MODFE, a modular finite-element model for simulating steady- or unsteady-state, area1 or axisymmetric flow of ground water in a heterogeneous anisotropic aquifer is documented in a three-part series of reports. In this report, part 2, the finite-element equations are derived by minimizing a functional of the difference between the true and approximate hydraulic head, which produces equations that are equivalent to those obtained by either classical variational or Galerkin techniques. Spatial finite elements are triangular with linear basis functions, and temporal finite elements are one dimensional with linear basis functions. Physical processes that can be represented by the model include (1) confined flow, unconfined flow (using the Dupuit approximation), or a combination of both; (2) leakage through either rigid or elastic confining units; (3) specified recharge or discharge at points, along lines, or areally; (4) flow across specified-flow, specified-head, or head-dependent boundaries; (5) decrease of aquifer thickness to zero under extreme water-table decline and increase of aquifer thickness from zero as the water table rises; and (6) head-dependent fluxes from springs, drainage wells, leakage across riverbeds or confining units combined with aquifer dewatering, and evapotranspiration. The matrix equations produced by the finite-element method are solved by the direct symmetric-Doolittle method or the iterative modified incomplete-Cholesky conjugate-gradient method. The direct method can be efficient for small- to medium-sized problems (less than about 500 nodes), and the iterative method is generally more efficient for larger-sized problems. Comparison of finite-element solutions with analytical solutions for five example problems demonstrates that the finite-element model can yield accurate solutions to ground-water flow problems.