This interim report, the first of three requested by Congress from NIE, is in response to Congress' instructions to NIE via the 1974 ESEA amendments to (1) conduct a study of compensatory education programs which would examine the fundamental purposes and effectiveness of the programs, (2) analyze ways of identifying children in greatest need of compensatory education, (3) consider alternative ways of meeting these children's needs, and (4) consider the feasibility, costs, and consequences of alternative means of distributing Federal compensatory education funds. The present report describes how NIE's research strategy dealt with Congress' instructions and also discusses the fundamental purposes of compensatory education programs and the manner in which NIE is assessing the effectiveness of current programs and the consequences of possible changes. The research strategy according to which NIE is conducting its overall study consists of 35 projects organized into the four areas of funds allocation, compensatory services, student development, and administration. Findings from the NIE survey include the following: that in the 1975-76 school year, ESEA Title I represented 3% of total national expenditures and that 90% of the nation's school districts received Title I funds; that the services provided by Title I funds were quite diverse and varied with SES of the school district populations; that students in Title I districts appeared to be concentrated in grades 1-6; and that many students received instruction in more than one subject area--the average amount of time spent in compensatory education being five and one-half hours per week. (RJ)