This interim study was conducted to provide descriptive and analytic information about Chapter 1 program operations during the second year of implementation of the Hawkins Stafford Act amendments to the Elementary and Secondary Education Act. Data were collected through a mail survey administered to Chapter 1 coordinators in 1,600 school districts, with an overall response rate of 88 percent. Additional information was obtained through on-site interviews in a nested sample of 9 states, 27 districts, and 54 schools. Findings indicate that the program improvement process that provides leverage for school change by holding schools accountable for student growth should continue, but two weaknesses are the inaccuracy of the identification process and a significant underestimation of the magnitude of the needed program improvement effort. Findings on schoolwide projects indicate a real sense of excitement in some high poverty schools, although accountability requirements and parent involvement components were not well implemented. Data also indicate that procedures for identifying students who had not made gains for 2 consecutive years were weakly implemented. Finally, visits to sites and state coordinators indicated that state Chapter 1 coordinators have difficulty exercising programmatic leadership. Included are 56 exhibits; and 3 appendixes containing the district survey, information on the study methodology, and 17 back-up tables. (JB)