FUNDS PROVIDED BY LEAA FOR JUVENILE GROUP HOMES HAVE OFTEN BEEN IN THE FORM OF 'SEED' MONEY; THAT IS, THE FUNDS ARE ALLOTTED IN ORDER TO HELP INITIATE AND SET UP GROUP HOMES, AND THEN ARE GRADUALLY REDUCED AND CUT OFF. IN ORDER TO EXAMINE THIS TRANSITION, RESEARCHERS PERUSED THE EVALUATION PAPERS OF 60 GROUP HOMES IN 39 STATES AND PREPARED A QUESTIONNAIRE WHICH WAS SENT TO 55 STATE PLANNING AGENCIES. DATA GLEANED FROM THE 20 RESPONSES WERE ANALYZED, AND THEY REVEAL THAT MANY STATES' HOMES WERE EXPERIENCING CRISES DURING THIS TRANSITION STAGE DUE TO LACK OF REVENUE, WHILE OTHER STATES' HOMES MADE SUCCESSFUL TRANSITIONS. ALL 340 GROUP HOMES EXISTING IN THE 20 RESPONDING STATES WERE STARTED WITH LEAA FUNDS, 89 PERCENT WERE STILL OPERATING IN 1978, AND THE MAJORITY OF HOMES NO LONGER OPERATING HAD CLOSED BECAUSE OF FINANCIAL PROBLEMS. BASED ON THE SURVEY DATA, THE SUCCESS RATE FOR GROUP HOME SURVIVAL AFTER CESSATION OF FEDERAL FUNDS WAS 38 PERCENT. STATE AND LOCAL SUPPORT TENDED TO STEM FROM COMPREHENSIVE EMPLOYMENT AND TRAINING ACT, TITLE 20, STATE WELFARE, AND LOCAL GOVERNMENT FUNDS AND COURT BUDGETS. IT IS CONCLUDED THAT THE USE OF 'SEED' MONEY IS EFFECTIVE AND, OVERALL, THE TRANSITION FROM FEDERAL TO STATE AND LOCAL FUNDING SOURCES HAS BEEN SUCCESSFUL. NOTES ARE PROVIDED. (DAG)