The General Accounting Office (GAO) examined the allocation of vocational rehabilitation (VR) funds to determine whether and how states are prioritizing VR services to individuals with the most severe disabilities through the order-of-selection procedure mandated in the Rehabilitation Act of 1973. GAO visited VR agencies in 20 states and analyzed national caseload statistics from two Rehabilitation Services Administration (RSA) databases. Eleven of the 20 states had never used the order-of-selection procedure; however, many used caseload management techniques (including reducing outreach efforts) to limit applicants when resources to serve additional clients are unavailable. Overall, the caseload percentage of clients with severe disabilities among the nine order-of-selection states was substantially higher than among all other states. It was concluded that the RSA has provided inadequate guidance and oversight with respect to order of selection. It was recommended that the RSA take the following steps: establish clearer criteria for determining if/when states must use order-of-selection procedures; disseminate information on states' successful order-of-selection experience; and direct regional offices to review state determinations regarding the need to implement the procedure and enforce its use. (Appended are the following: caseload data analysis methodology, comments from the Department of Education, and a list of major contributors to the report.) (MN)