to some high

    school sports teams and cheerleading squads, particularly those with winning
    records. Channel One Channel One has provided free audiovisual equipment and
    news

    programming to middle and high schools since 1990. Participating schools
    must sign a contract agreeing that they will show Channel One's news
    program- 10 minutes of news and 2 minutes of commercials- 90 percent of all
    school days in 80 percent of all classrooms. In exchange, Channel One
    installs a free satellite dish, internal wiring at the school, two
    videocassette recorders, and a 19- inch television set for each classroom.
    Channel One owns, operates, and maintains the equipment.

    7 Jerry Schwartz, “Are We Selling Our Students?” Associated
    Press (Aug. 2, 1998). 8 Captive Kids: A Report on Commercial Pressures on
    Kids at School (Yonkers, N. Y.: Consumers Union, 1995) reviewed examples of
    educational materials sponsored by Fortune 500 companies, smaller companies,
    trade associations, and corporate foundations and

    institutes. Often the companies and commercial organizations had their own
    in- house operations for producing materials for schools, but just as often
    they used the services of school- marketing specialists.

    B- 284190 Page 27 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Schools in two districts we visited had Channel One, but members of other
    school boards or district officials said their boards had rejected it,
    feeling that advertisements were inappropriate for the classroom. The
    schools that had Channel One felt the benefits of having the technology
    outweighed any

    concerns about the commercials. The schools incorporated Channel One into
    the school day in different ways- for example, by extending homeroom time or
    first period. According to some of the school officials

    we interviewed, classes were required only to have the television on, and
    some teachers let students talk quietly during the program. One teacher said
    he was more concerned about the quality of the news program than the
    commercials, saying that the program had changed and had less hard news and
    more feature stories. Since Channel One was first introduced, critics have
    argued against it on many grounds: (1) its 2 minutes of daily commercials
    take up class time and take advantage of students as a “captive
    audience,” (2) showing commercials in schools gives products extra
    credence and credibility, (3) Channel One commercializes the classroom and
    education, and (4) schools do not have any control over the content of the
    program or commercials. On the other hand, supporters say that (1) Channel
    One exposes students

    to news that is current and relevant to them, particularly because many
    students are not exposed to news in any other way; (2) students learn media
    literacy; and (3) financially strapped schools receive needed technology
    resources free of charge. According to a Channel One official,

    12, 000 schools, or about 38 percent of all middle and high schools in the
    United States, are currently connected to the system, and the company plans
    to add another 1,000 schools during the next several years.

    ZapMe! ZapMe! has been in operation since 1998, and its availability is
    growing, raising concerns about advertisements and privacy. Under each
    contract, ZapMe! installs up to 15 multimedia personal computers with 17-
    inch monitors, a high- speed Internet connection, and a printer in a middle
    school's or high school's computer lab. Each computer has a custom- built
    Web browser that incorporates word processing and spreadsheet software and
    gives students Internet access to approximately 12,000 selected educational
    sites. The company shows ads on its computer screens, and

    schools are required to use ZapMe! computers an average of 4 hours each
    school day in order to receive the computer equipment.

    None of the schools we visited had ZapMe! installed, but two- a middle
    school and a high schoolexpected to have it installed within a couple of
    weeks of our visits. Because ZapMe! has only existed for 2 years, some

    B- 284190 Page 28 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    school officials we interviewed were not familiar with how it worked or had
    never seen it used. Several school board members and district officials,
    however, said they would be reluctant to have ZapMe! installed because of
    the advertisements it displays and its ability to track students' Internet

    usage. Officials in two districts said they have adequate funds to buy
    computers for their schools and, therefore, do not need ZapMe!

    Many critics have raised similar concerns about ZapMe! as have been raised
    about Channel One- primarily, that students are shown advertisements during
    school, using time that could be spent on instruction. Moreover, critics
    also have raised the concern that ZapMe! has the ability to track and report
    students' Internet usage by age, gender, and

    school ZIP code. According to a ZapMe! official, however, the company does
    not track individual usage, although it does collect data in the aggregate.
    As of April 2000, ZapMe! was installed in almost 1,800 schools, or about 8.6
    percent of U. S. secondary schools.

