Yes, she is a first grader TESTING on a 5th grade level in reading. As of the beginning of kindergarten, she tested on a 3rd grade level in math and hasn't been tested again, though of course she's moved up since then, so I'm being conservative when I say she's two grades above in math. Maybe it's three now.
Grade equivalent scores are tricky. They don't indicate *mastery* of grade level material, only that the child got the same score as a fifth (or third or whatever) grader at the 50th percentile got. Students at the 50th percentile have *not* mastered grade level material. Mastery is generally indicated at about the 90th percentile or above.
Just to get a general idea about the difference, a student scoring at the 5th grade level in reading has likely mastered 2nd grade reading and a student scoring at the 3rd grade level in math has likely mastered 1st grade math.
So what this means is that grade equivalent scores should not be used to make placement decisions. School officials know this, and generally don't pay attention to parents who come in demanding acceleration based on them.
That's not to say that acceleration isn't warranted, it just means that you want to be sure that the student will be capable of mastering the material presented in the higher grade. A combination of looking at scores from above level testing and observations about what the student is actually capable of doing are more accurate ways to determine appropriate placement.
As the others suggested, finding out what the policy actually is would be a good first step. The next step would be getting your child assessed (if you haven't already) where one of the tests done is an achievement test two grades above her current grade level (or one grade above the level you think she should be placed). So if she's in 1st grade now, have her take the 3rd grade test for placement in 2nd grade subjects. Have it scored against 3rd grade norms. Then use the Iowa Acceleration Scale to see if it ends up indicating that she is a good candidate for acceleration. (The IAS is actually for whole grade acceleration, but it will also work for subject acceleration.) Perhaps data that go beyond grade equivalent scores will bolster your argument for subject acceleration in the eyes of the school officials.
