The purposes of this paper are to explore and present various opinions concerning the nature of functional literacy and the questions involved in assessing the extent to which one is or is not functionally literate, and to describe one instrument designed to measure functional literacy. The major sections of the paper provide information on the following topics: the definition of functional literacy/competency, how to test for functional literacy, what do to with the results of such tests, national and state efforts at functional literacy testing, and local efforts, including the development of an instrument by one school district that would measure and reflect the kinds of skills employers expect from employees in one geographic area. (FL)