    Other Internet companies are entering the arena. For example, a new service
    called HiFusion, 9 introduced in April 2000, offers families free Internet
    service and allows parents and schools to “chat” on- line. This
    software, which is distributed free to schools, contains advertisements and

    can gather personal information on students, such as their names, addresses,
    and buying preferences. Indirect Advertising Materials Are Widely Available,
    but Their Use Is

    Often Limited Although we found examples of indirect advertising in all the
    schools we visited, teachers and principals limited the prevalence of most
    of these

    activities. Types of indirect advertising include corporate- sponsored
    educational materials and teacher training, corporate- sponsored contests
    and incentives, and corporate grants and gifts. Corporate- Sponsored
    Educational Materials and Training

    Despite the wide availability of corporate- sponsored educational materials,
    teachers we interviewed used few of these materials, and, when they did use
    them, it was primarily for a short or one- time lesson or as a supplement to
    the regular classroom curriculum. For example, in New Mexico, one large
    chain store sent schools free videos on local artists and artisans and an
    oil company sent videos on the state's history, both of which teachers said
    helped supplement available teaching materials. Also, teachers and

    9 Because the program is so new, we were unable to include it in our review.

    B- 284190 Page 29 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    schools in several districts used materials from local power companies to
    teach students about energy conservation. According to the 1995 Consumers
    Union report, over 200 examples of educational materials and programs,
    including teaching kits, software, books, and workbooks, had been developed
    or sponsored by various companies, trade organizations, and nonprofit
    organizationsan amount the study deemed “the tip of the
    iceberg.” More recently, a large amount of

    corporate instructional materials has become available to teachers through
    Internet sites. However, no data are available to determine how widely
    teachers actually use this information. In contrast to the more subtle
    corporate sponsorship we saw during our school tours, many articles and

    studies have described examples of corporate- sponsored materials that are
    overtly commercial and have questionable educational value. For example, the
    Consumers Union study found over half of the 77 examples of corporate
    curricula it evaluated had commercial or highly commercial messages.
    Although the materials rarely contained advertisements, almost 80 percent
    contained biased or incomplete information or promoted a viewpoint that
    favored consumption of a sponsor's product or service or a position that
    favored a company or its economic agenda.

    Some businesses in the districts we visited offered free teacher training,
    but opportunities were limited, and most were available in a limited
    geographic area. For example, one local newspaper offered training to
    teachers on how to instruct students to read the newspaper, for which
    teachers could earn education credits. In addition, in three districts,
    computer or technology companies gave a limited number of teachers free

    computer training or help in teaching math and science in the classroom. One
    of these computer companies hired teachers as paid summer interns, and
    another paid all the expenses for a teacher to attend a summer training
    program. Because of its limited availability, few of the teachers we
    interviewed had participated in corporate- sponsored training.

    Corporate- Sponsored Incentives and Contests

    Although many corporate- sponsored incentive programs and contests are
    available nationwide, the teachers we spoke with rarely promoted them unless
    they were aligned with curriculum objectives. Teachers and principals in
    some schools posted information and let students decide whether to
    participate.

    Most of the elementary schools we visited promoted a reading incentive
    program that rewards students with a free pizza for reading a required
    number of books. When students reached their reading goal, they were

    B- 284190 Page 30 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    given a certificate for a free personal pizza, a button, and stickers.
    Proponents of this program say it encourages children to read, while critics
    contend that the program takes the intrinsic value out of reading and
    coerces families to eat at the sponsor's restaurant. Even in the schools
    that participated in this program, participation varied. Two elementary
    schools incorporated the program as part of their regular reading
    curriculum, while

    others let individual teachers decide whether to participate. Two of the
    teachers we interviewed required students to participate in corporate-
    sponsored contests. At one high school, an art teacher required her advanced
    art students to enter artwork in a contest of their choice to add examples
    of their work to their art portfolios. At another high school,

    students in a technology class participated in a national “solar
    boat” contest. The project required the class to raise $25,000 to
    build the boat, and two donors received free publicity by putting their
    logos on the boat. On the national level, corporate- sponsored contests
    range from those that put “educating students ahead of selling to
    them,” according to the Consumers Union report, to those that are
    “flagrantly” commercial- for example, those that incorporate
    brand names or logos in contest titles or on entry forms and those for which
    the sponsor's products or services are offered as prizes. Some contests,
    such as a national science contest or a spelling bee, had a very low
    commercial content, according to the report, while others “were
    clearly designed to promote their sponsors' corporate images, products, or
    services.” Although many contests and incentive programs are available
    nationwide, no national data are available on the number of schools that
    participate in particular contests.

