This report presents an analysis of and conclusions (based on audits of projects) on the progress being made by state educational agencies (SEA's) in assuring that local educational agencies (LEA's) are designing and implementing projects to meet the needs of educationally deprived children. Two considerations are said to have been employed in reviewing the effectiveness of SEA practices: the extent to which Title I funds are used for high priority educational needs and the extent of improvements due to the use of funds. Although variations among the 14 states reviewed are found, a pattern of change for the better is stated to exist, perhaps due to clearer guidelines from the USOE, more effective Federal and SEA monitoring processes, and better familiarity and acceptance of the requirements of the program by many SEA's. Further improvement is considered to be necessary as 12 percent of Title I funds are still not being used for high priority needs. Recommendations include (1) closer monitoring of procedures used by SEA's in reviewing and approving projects, along with on-site monitoring; and (2) requiring SEA's to provide LEA's with information and training on the requirements for educating deprived children. (Author/AM)