Educators use informal theories and assumptions to guide their actions, yet often fail to evaluate these beliefs. This digest examines the nature and purpose of educational-indicator systems and discusses the design of report cards by which schools can inform the public of their performance. An indicator is any statistic that casts light on the conditions and performance of schools, some of which are teacher turnover, student mobility, and financial resources. Indicators play a central role in accountability systems by focusing attention on results, especially the school's performance on standards-driven assessments. Although indicators hold out the promise of improved decision-making, they can also be abused. Indiscriminate data collection, data misinterpretation, and overreliance on data can wreak havoc on a school's accountability system. Designing effective school report cards poses a considerable challenge because parents and taxpayers may have different ideas than do policymakers. The Annenberg Institute for School Reform has designed a six-part "inquiry cycle" that uses indicators effectively. Tracking and reporting selected indicators will satisfy minimum requirements of accountability, but significant improvement will come only when the data are used systematically and intelligently. (Contains 13 references.) (RT)