    Corporate Grants and Gifts In the schools we visited, corporate gifts ranged
    from free doughnuts for parent- teacher functions to coupons for free fast
    food to computer labs in the schools. These gifts were donated by large and
    small companies and

    were given to elementary, middle, and high schools; parent- teacher
    organizations; booster clubs; school administrations; and teachers.
    Furthermore, many companies offer grants that teachers or schools can apply
    for. Some examples follow.

    ? A national computer company donated 30 computers and related equipment to
    a school computer laboratory. ? An automotive dealership leased three cars
    to the high school drivers' education program for $3 a year, and the school
    returned them after 3,000 miles.

    B- 284190 Page 31 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    ? Companies donated extra supplies and materials, such as laboratory
    glassware and supplies, photocopying paper, and computers.

    On the national level, soft drink, manufacturing, computer, fast food, and
    technology companies and their associated foundations, among others, give a
    variety of resources to schools, including grants for hundreds of millions
    of dollars, instructional materials, equipment, and services. Some donations
    are intended to be philanthropic and financially benefit their sponsors only
    indirectly, if at all. Other donations overtly advertise the sponsor's
    products or services or are connected to purchasing other products or
    services. No central data source tracks the value of corporate contributions
    to pre- college education.

    Market Research Is Controversial

    None of the education officials we interviewed said schools were appropriate
    venues for market research, and none reported that market research had been
    conducted in their schools by either school staff or employees of other
    organizations. Information on the prevalence of market research in schools
    is not available, and relatively few examples have been reported in the
    popular or research literature. However, education, corporate, and advocacy
    groups report market research in schools is a growing phenomenon. According
    to market research literature, some schools have earned thousands of dollars
    or computer equipment in exchange for allowing companies to conduct market
    research activities with students, including

    taste tests, focus groups, and surveys. Market research might be conducted
    by employees of market research firms or through students' school Internet
    use. For example, using computers in schools across the nation, children
    serve on Internet panels and respond to surveys or questions that are
    presented on- line. Students can also participate in virtual shopping games
    in which they indicate their preference for items and participate in
    contests. According to the National School Boards Association, Education
    Market Resources, a firm that specializes in reaching children through
    Internet panels, has conducted market research in over 1, 000 schools.

    In addition to delivering advertising, ZapMe! has the capability to track
    individual students by age, gender, and school ZIP code and aggregate
    information describing students' Internet activities when they use ZapMe!
    computers. Although the company has said that it has never analyzed

    student data or sold them to companies that could use this information to
    customize ads for children, many policymakers and advocacy groups have

    B- 284190 Page 32 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    raised concerns about student privacy, especially if the information is
    gathered without parental consent. Many Web sites collect personal data for
    market research purposes. For example, a 1999 survey of randomly selected
    commercial Web sites for children conducted by the Center for Media
    Education 10 found that 95 percent of commercial sites collected personal
    data when children visited these sites. In addition, some Web sites gather
    information about students without their knowledge by using sophisticated
    tracking tools. 11

    Benefits From Commercial Activities Vary and Support Many Activities

    Some commercial activities generate more money for schools than others do,
    and the same type of activity generates different amounts of money for
    different schools or districts. For example, exclusive soft drink sales can

    potentially raise more money than gift- wrap sales, and one school or
    district can earn more from soft drink sales than another school or
    district. Similarly, proceeds from commercial activities generally supported
    basic instructional activities, athletics, and other student activities.

    The amount of soft drink revenue generated for a school or district varied.
    For example, one elementary school principal said the beverage contract,
    which covered only one machine that was located in a teachers' lounge,
    generated only about $12 a year. A middle school principal estimated the
    beverage agreement in his school yielded about $4,000, or about $3.65 per
    student. One high school principal reported the contract in his school
    generated about $67,000 in up- front money and commissions its first year,

    or about $12 per student per year over the life of the contract. One
    district 10 According to the Center for Media Education, its purpose is to
    create a quality electronic media culture for children and youth, their
    families, and the community. 11 According to findings reported in The
    Internet and the Family 2000: The View from Parents, the View from Kids (New
    York, N. Y: Annenberg Public Policy Center, May 2000), nearly half of the
    parents surveyed were not aware that Web sites can gather information about
    users without their knowledge by aggregating small pieces of information
    using sophisticated tracking tools.

