The U.S. Department of Labor decided yesterday to complete the funding of a $1.5 million contract to Youth Pride, Inc., on the condition that the District of Columbia impose stringent requirements on the self-help group.

Among these requirements is the posting of a federal monitor to oversee administrative procedures of Youth Pride headquarters. The Labor Department would pay for this. Youth Pride also would be required to deposit the grant funds in a separate bank account and to report its expenditures monthly.

The demands were presented in a letter from James L. Whitsett, the Labor Department's regional grant officer, to D.C. Labor Department director William R. Ford.

Ford said he had not yet received the letter, which was dated yesterday and was hand-delivered from Whitsett's office in Philadelphia to Ford's office, according to a U.S. Labor Department source.

The requirements were imposed following a federally-ordered audit of Youth Pride's records for the first three months of the current fiscal year. The audit was conducted by the accounting firm of Jack Martin and Co.

"While that audit did not disclose significant problems of the sort which would require us to terminate the grant," the Whitsett letter stated, "it did evidence areas of concern with respect to administrative procedures and controls."

To date, according to U.S. Labor Department figures, Youth Pride has received $895,517. The remaining $604,483 is to be paid to Youth Pride on a month-to-month basis, if the organization and the D.C. Labor Department meet the federal requirements.

The contract covers a Labor Department experiment known as the Mixed Income Program. Conducted in four other locations in the country, it is a $6 million effort to determine whether poor youngsters benefit from undergoing training alongside youngsters from higher income families.

The letter said that the Labor Department considered Youth Pride's operation of the program "successful and beneficial for the youth involved." About 400 youngsters are in the program.

Youth Pride, which was chosen to conduct the program here, is a self-help organization founded in 1967 by now-Mayor Marion Barry, his former wife, Mary Treadwell, Carroll B. Harvey, who now is director of the D.C. Department of General Services, and several other onetime black activists.

In December, the Labor Department suspended payment of most federal funds to Youth Pride following publication of articles in The Washington Post two months earlier detailing the theft of at least $600,000 from the U.S. Department of Housing and Urban Development and low-income tenants by P.I. Properties Inc., a real estate spinoff of Youth Pride, Inc.

Both firms are headed by Mary Treadwell. She had denied any wrong-doing.

The articles had prompted a continuing federal grand jury investigation of all Pride-related enterprises, including P.I. Properties and Youth Pride.

The U.S. Department of Labor has granted $21 million to Youth Pride since it began providing job training for disadvantaged youths in 1967. Since 1974, the D.C. government has been responsible for the disbursement and monitoring of federal funds to local organizations like Youth Pride.

The recent Jack Martin audit questioned $20,000 in Youth Pride expenditures. Auditors found that some were not substantiated by receipts, others were for costs not related to the program and still other expenditures exceeded the maximum amount allowed by the D.C. government.

The U.S. Department of Labor asked for Ford yesterday to resolve these expenditures.

Federal audits over the years repeatedly have criticized Youth Pride's accounting procedures. Treadwell has said that it is hard to kepp good staff at the wages she is allowed to pay. Local labor officials have said Pride's accounting procedures should not be expected to be as refined as those of major businesses.

Until the recent audit, no Youth Pride contract has been audited since 1976. The Martin firm currently is auditing all other contracts signed with Pride since then, and is expected to finish those audits by June.