An independent audit of the San Diego (California) special education department was commissioned to examine: (1) whether programs exceed mandates of federal and state law, (2) whether the district has maximized funding sources in reporting programs and costs; and (3) whether alternative service delivery models or community interagency collaboration efforts might be provided at more cost effective levels. Among conclusions were that some services (such as those to students in home or hospital settings and those to large numbers of students identified as seriously emotionally disturbed) exceed requirements, and that the district has not maximized resources (e.g., too many special day class settings and non-optimal reporting procedures). Among 10 recommendations are the following: increase integration of special education students into regular education programs; review agreements with related agencies; review eligibility criteria, placement standards, and need for school provided physical/occupational therapy services; reduce numbers of pupils assigned to programs for seriously emotionally disturbed students; and redistribute instructional personnel service units so that closer to 2.8% of pupils are served in special day classes. A glossary of terms is appended and tables provide such information as instructional personnel service units by program, current program operation by setting, and effects of nonfunded programs. The attached supplementary report by Janet L. McDaid describes the district's special education programs against a background of relevant legislative and administrative information. Seven case studies are also presented to illustrate the different types of services provided. (DB)