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This OSEP letter addresses whether state set-aside funds under 34 CFR §300.704 can be used, in conjunction with other state and federal funds, to provide technical assistance to schools and LEAs identified for corrective action or improvement under No Child Left Behind (NCLB), due to their failure to meet adequate yearly progress (AYP). OSEP notes that the authority under 34 CFR §300.704(b)(4)(xi) is limited to schools and LEAs identified for improvement on the sole basis of the assessment results for the disaggregated subgroup of children with disabilities. The letter discusses other relevant provisions and confirms that funds reserved by a state under 34 CFR §300.704(b)(1) can be used without regard to the prohibitions on commingling or state-level supplanting, as described in 34 CFR §300.704(d).