Ten agencies in New York State provide educational services to over 46,000 children (daily average) in state care or custody. This audit report, through verbal and statistical summaries, evaluates these agencies' performance. Chapter I provides background data, describes the scope of the audit, and discusses state laws and regulations designed to guarantee educational opportunity for children in custody. Chapter II presents information on programs directly supervised by the state education department (SED), including placement statistics; educational program standards; monitoring procedures; the state comptroller's review of SED's oversight methods; eligibility criteria, placement procedures, and funding consideration for two types of special schools; and overall program costs. Chapter III reviews the other nine agencies' programs, including the populations served and their needs, services provided and their administration, and these programs' compliance with SED standards. Chapter IV compares the various agencies' roles and responsibilities, funding mechanisms, and compliance with SED standards. Finally, appendixes provide (1) a list of state officials contacted for this study; (2) tables showing placement data, population characteristics, and program expenditures; and (3) agencies' comments on this report. (MCG)