The D.C. Department of Employment Services, saying it is pinched for office space but not for money, is spending nearly $2,400 to rent 10 rooms on the top floor of the Harambee House hotel for department employes to use while reviewing job-training proposals.

City officials said yesterday they were unable to find sufficient space in city facilities. They said the money, $2,384, comes from federal grant funds and could not be used to help bail the District out of its current financial crisis -- which has led to more than 400 scheduled layoffs, massive program cuts and higher taxes.

About 30 department employes are using the rooms and two conference rooms on another floor to review contract proposals from private groups seeking funds under the federal Comprehensive Employment and Training Act (CETA) program.

In previous years the review of proposals has been done in regular Employment Services offices, Officials said. But this time, private space was rented.

"There are certain functions that require this kind of intense -- exclusive, you might say -- study and review which cannot be carried out in the normal confines of work," department spokesman Adolph J. Slaughter said.

Slaughter said that the hotel money was part of a federal grant that could only be spent by the city to administer the CETA program. However, he conceded that the funds could have been used for the CETA program expenses or to pay the salaries of people who administer the program.

Employment Services Director William R. Ford said his agency "doesn't have room. We're right now bursting at the seams." The department has its main offices at 500 C St. NW and other offices at 605 G. St. NW in addition to several field offices scattered throughout the city.

Ford said that employes at the hotel were grouped together to process the proposals and could thereby move them thrhough the review process more quickly than in the department's regular offices.

A U.S. Labor Department official involved in the CETA program said yesterday he was uncertain whether renting the rooms was a legal use of CETA administrative funds. But the official said, the choice of hotel "seems like a poor idea."

The District government spends about $13.8 million a year to lease private space in 134 buildings and other open spaces for parking and storage, according to city officials.

In addition, many city agencies use available space in the city's schools for temporary storage or to carry out various programs such as immunization campaigns, voting and employe conferences.

City Administrator Elijah B. Rogers said yesterday that the department had sought sufficient space on city property, including D.C. Village, the city's home for the elderly in far Southeast Washington. But none could be found, Rogers said.

Ford then decided to rent space at the hotel. "Bill Ford made a management decision and I supported it," Rogers said.

In addition to the guest rooms, which have earth-tone painted walls, color television sets, carpeting and in-room steam baths, the department also rented two conference rooms on the third floor for five days as part of the package. City officials said the rooms are being used only during regular working hours.

Slaghter said the employes expect to be at the hotel at 2225 Geogria Ave. NW only through today, but may have to return next week. He said, "It's not a public meeting. It's a closed meeting. We feel the reasons are perfectly valid, and that is our determination to make."

The 30 employes are pondering about 100 proposals from various private organizations to receive part of the $40 million in job-training funds that the District will give out for the fiscal year beginning Oct. 1.

A clerk at the hotel said the rooms usually rent for $61 a night. Ford said Wednesday the prices were "the cheapest hotel cost in the city." The city is renting the 12 rooms as a package deal.

For the past several months, the District government has been negotiating through the D.C. Development Corporation for a possible purchase with the private owners of the 156-room hotel to rescue it from bankruptcy.

The hotel's management has been partially taken over by the federal Commerce Department's Economic Development Administration, which has already written of $6.5 million in investment loans to the corporation and still has a $4.5 million loan that it hopes recoup through sale of the property.