The administration of the Pell Grant program by proprietary schools was assessed with a randomly selected sample of 35 schools from a universe of 1,165 schools. In addition to evaluating records of 761 students, officials who administered the program were interviewed. The following practices by schools did not comply with the Pell program requirements: (1) admitting unqualified students who had a greater tendency to drop out of school before completing their training than did qualified students; (2) not establishing and/or enforcing academic progress standards; (3) misrepresenting themselves to prospective students; and (4) making errors in computing and disbursing Pell Grant awards and refunds. It was found that about 83 percent of the schools failed to consistently enforce academic progress standards. Estimates by the General Accounting Office indicate that: 27,100 students were allowed to remain in school despite making little academic progress, and while receiving $68 million in federal assistance; 766 of the 1,165 schools in the universe had misrepresented themselves to varying degrees in recruitment; and 433 schools had computed some Pell Grant awards incorrectly. Appendices include the response of the Department of Education to this report and information on the study methodology. (SW)