    B- 284190 Page 33 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    covered under a consortium contract is guaranteed to make a minimum of $30
    per student per year, or about $785,000. 12 Schools used revenues from
    beverage sales differently. For example, a beverage company gave one high
    school $80,000 in up- front payments over 3 years to build an all- weather
    track. At another high school, revenue generated from designated vending
    machines was dedicated to specific athletic programs, such as football and
    swimming, as well as to other student activities, such as student
    government. In other high schools, and most elementary and middle schools,
    funds helped support a wide variety of programs, including field trips,
    student incentives, musical instrument programs, teacher training, and
    career development activities for students.

    Principals usually decided how funds would be used. Sales of school- related
    products were not generally very profitable. For example, some schools sold
    school pictures at a low price, accepting modest profits or receiving only
    free student and staff picture identification cards. The revenue or rewards
    from a commercial activity can vary. Although

    selling refreshments at concession stands during sporting events was a
    lucrative activity and often generated thousands of dollars for student
    activities, many other types of fundraising sales were time- consuming and

    raised relatively few dollars given the amount of time and effort involved.
    Often, parent volunteers worked hard selling products for modest returns.
    For example, one parent- teacher organization raised about $7, 500 through

    seven product sales that spanned the 1998- 99 school year and involved the
    entire student body, a relatively small return for the effort involved. In
    addition, rewards from some cash or credit rebate programs are small. For
    example, a volunteer in one school collected 1,700 proof- of- purchase
    labels in order to obtain a single dictionary for the school library. 12 For
    comparison purposes, per- student revenue is the best measure available, but
    comparisons can be misleading because each contract reflects a different set
    of rules and

    conditions. For example, per- student revenue from school- based contracts
    reflects sales at one school, and per- student revenue from district and
    consortia contracts reflects average sales in all schools- elementary,
    middle, and high schoolsin a district. Also, not all

    schools or districts maximize their commissions. Some charge higher prices
    for beverages or sell beverages in larger quantities, while some negotiate
    more advantageous contracts than others. In addition, demographics and
    special characteristics- for example, having a champion football teamcan
    greatly affect a school's or district's ability to negotiate favorable
    terms. Finally, schools can increase their revenue by stocking machines and
    maintaining sales records instead of giving vendors the responsibility for
    these activities.

    B- 284190 Page 34 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Although technology has made some rebate and credit programs easy to use,
    returns to some schools remained modest, often because retailers offering
    the programs were not located in the community served by the school, some
    awards were negligible, or customers were required to pay fees to
    participate. For example, 13 of the 19 schools we visited received less than
    $200 for a 6- month period from a cash rebate program. Internet shopping
    programs were not sources of revenue in the schools we visited

    because some officials were unaware of them. With the exception of exclusive
    beverage contracts that included advertising rights, most advertising in the
    schools we visited was displayed in exchange for free equipment or to reduce
    the cost of products such as student planners or yearbooks. In contrast, the
    national media have

    reported that some districts and schools have received large earnings from
    advertising. For example, the Grapevine- Colleyville School District in
    Texas generated several hundred thousand dollars a year by selling ads on

    school buses and school buildings. 13 Also, the New York City Board of
    Education recently approved a plan to develop its own Internet service and
    Web site that will carry corporate advertising. Proponents of this plan
    believe that the profits could reach $100 million annuallyenough money to
    buy laptop computers for all eighth grade students in New York City's public
    schools. 14

    Concluding Observations Commercial activities in schools run the gamut from
    noncontroversial approaches, such as grants and gifts, to highly
    controversial activities, such

    as market research. Often the values of school board members, district
    officials, and parents determine whether a certain type of activity is
    controversial or not, rather than the nature of the activity itself. For
    example, in various districts soft drink sales are an issue of nutrition,
    the appropriateness of sales during school hours, or brand preference. In
    some cases, these sales raise no value- related issues at all. Because most
    of the

    decisions are made at the local level, different preferences of local
    officials will result in different levels of commercial activities across
    districts and across schools in the same district. New technologies,
    particularly those

    13 Mike Kennedy, “Public Schools, Private Profits,” America
    School and University (Feb. 2000). 14 Andrew Trotter, “Denver, New
    York Seek Online Revenue,” Education Week (May 10, 2000).

