To provide information for decision making related to competency testing in reading, the Cleveland School District developed a working paper for staff discussion. This paper presents information about the varied aspects of a competency testing program which will use locally developed test questions and be implemented in response to a Board of Education policy and a State mandate requiring such programs, and as a requirement for achieving compliance with a Federal Court Order for implementation of educational improvements in a district-wide desegregation plan. Drawing upon the performance of Cleveland students in a May 1982 pilot testing with a commercially produced test, the use of test data for improvement of student performance in reading is demonstrated. Contents include: advantages and disadvantages of competency testing, potential legal problems, expected outcomes, program implementation, major program elements, personnel involvement, progress, problems, remediation, district performance, requirements for graduation, how a competency test works, reporting to parents, and tables indicating the least able performance by Cleveland students on the May 1982 pilot test. (Author/PN)