Standards Based Grade Reporting

This subject, in my mind, is one of the most pressing issues for secondary schools.  How do grades reflect the level of mastery in the classroom.  State Standards based Assessments and accountability forces us to evaluate our grading techniques.  Many schools can identify students that have failed courses yet reach advanced levels on state assessments for the same course or students that have "A's" but score below the proficient level on state assessments.  Assuming that your local curriculum has been aligned with state standards, how do we insure that grades reflect what a student knows and can do?  Teachers at the K-3 level have been using standards based report cards for the last decade.  The challenge for 9-12 teachers is to develop a reporting system the reflects more complex curricula and meets the needs for post secondary institutions.