    Page 35 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    involving the Internet, might increase opportunities for schools to earn
    money but raise concerns about student privacy. Comments From Education
    Organizations

    Several national education organizations reviewed a draft of this report.
    They generally thought it was informative and should provide school
    districts with valuable information related to commercial activities. An
    official of the National School Boards Association, however, said that
    because we had not encountered any examples of Internet tracking in our site
    visits, we should not highlight the issue by including it in table 1.
    Because table 1 provides an overall framework for discussing categories of

    commercial activities, we believe Internet tracking is appropriately
    included.

    As agreed with your offices, unless you publicly announce its contents
    earlier, we plan no further distribution of this report until 30 days after
    its issue date. At that time, we will send copies to the Honorable Richard
    W. Riley, Secretary of Education; appropriate congressional committees; and
    other interested parties. We will also make copies available to others upon
    request.

    If you or your staff have any questions about this report, please call me on
    (202) 512- 7215 or Eleanor L. Johnson on (202) 512- 7209. Kathleen D. White
    and Carolyn S. Blocker also made major contributions to this report.

    Marnie S. Shaul Associate Director, Education, Workforce,

    and Income Security Issues

    Page 36 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Appendix I

    Appendi xes Scope and Methodology Appendi x I

    To obtain information for this report, we reviewed reports and articles
    about commercial activities, conducted a Lexis search of state legal codes
    to identify laws governing commercial activities in schools, and gathered
    detailed information on commercial activities in 19 elementary and secondary
    schools in a total of seven school districts in three states. The

    schools visited ranged from those serving large numbers of poor students to
    those serving children from affluent families. In each school, we
    interviewed the principal; representatives of parent- teacher organizations

    and booster clubs; selected teachers; and other key staff, such as athletic
    directors. In each district, we interviewed a district superintendent or
    assistant superintendent, a district business officer, and a school board

    member. (See table 3.)

    Table 3: Sites Visited District School California

    Long Beach Unified School District James R. Lowell Bayside Academy Hubert H.
    Bancroft Middle School Robert A. Millikan High School

    Oxnard School District (elementary and middle school district) Emilie
    Ritchen Elementary School

    John C. Fremont Intermediate School Oxnard Union High School District
    Hueneme High School

    Michigan

    Grand Rapids Public Schools Henry Paideia Academy Westwood Middle School
    Ottawa Hills High School

    Ludington Area Schools Pere Marquette School (Grades K- 2) Foster Elementary
    (Grades 3- 6) O. J. DeJonge Junior High School Ludington High School

    New Mexico

    Albuquerque Public Schools Los Padillas Elementary School Lyndon B. Johnson
    Middle School Cibola High School

    Los Alamos Public Schools Barranca Mesa Elementary School Los Alamos Middle
    School Los Alamos High School

    Appendix I Scope and Methodology

    Page 37 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    We spoke with individuals representing the following education associations,
    parent- teacher organizations, businesses, and advocacy groups: American
    Association of School Administrators

    Association for Supervision and Curriculum Development Association of School
    Business Officials International Center for the Analysis of Commercialism in
    Education Center for Commercial- Free Public Education Channel One
    (Primedia) Commercial Alert National Parent Teacher Association National
    School Boards Association National Soft Drink Association New Mexico
    Research and Study Council Texas Parent Teacher Association ZapMe!

    Page 38 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Appendix II Summary of Site Visit Information Appendi x II

    Tables 4 through 7 summarize written policies and procedures on product
    sales, direct advertising, indirect advertising, and market research in the
    districts we visited. These tables illustrate the variability in policies
    among school districts. Moreover, unwritten district policies and the values
    of

    school administrators and school board members play critical roles in
    decisions about what commercial activities are allowed. Table 8 describes
    the soft drink arrangements in the six high schools that we visited. Table
    4: Summary of Key District Policies and Procedures Covering Product Sales,
    by School District Albuquerque Grand Rapids Long

    Beach Los Alamos Ludington Oxnard School

    District Oxnard Union

    High School District

    Approval of fundraising activities

    Superintendent or designee must approve fundraisers, inform parents/
    guardians of their purpose, tell parents/ guardians how much money was
    raised, and encourage parents/ guardians to offer their suggestions for the
    use of the money raised. X

    Superintendent has the authority to approve agreements on behalf of the
    district. X X Superintendent or designee must review the contract if the
    sale or soliciting activities involve a contract.

