Despite the fact that funding for Title I continues to grow, and the program is now the major funding arm of "No Child Left Behind", the research reported here indicates that funds are not always spent in a way likely to accomplish the purposes of the legislation. In most urban districts a systematic bias is built into the district allocation patterns, a bias that supports disproportionate funding for schools in the more affluent neighborhoods. Title I funds, intended to augment spending for poor children, are used instead to bring spending in poverty neighborhood schools up to parity with other district schools. Moreover, a portion of Title funds, intended for students in schools with the highest poverty levels, are diverted to schools in the wealthiest district neighborhoods. The problem is two-fold: First, district funds-allocation practices are so murky and complex that it is difficult to determine how much money is spent at any individual school. The assumption that non-categorical funds are spent equitably is incorrect. Second, the spirit of the law--that these federal funds are used only to augment services for disadvantaged students--is easily broken. This is true even when school administrators are committed to the intent of the law and make every effort to follow it to the letter. This report discusses the following topics: (1) How Title I Funding Is Supposed to Work; (2) How Funds Are Allocated in Practice; (3) District Budget Practices Favor Some Schools over Others; (4) Salary Averaging Might Funnel Title I Money to Schools in Wealthier Neighborhoods; (5) Actual Spending vs. Legislative Intent; and (6) Implications. (Contains 19 footnotes.) [Report written with Larry Miller and Paul Hill.]