A study was done to assess implementation of the Chapter 1 program improvement provisions of the Hawkins-Stafford Elementary and Secondary School Improvement Amendments of 1988. Chapter 1 is the largest federal education program for educationally deprived school children, and the Hawkins-Stafford Act was designed to ensure that individual schools are effective in helping students achieve Chapter 1 goals. Specifically, the study reviewed the process used to identify schools in need of program improvement and determine whether this process could be improved and to compare implementation of the joint and local phases of program improvement. The study used multiple methodologies including statistical analysis, mail surveys, case studies, and a literature review. The results show that the process used to identify schools for program improvements is flawed because schools often are evaluated only on whether their Chapter 1 students show annual increases in achievement test scores. When schools are evaluated only on achievement test scores, many schools are likely to be judged on changes in test scores that reflect random fluctuations rather than actual changes in student performance. Chapter 1 policy does not adequately explain how evidence from multiple indicators of student performance may be interpreted. In addition, pressure to increase test scores may have negative effects on instruction. Includes 5 tables; 19 figures; 45 references; and extensive appendixes containing officials' views, technical and methodological information, survey results, U.S. Department of Education comments, and a list of major contributors to the report. (JB)