The 1976 Vocational Education Act set up procedures governing the flow of funds from the federal government to the states and from the states to the localities; and it establishes priorities for distribution of funds. The Act also demands that money be spent only on the programs or activites mentioned in the Act and that certain minimum proportions of federal grants are to be spent in providing training for the handicapped, the disadvantaged, and those with limited knowledge of English. This study was conducted to determine how well these mandates are being met. Data were collected from the Vocational Education Data System (VEDS) and from various state, local, and federal government reports. Findings included the following: (1) The formula specified by the Act for distributing VEA funds to the states does not target funds effectively; it directs more funds to southern and western states with relatively low rates of unemployment. (2) There is no systematic relationship between the distribution of funds within states and factors specified by Congress for determining the distribution of funds. (3) Even when states satisfied the instructions to concentrate resources in school districts with particular characteristics, the degree to which they met these requirements varied greatly. (4) Funding for targeted populations rarely exceeded mandated minimum levels and sometimes did not meet minimums. In general, it was found that federal vocational education law is ambiguous and ineffectively administered; has ineffective matching requirements; requires excessive data collection and reporting; and is inadequately coordinated with other federal education policies. (KC)