The D.C. Department of Human Resources, the city government's largest employer, has made "a sham" of its own guidelines against favoritism in hiring and allowed suspended DHR director Joseph P. Yeldell to run his own employment system for persons who applied to him directly, the D.C. auditor reported yesterday.

In a a strongly-worded but sometimes loosely documented report, D.C. Auditor Matthew Watson said there was "a lack of administrative will to insure" that persons in DHR's 10,000-employee department were not hired and promoted partially on the basis of favoritism.

Watson asked that until the city can establish its own personnel system, DHR be stripped of its authority to hire without approval form someone outside of the massive agency and the city personnel department.

"Regardless of the provisions of a future independent merit system," Watson said, "its implementation will be made more difficult, if not impossible, with the current state of DHR personnel practices."

Watson's conclusions yesterday were nearly identical to those he reported more than two weeks ago in draft reports on the auditor's investigations of hiring and promotional practices in the troubled health and social services agency.

The auditor's findings also included a report on the hiring last year of Yeldell's wife, Gladys, by the city's personnel department. Watson, who had earlier said he had "documentary evidence" to indicate that Mrs. Yeldell was given preferential treatment, yesterday said only that the evidence surrounding her hiring was "conflicting."

"In light of the conflicting evidence, I cannot determine with certainty whether there was preselection of Mrs. Yeldell for a position in the personnel office," Watson said. "However, strong evidence . . . suggests preselection."

The auditor's report was the latest in a series of fact-finding disclosures from six separate investigations into alleged hiring, leasing and contracting abuses in DHR.

Yesterday's disclosure before the City Council drew sharp criticism from Council members of some of Watson's methods and findings as well as a pointed attack on and a call for a boycott of the city's daily newspapers, which first made the allegations nearly 11 weeks ago.

"It's a case of two kettles (The Washington Post and the Washington Star) calling the skillet black," said Jerry A. Moore (R-at lareg), saying that the papers' allegations against the city government were the result of a feud between similarly "imperfect institutions."

Moore called the string of accusations of mismanagement and misconduct in DHR a "witch hunt for the sole purose of crucifixion of individuals that some folks don't happen to like.

"They pounce upon the week, the defenseless, a fledging government," Moore said." If I had my way, i would say to every subscriber of the Star and every subscriber of the Post to stop their subscriptions tomorrow morning."

Despite the strong wording of Watson's reports, they have done little to clear the uncertainty about whether several DHR hirings reported by the newspapers were clearly right or wrong under the city's personnel system.

The mayor's Office of Municipal Audit and Inspection released a report Jan. 11 saying that Yeldell "may have" improperly helped two relatives obtain jobs in his department, but deferred to be D.C. Corporation Counsel's Office to determine any wrongdoing. That determination is expected this week. The same office issued another report Jan. 24 flatly saying there was nothing improper in Mrs. Yeldell's hiring.

Watson's report yesterday, which was based primarily on unsworn statements, found several things that appeared to leave unanswered questions about Mrs. Yeldell's hiring and to suggest favoritism. However, when pressed by Council member David A. Clarke (D-one), Watson said, "There has not been a showing beyond a reasonable doubt" of favoritism in the hiring of Mrs. Heldell.

The question of impropriety in the Nov. 9, 1976, hiring of Mrs. Yeldell as a GS-9 programs analyst in the city's personnel department revoled primarily around a meeting she had Oct. 19 with George R. Harrod, the city's personnel director.

Shortly after that meeting, Watson said, Mrs. Yeldell wrote a letter of resignation from Washington Technical Institute, where she had been working, saying she was going to accept a job in the D.C. personnel department. The job Mrs. Yeldell was given was not advertised until two weeks later. Thus, it appeared to Watson that she had been promised the job in the meeting with Harrod, before the opening was announced.

Watson cited statements allegedly made by Mr. Yeldell to her former supervisor indicating that she may have been given a job commitment. However, in a sworn affidavit taken by Yeldell's lawyers, the supervised - Calvin C. Hughes - later reserved the testimony he had given voluntarily on five other occasions and said Mrs. Yeldell gave him no indication that she had been promised the job or knew how it was to be financed.

Both Harrod and Mrs. Yeldell denied that any commitment had been made at the Oct. 19 meeting.

Watson's criticisms of DHR's personnel practices were based on alleged-lack of adherence of the agency's own merit system, which was adopted in April, 1975. In violation of the merit plan, Watson said, DHR hires many persons in temporary positions that are later made permanent without competition.

The agency also does not follow antifavoritism guidelines set forth in a widely used promotion system in DHR, Watson said. Watson repeated earlier findings that there were four individual hirings in which Yeldell was involved that appeared to be improper. In three other cases, Watson said, DHR employees mentioned in news reports did not appear to have adequate qualifications for their jobs.

Watson recommended that the mayor convene employee disciplinary hearings to determine if there were any wrongdoing in all of the cases cited and to impose penalties if any personnel regulations had been violated.

A spokesman for Mayor Walter E. Washington said late yesterday, however, that no such public hearings would be undertaken "at this point."