As part of a continuing review of Department of Defense Dependents Schools (DODDS), the United States General Accounting Office (GAO) was asked to provide information on educating Department of Defense dependents overseas. The study: (1) reviewed legislation that establishes eligibility and authorizes funding for students to enroll in DODDS as space-available; (2) identified the number of students enrolled as space-available and their locations; and (3) explained the circumstances surrounding high space-available enrollments in some schools. Data were derived from a review of the law and DOD regulations, analysis of statistical data on school year 1994-95 enrollments, and interviews with DODDS officials. Findings indicate that space-available enrollments in DODDS schools are generally very low and do not present a problem for the school systems. However, in Korea a problem exists at several levels. First, at the program level, DODDS has not followed stipulations that prohibit DOD from requesting funds for teachers and resources to educate space-available, tuition-free students. Second, at the local military command level, the many children who do not attend school may require increased time and resources to address growing behavioral problems. Finally, on a social level, leaving children uneducated raises a social and ethical dilemma for DODDS and the military. Alternative solutions include allowing DODDS to request resources in special situations for space-available tuition-free students, or having the military take strong measures to discourage noncommand-sponsored dependents in certain areas. The report recommends that the Secretary of Defense propose alternatives and their costs to the Congress in order to bring DODDS into compliance with budgetary guidelines. Four tables and one figure are included. Appendices contain enrollment categories for students in DODDS overseas schools; DODDS enrollment for 1994-95, by category and location; comments from the DOD; and a list of contributors to the report. (LMI)