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)

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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

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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. ***