It was the kind of place that nobody missed.

Especially the federal government, which turned over $279,000 of the tax-payers' money for the project and never even knew that it collapesed-literally.

The story begins in 1975, when the Department of Housing and Urban Development approved $100,000 in spending for a community center in rural Merrill Township, Michigan, half-way between two small communities. The Commerce Department's Economic Development Administration added another $179, 000 for a never-completed road to the complex.

There was a groundbreaking ceremony in April 1976 but the completed building never was used. It was unpainted, unlandscaped and unfurnished. Apparently, it was forgotten.

Rediscovery occurred last Washington's birthday, when a woodsman found a collapsed structure, apparently the victim of heavy snow. He reported it to a local postmaster who called a sheriff and township supervisor, who relayed the news to HUD's office in Detroit.

Enter Sen. William Proxmire (D-Wis.), whose reputation has been constructed partly from uncovering government misdeeds. You guessed it-the HUD and EDA largesse yesterday won Proxmire's uncoveted "Golden Fleece of the Month" award for April.

Proxmire called it a "tragedy of errors" and added that "virtually everyone" is shunning responsibility for the fiasco. HUD didn't know that in order to serve two small towns, a center had to be built at a secluded site in a virtually inaccessible forest. EDA didn't know that highway funds it turned over were not sufficient to complete the road or that a railroad easement was needed.

"Nevertheless, this unused community center built on a site in the middle of nowhere, inaccessible by public roads, collapsed without anyone knowing it after the expenditure of $279,000 of public funds and four years of time and efforts . . . mindless funding and lack of oversight," Proxmire charged yesterday.

James Ware, township supervisor in Bitely, Mich., was just as cutting as Proxmire. The decision to build had been by a "darn fool" predecessor administration, he told the Associated Press yesterday. And the building cost $40,000 more that the U.S. taxpayers paid, which the township still owes.

HUD claimed that its monitoring and auditing reports assured them that the project was all right and that last month a letter had arrived, indicating that a state inspector had certified construction deficiencies.

At EDA - the agency recently selected by President Carter to become the focal point of U.S. spending for local economic development - an official expressed "regret" at what happened but noted that a major goal of such spending-providing local jobs in a depressed era-was met.

The money was spent in 1975 to counter depressed regional employment and a sharp downturn in construction activity. Altogether, some $4 billion went to 8,500 projects-with virtually all of the decision-making on how to spend the funds left to local governments.

Embarrassed HUD and EDA officials said yesterday that while there is never an excuse for wasting taxpayers' money, the cost to the government would have been far greater had it got involved in every local decision on spending.

Finally, the story has an ending. The road apparently can be used. It provides a secluded path into the forest, ending at the rubble of what was to be a center for counseling, food stamp distribution, literacy classes and job training. CAPTION: Illustration, no caption, By William Coulter for The Washington Post