    X X Principal may permit fundraising by organizations whose funds are
    managed by the school district if activities are conducted on school
    grounds; the superintendent may permit fundraising if

    conducted off school grounds. X X

    Superintendent may permit fundraising by organizations whose funds are not
    managed by the school district. X X X X

    Superintendent and principal must approve in writing all activities
    involving the community extensively. X X All solicitations on campus must be
    approved according to regulations developed by the superintendent.

    X X Principal must approve activities. X X X Principal must approve all
    activities of parents' groups. X X

    Appendix II Summary of Site Visit Information

    Page 39 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Limits on door- to- door canvassing

    Door- to- door canvassing is prohibited. X X X Ability of minors to engage
    in door- to- door fundraising canvassing is limited. X X X

    Limits on number and length of fundraisers

    Superintendent must develop guidelines for the solicitation of funds that
    specify the times and places in which funds may be collected, describe
    permitted methods of solicitation, limit the kinds

    and amounts of advertising for solicitation, and limit the number of
    fundraising events. X X

    Superintendent must implement guidelines to ensure that parent- teacher
    organizations and other school- related organizations comply with

    school board policies and that funds are used for projects approved by the
    superintendent and principal.

    X Student groups are limited to two fundraisers a year. X

    Staff must limit fundraising activities to appropriate time periods
    designated by the principal. X X

    Other policies

    Students may not be required to raise a specified amount of money in order
    to participate in an activity sponsored by a school- related

    organization. X X X X

    Schools are to coordinate fundraisers so that sales will not be negatively
    affected by competition. X X Fundraising involving gambling is prohibited. X
    X X X Principal must ensure that letters are sent to all parents/ guardians
    regarding fundraising activities. X X

    Awards or incentives identifying donors may not be used. X (Continued From
    Previous Page)

    Albuquerque Grand Rapids Long Beach Los Alamos Ludington

    Oxnard School District

    Oxnard Union High School District

    Appendix II Summary of Site Visit Information

    Page 40 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Table 5: Summary of Key District Policies and Procedures Covering Direct
    Advertising, by School District Albuquerque Grand

    Rapids Long Beach Los Alamos Ludington

    Oxnard School District

    Oxnard Union High School District

    Approval of direct advertising activities

    Superintendent or designee has the authority to approve agreements on behalf
    of district. X X

    Superintendent must review the commercial advertising content of all
    instructional programming and other materials and act to protect students
    from any negative aspects of the advertising content.

    X X Materials generated by nonstudents may be distributed or posted only
    with the prior approval of the superintendent or his or her designee.

    X X Superintendent or designee must authorize the distribution to students
    of materials from profitmaking companies.

    X X Ticket sales and promotional announcements in schools must be approved
    by the principal and permitted by the appropriate superintendent, with the
    exception of activities relating to school functions that are held at the
    discretion of the principal.

    X

    Limits on direct advertising

    Advertising promoting alcohol, tobacco, gaming, firearms, political
    endorsements, and controversial products or services is prohibited.

    X Advertisement of materials that are obscene or libelous, incite students
    to commit illegal acts, violate school rules, discriminate against groups,
    or promote one group over others is prohibited.

    X X Superintendent or designee may not accept promotional material of a
    commercial nature for distribution by or to students.

    X X Organizations that provide schools with materials or equipment that
    contains commercial messages must submit a request to the director of
    business.

    X X Superintendent must establish guidelines that limit the kind and amount
    of advertising for fundraisers. X

    Superintendent must develop regulations that provide for the acceptance of
    gifts of uniforms, equipment, or money. X X

    Coupons may be distributed through the school, but they must relate to or
    support an instructional activity. X X

    Appendix II Summary of Site Visit Information

    Page 41 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Advertisements in school- sponsored publications, announcements, and other
    communications are prohibited.

