Those formula grants were designed to distribute Federal financial assistance to States and local government agencies in the juvenile justice arena; however, receipt of the formula grant money was conditioned on compliance with three substantive mandates by dates specified in the Act. One of the them, the focus of this article, was the deinstitutionalization of status offenders (DSO). This analysis explores the extent to which and how the formula grant program operates in a quasi-regulatory mode, and whether Federal grant requirements have overly restricted State flexibility in achieving the statutory mandates. The authors conclude that some of the amendments to the Act demonstrate Congressional willingness to give States maximum flexibility in meeting the Act's goals. 15 notes, 20 references, and 1 figure