This report by the California State Auditor reports that six of 10 California community college districts audited are incorrectly reporting their levels of spending on teacher salaries. State law requires that districts spend 50% of their current educational expenses on instructor salaries each year. By mandating this spending level, the legislature hoped to reduce class size and increase the effectiveness of classroom instruction. The 50% law specifies that districts should compute their compliance rates by dividing instructor salaries by current educational expenses. Instructor salaries should be calculated by using the salaries and fringe benefits of instructors and instructional aids. The figure should be reduced for time instructors spend in non-instructional positions, such as department chairs. Current educational expenses are total expenditures reduced by exclusions outlined in the law. In general, districts overreported their compliance rate in two ways: (1) by including administrative salaries and benefits in instructor salaries; and (2) by excluding normal operating expenses from current educational expenses. The report concludes that ineffective oversight by the Chancellor's Office allows districts to misreport their compliance rates. The report includes responses from school districts that fell below the 50% threshold, along with the auditor's response to their comments. The report estimates that the six districts that fell short spent $10 million too little on instructor salaries. (NB)