A former Transportation Department employee accused of stealing and spending $850,000 in government funds was released again on bond yesterday despite government allegations that he is continuing to spend money while claiming in court that he is a pauper.

William C. Sibert, 30, who said in previous court hearings that all of his assets have been frozen by government civil suits, has in the last three weeks spent $1,000 on two used cars, has been paying cash for motel rooms in which he has been living and has attempted to sell a $1,000 videotape machine he allegedly bought with stolen funds, according to government agents.

U.S. Magistrate Jean F. Dwyer said she was "concerned" about Sibert's activities and his alleged access to cash, but said she would reinstate an earlier unsecured bond of $50,000. That bond requires no desposit or collateral by Sibert, but merely his promise to pay the government $50,000 if he fails to show for court appearances.

However, Dwyer set strict conditions on the bond. They require Sibert to report personally to her office weekly, put in writing his agreement to help the government account for missing funds, provide an accounting of materials he has supposedly removed from his house and undergo psychiatric examination.

Sibert's trip through the court system began in early August when he was arrested in Las Vegas, Nev., with $59,000 in cash.

A quick investigation by the Secret Service and the FBI ended with charges that Sibert had embezzled $850,000 in federal grant money that supposedly was being sent to the Atlanta subway system and had spent it lavishly on items such as 14 cars, a house with a swimming pool and a topless bar.

Sibert remained in jail for about 10 days before being released on the $50,000 unsecured bond by U.S. Magistrate Henry H. Kennedy Jr. He promised at that time that he would live with his parents and return for court appearances. Although not a condition of his release, Sibert promised at that hearing to help the government account for the missing money and swore that he could afford to pay an attorney.

Around the same time, the Justice Department obtained a court order freezing Sibert's assets and blocking his access to property and material he allegedly purchased with stolen funds.

Assistant U.S. Attorney Brian Shaughnessy of the fraud division said yesterday that since that court order. Sibert has bought two used cars - a Thunder-bird and a Pontiac station wagon - for $1,000, has lived in motels instead of with his parents and has gone to the home he allegedly purchased with stolen funds and removed goods from it.

At one point, Shaughnessy said, Sibert reportedly told an FBI agent that he had purchased three cars, but would not tell the FBI where they were because he wanted the agency to "do it own leg-work."

In asking for a high bond, Shaughnessy said Sibert has "misled the court," and had shown "an utter lack of good faith."

Sibert also paid a $400 advance on a new apartment, and had told a friend she was "foolish" for returning to the government $2,500 in allegedly stolen funds she had been given by Sibert, Shaughnessy added.

Sibert was indicted by a grand jury Friday, and picked up on an arrest warrant Sunday. The arrest warrant was issued after the government told a federal judge Friday that Sibert was believed to be liquidating some of his assets.

Defense Attorney Ed Wilhite said that Sibert case was a complex matter and tht the problems since his release have been more a matter of confusion and misunderstanding than an attempt to misled the court.

Wilhite said Sibert had money available from "miscellaneous sources" unrelated to his alleged embezzlement, that he now held a job at an auto shop and that his wife had reportedly been paid $300 for an interview by a national tabloid newspaper.

Sibert moved out of his parents' home because of a "conflict in the family," Wilhite added. He said his client had kept the bail agency informed of his whereabouts.

Dwyer said she would hold another hearing in the next two weeks to determine if Sibert is still eligible for court appointed counsel Sibert, who pleaded innocent here yesterday to the indictment in the fraud scheme is scheduled for arrangement today in federal court in Virginia on a year-old unrelated gun possession charge.