    X

    Other policies

    Advertising initiatives that enhance district goals are supported. X
    (Continued From Previous Page)

    Albuquerque Grand Rapids Long

    Beach Los Alamos Ludington Oxnard School

    District Oxnard Union

    High School District

    Appendix II Summary of Site Visit Information

    Page 42 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Table 6: Summary of Key District Policies and Procedures Covering Indirect
    Advertising, by School District Albuquerque Grand

    Rapids Long Beach Los Alamos Ludington

    Oxnard School District

    Oxnard Union High School

    District Approval of indirect advertising activities

    Organizations must request a letter of authorization from the Community
    Relations Office or from Curriculum Support before seeking the approval of
    the principal to distribute course- related materials, contest materials,
    products, or programs.

    X X All materials or activities proposed by commercial sources for student
    or staff use or participation must be approved by the principal on the basis
    of their educational contribution.

    X X Superintendent must review the commercial advertising content of all
    instructional programming and other materials and act to protect students
    from any negative aspects of the advertising content.

    X X School board acceptance is required for all gifts valued at over $100. X

    Limits on indirect advertising

    Schools may use films or other educational materials if they mention the
    producing or sponsoring company. X X

    Product materials donated by companies may be used in classrooms as long as
    they serve an educational purpose and do not unduly promote commercial
    activities or products.

    X X Superintendent or designee may not accept promotional materials of a
    commercial nature for distribution by or to students.

    X Materials advertising a product for sale or rent may not be used unless
    activity is authorized and approved by the principal.

    X Contests and exhibits may not make unreasonable demands upon the time or
    energy of students, teachers, or the district; interrupt the regular school
    program; involve any direct cost to the district; or cause the participants
    to leave the school district.

    X X

    Other policies

    Superintendent must establish regulations governing partnerships between
    private industries and schools. X

    Appendix II Summary of Site Visit Information

    Page 43 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Table 7: Summary of Key District Policies and Procedures Covering Market
    Research, by School District Albuquerque Grand

    Rapids Long Beach Los

    Alamos Ludington Oxnard School

    District Oxnard

    Union High School District

    Approval of market research activities

    Organizations may not administer surveys or questionnaires to students or
    staff unless instruments are submitted to the superintendent for approval;
    if approved, a copy of the survey or questionnaire results and the proposed
    manner of their communication must be provided to the superintendent for
    review and approval before they are released.

    X X Unless generated by the school, questionnaires to students or parents/
    guardians must be approved by the superintendent or designee and must bear
    the name and location of the sponsor.

    X X

    Appendix II Summary of Site Visit Information

    Page 44 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Table 8: Comparison of Soft Drink Agreements at the High Schools We Visited
    School Coverage of agreement Type of agreement Year of agreement Length of

    agreement Revenue or in- kind benefits Sponsor responsibilities District
    responsibilities

    Albuquerque, N. M. Cibola High School

    School Informal agreement 1999 None specified ? About $3 per student ? 10
    competitive grants of $1, 000 for district teachers

    ? A baseball scoreboard ? Cafeteria banners Maintain 60% of machines
    Maintain 40% of machines

    Grand Rapids, Mich. Ottawa Hills High School

    18 districts in the Kent Intermediate School District Beverage Consortium
    Exclusive contract covering all public schools and

    facilities 1999 10 years ? Minimum commission of $20 per student per

    year for all students in the district and $10 per student per year for
    exclusivity rights, for a total of $30 per student per year ? Promotional

    merchandise and student incentive programs valued at over $600, 000 ?
    Guaranteed earnings of $785, 000 and estimated

    possible earnings of $1. 5 million for the district

    Maintain all machines May not sell or advertise products of competing
    companies

    Long Beach, Calif. Robert A. Millikan High School

    School Exclusive contract, but food service operations, including

    cafeteria service, are excluded 1995 10 years ? $29,284 per year, or

    about $6. 80 per student (based on revenues from 1998- 99) ? Donation of
    $11,420 toward purchase of a

    football scoreboard ? 25 free cases of soft drinks a year

    Maintain all machines May not sell or advertise products of competing
    companies in schools or at school events

    Appendix II Summary of Site Visit Information

    Page 45 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Los Alamos, N. M. Los Alamos High School

