This January 2000 audit report concerns the status of California community college districts' compliance with Section 84752 of the California Education Code, which prohibits districts from receiving full-time equivalent student (FTES) funding for activities that are fully funded through another source. The state apportions funds to districts based on students' class attendance. Districts use these funds to support their community colleges, including the instruction provided. Districts can use instructional service agreements (ISAs) to contract with public or private entities to provide specific training or services. According to Section 84752's regulations, community colleges can receive state apportionment funding for FTES in classes given through ISAs except when these classes are fully funded through another source. Most districts appear to be complying with these regulations. However, according to this report, the California Community Colleges Chancellor's Office is not properly monitoring ISAs and therefore cannot assure that all districts receiving funds through ISAs have met state requirements for receiving apportionment funding. Currently, the Chancellor's Office cannot identify districts with ISAs or the number of FTES those agreements generated to obtain state apportionment funding. If each district were required to report sufficient information about ISAs and the number of FTES claimed, it could better ensure that districts comply with state regulations. (KP)