This monograph provides a philosophical framework and practical ideas for improving service delivery to children of color who are severely emotionally disturbed. The monograph targets four sociocultural groups (African Americans, Asian Americans, Hispanic Americans, and Native Americans). The document emphasizes the cultural strengths inherent in all cultures and examines how the system of care can more effectively deal with cultural differences and related treatment issues. In dealing with cultural differences, there is a need to clarify policy, training, resources, practice, and research issues, and cultural competence should be viewed as a developmental process. Five elements contributing to a system's, institution's, or agency's ability to become more culturally competent are identified: value diversity, cultural self-assessment, consciousness of the dynamics of cultural interaction, institutionalization of cultural knowledge, and development of adaptations to diversity. Cultural competence must be developed at the policymaking, administrative, practitioner, and consumer levels. Service adaptations developed in response to cultural diversity may impact on intake and client identification, assessment and treatment, communication and interviewing, case management, out-of-home care, and guiding principles. Planning for cultural competence involves assessment, support building, facilitating leadership, including the minority family and community, developing resources, training and technical assistance, setting goals, and outlining action steps. (Approximately 170 references) (JDD)