The National Endowment for the Arts has failed in an attempt to close another chapter of last year's controversy over federal funding of the arts by stating that it will let courts decide whether any grant money awarded in 1990 was spent to create "obscene" works.

In an internal memo dated Feb. 8, NEA Chairman John Frohnmayer notified endowment staff that 1991 legislation leaving obscenity determinations to the courts would be applied retroactively. But Frohnmayer did not drop a controversial requirement that grant recipients certify they would not create obscene works.

For 1990 grants, "the Endowment will rely on a court of law to determine if work is obscene," Frohnmayer said. After a conviction and exhaustion of appeals, the endowment will seek to recoup its money.

Last year, the endowment required grant recipients to sign a controversial certification that they would not use federal money to create works that the NEA might find obscene. The endowment incorporated into its guidelines language that had been included in the NEA's fiscal 1990 appropriation. Specifically, the legislation prohibited used of grant money for work that might be obscene, including "depictions of sadomasochism, homoeroticism, {or} the sexual exploitation of children."

Many artists deleted the pledge or refused to sign it; a few filed suits challenging the constitutionality of the requirement. Choreographer Bella Lewitzky and the Newport Harbor Art Museum won a ruling in federal court in California last month that the pledge was unconstitutional. A similar case by the New School for Social Research is pending in federal court in New York.

In his memo, Frohnmayer said grant applicants who sign the pledge of compliance with the 1990 law "are simply agreeing to abide by their local criminal obscenity and child pornography laws." He wrote that he made the change "in large measure because it is my belief that it is time for all of us to move forward in the spirit of renewal ... to continue to do what the National Endowment for the Arts does best -- fostering the best art that our diverse national community can manifest."

But Frohnmayer did not delete from the agency's guidelines the fiscal 1990 legislative language on obscenity. As long as that language remains, the New School will not drop its suit, said attorney Floyd Abrams.

Abrams said Frohnmayer "loses yet another opportunity to put all this unnecessary controversy behind him." Abrams said he will argue in court that 1990 grant recipients cannot rely on Frohnmayer's latest decision to let the courts apply obscenity law. The endowment is "absolutely free to issue a new memo tomorrow, or a new statement of policy ... and based on their conduct in this case, there is every reason to expect that they will do so," Abrams said.

Elliot Mincberg of People for the American Way, which represented Lewitzky, said Frohnmayer's interpretation of the law "is a step toward resolving this controversy." But he added, "I find it very difficult to understand why they continue to insist on ... having people sign this oath... . Why we're seeing only these halting steps forward, I don't know." He said he believes the California court ruling means his client does not have to sign the obscenity pledge.

The NEA declined to comment yesterday on Frohnmayer's memo or to say whether it intends to appeal the California decision. Such a filing would be due next month.