The Montgomery County Council, in its first public pronouncement on allegations - now before a county grand jury - that Police Chief Robert diGrazia has mismanaged his department, said yesterday it "would conduct no further inquiry into the matter."

The council decision came after its Office of Legislative Oversight, which acts as a watchdog agency of the council, completed an evaluation of a citizen group's allegations against the department and diGrazia's response.

The evaluation done by director Andrew Mansinne Jr., found that there "have been procedural violations, administrative errors and misrepresentations on the part of the department" in processing some consultant's contracts.

Mansinne concluded that the chief of police "has broad authority to run his department. The exercise of a particular philosophy and management style may be subject to questioning, and even criticism, but it does not in itself constitute mismanagement."

The department, in its response the allegations, had acknowledged some procedural violations and administrative errors. But a spokesman for diGrazia said yesterday that he "does not understand what Mansinne means by 'misrepresentations.'"

The council action was sparked by the allegations of a group called Code 3 - police terminology for a "serious crime in progress" - headed by the wife of a county police officer.

DiGrazia asserted last month that his administration has been virtually paralyzed by his efforts to clear himself of the allegations.

Code 3 has charged that under diGrazia violent crime has increased, officers are insufficiently backed up in emergencies, and there are too few patrol officers. The group also charged that civilians have been hired for jobs that career police officers could perform better, that money was wrongly spent for travel and training expenditures, contracts were improperly awarded, and a petty cash fund was not properly accounted for.

DiGrazia has maintained that he has done nothing illegal, and that Code 3's allegations stem from a philosophical dispute over his methods of policing. These methods have also drawn criticism from within the department, particularly from the Montgomery County chapter of the Fraternal Order of Police which last summer voted "no confidence" in the chief. The FOP cited "frustration and dissatisfaction" with his leadership.

The FBI, the Governor's Commission on Law Enforcement and the Administration of Justice, the Law Enforcement Assistance Administration and the county's auditing department have looked into the allegations and have found no criminal violations.

Mansinne stressed in his memorandum to the County Council that he had evaluated the police department's explanations only to determine if they were "responsive" to the Code 3 allegations, but did not conduct an investigation to verify their accuracy.

Mansinne had previously said the department's initial responses were "inadequate and unresponsive."