New York State law permits school districts to invest cash not immediately needed for district operation and also specifies the kinds of investments that may be made in order to ensure the safety and liquidity of public funds. This audit examines cash management and investment practices in New York state's financially independent school districts. Of 275 randomly selected school districts that were sent questionnaires, 173 (63 percent) responded. Of these districts, 28 within 10 counties were selected for field visits. Three counties, wealthier than the others, outearned other school districts because of a combination of the many banks competing for school district cash and districts' borrowing for investment purposes. Districts using three or more banks for investment purposes generally earned more than districts using one or two. Alternatives suggested to school districts for improving earnings include use of interest-bearing checking accounts; pooling available cash with other school districts, towns and villages, or Boards of Cooperative Educational Services to obtain larger, higher interest-earning investments; and obtaining interest rate "quotes" from several banks. The appendixes contain a list of interviews and contacts, a table showing school district uninvested cash, a summary of investment pooling practices in four states, and two letters from state agencies. (MLF)