    53 school districts and 11 institutions of higher learning

    in New Mexico Exclusive contract 2000 8 years ? Estimated total benefit

    of about $82,500 for the district, or $22 per student per year ? Guaranteed
    $24, 121 per year regardless of

    sales, or about $6. 50 per student per year ? In- kind benefits worth

    $4, 700 per year for the district Maintain all

    machines May not sell or advertise products of competing companies; schools,
    concessions, and food services selling beverages on campus must buy cups,
    carbon dioxide, and related products from the vendor

    Ludington, Mich. Ludington High School

    High school/ middle school complex

    Exclusive contract 1997 10 years ? Up- front payment of $12,000 toward the
    cost of a scoreboard ? Installation of the

    scoreboard ? Estimated commission of about $4,800 per

    year ? Approximately $5 per

    student per year Maintain all machines May not sell or advertise products of
    competing

    companies; must place advertisements on all menu boards,

    scoreboards, and concessions and buy cups, carbon dioxide, and related
    products from the vendor

    Oxnard, Calif. Hueneme High School

    School Exclusive contract, but food service operations, including

    cafeteria service, are excluded 1999 6 years ? Up- front payments of

    $50,000, $15,000, and $15,000 over first 3 years of contract ? $17,000
    commission

    per year, or about $6.40 per student ? Estimated total benefit

    from soft drinks of $11.82 per student per year ? 50 free cases of soft
    drinks per year ? Promotional services not to exceed $1, 000 per year

    Maintain all machines Has exclusive sales rights with exception of products
    sold in cafeteria (Continued From Previous Page)

    School Coverage of agreement Type of agreement Year of agreement Length of
    agreement Revenue or in- kind

    benefits Sponsor responsibilities District responsibilities

    (104987) Lett er

    Ordering Information The first copy of each GAO report is free. Additional
    copies of reports are $2 each. A check or money order should be made out to

    the Superintendent of Documents. VISA and MasterCard credit cards are
    accepted, also. Orders for 100 or more copies to be mailed to a single
    address are discounted 25 percent.

    Orders by mail: U. S. General Accounting Office P. O. Box 37050 Washington,
    DC 20013

    Orders by visiting: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW)
    U. S. General Accounting Office Washington, DC

    Orders by phone: (202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

    Each day, GAO issues a list of newly available reports and testimony. To
    receive facsimile copies of the daily list or any list from the past 30
    days, please call (202) 512- 6000 using a touchtone

    phone. A recorded menu will provide information on how to obtain these
    lists.

    Orders by Internet: For information on how to access GAO reports on the
    Internet, send an e- mail message with “info” in the body to:

    info@ www. gao. gov or visit GAO's World Wide Web home page at: http:// www.
    gao. gov

    To Report Fraud, Waste, or Abuse in Federal Programs

    Contact one: ? Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm ? e-
    mail: fraudnet@ gao. gov ? 1- 800- 424- 5454 (automated answering system)

    United States General Accounting Office Washington, D. C. 20548- 0001

    Official Business Penalty for Private Use $300

    Address Correction Requested Bulk Rate

    Postage & Fees Paid GAO Permit No. GI00

    PAGE 49 GAO/ XXXX- 98-??? NAME OF DOCUMENT

    Page 50 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Contents Table 1: Categories of Commercial Activities 8 Table 2: State
    Statutes and Regulations Targeting Commercial

    Activities in Schools 12 Table 3: Sites Visited 36 Table 4: Summary of Key
    District Policies and Procedures Covering

    Product Sales, by School District 38 Table 5: Summary of Key District
    Policies and Procedures Covering

    Direct Advertising, by School District 40 Table 6: Summary of Key District
    Policies and Procedures Covering

    Indirect Advertising, by School District 42 Table 7: Summary of Key District
    Policies and Procedures Covering

    Market Research, by School District 43 Table 8: Comparison of Soft Drink
    Agreements at the High Schools

    We Visited 44

    Contents Page 51 GAO/ HEHS- 00- 156 Commercial Activities in Schools

    Page 52 GAO/ XXXX-??-?? Document Name

    Contents Figure 1: Advertisements Can Be Found in and Around Schools 7
    Figure 2: Ads on Scoreboards 20 Figure 3: Ads on Calendars 21 Figure 4: Ads
    on Book Covers 24
    *** End of document. ***