Employes of the Department of Housing and Urban Development had long lamented the drab walls of their basement training rooms, painted in institutional neutrals. But with little money to spend on decorating, their only option was to call in the General Services Administration for another coat of the same.

To the rescue, with vividly colored murals and paintings, came students from Sign of the Times, the first and only arts organization in the District's far Northeast.

Sign of the Times is a nonprofit organization that operates workshops year-round in the visual, performing and commercial arts for Ward 7 residents, and special summer sessions for students.

The organization, founded 14 years ago by artist James Gregg, has taught more than 5,000 students in workshops at its headquarters, 605 56th St. NE, in Northeast public schools and at the Lansburgh Cultural Center downtown.

During the last two summers, Sign of the Times has sent its students into the HUD building to spruce up the gloomy quarters of its Office of Training.

"You have no idea how it's brightened things up," said office director Gail Lively. "People come from all over the department to see the students' work."

Artist and teacher Merry Weiss, who supervises the students, said she thinks the project at HUD is so simple and beneficial to both organizations that she is amazed the bureaucracy approved it, though she hopes it sets a precedent.

"There's a lot of ways the two communities art and government can work together, but it hardly ever happens," Weiss said.

The HUD decorating scheme was the brainchild of Darryll Jamison, a former Sign of the Times student who worked for HUD in the summer of 1982 as a clerk.

On Jamison's suggestion, Weiss and Gregg seized the opportunity to bring art students and sketches to HUD. Department officials selected a soft, abstract mural proposed by Mike Monroe. They were so pleased with the finished work that they offered Monroe a job as an art consultant, helping to design brochures and other materials for the Office of Training.

Monroe, 20, a Howard University student, works full time at HUD during the summer and part time during the school year.

Of about 45 students in each summer session, six worked at HUD last year, and two this year. Carlos Day Jr., 18, completed a mural that is scheduled to be unveiled Friday at the HUD building, Seventh and D streets SW.

HUD asked the other student artist, Vicky Thompson, 23, to make a painting instead of the dramatic mural she proposed--a design of stark green and purple lightning-bolt-shaped lines.

"They felt my colors were a little too vivid for a whole wall," Thompson said.

HUD supplied the paint and other materials. Lively said the total price tag was probably less than it would have cost to have GSA decorate the walls.

Other Sign of the Times summer students are finishing an outdoor mural near the group's headquarters at 605 56th St. NE, including two portraits by Marc Strong, 19. Strong also worked with Antonio Lattimore, 17, and Calvin Lee, 18, on two murals at the Lansburgh Cultural Center, Seventh and E streets NW, where the organization keeps a studio and offers year-round workshops for Northeast residents who work downtown.

Some of the summer students work as volunteers, while others were paid minimum wages by Arts D.C., an organization that helps to place young people interested in the arts in positions with nonprofit art programs.

Arts D.C. is a joint project of the D.C. Commission on Arts and Humanities, and the United Labor Agency. It also receives funding from the D.C. Department of Employment Services, to help place youths in arts-related summer work. Arts D.C. has placed youths in summer positions at Sign of the Times, one of 57 work sites for the Mayor's Summer Youth Employment program of DES.

Arts D.C. selects students for Sign of the Times positions according to financial need, talent and dedication. They usually are required to have a portfolio of their work or some training, though Arts D.C. sometimes makes exceptions.

Sign of the Times pays for supplies and teachers' salaries with grants they receive from government, nonprofit and commercial organizations including Hechinger hardware stores, the National Endowment for the Arts and the United Black Fund. "We have to go shopping for supporters every year," Gregg said.

Keeping Sign of the Times alive has been a 14-year struggle, one won by the sheer determination and survival instincts of Gregg and the art world at large, according to Weiss, who has worked with the organization six summers. She teaches part time during the school year at the Corcoran Gallery of Art's children's program.

Weiss said many of her Corcoran students are from wealthy, influential families for whom museum trips, art lessons and supplies are part of growing up. In contrast, many of Sign's students had to learn about art in stolen moments with pencils and scrap paper, she said, and, consequently, only the truly dedicated ones stick with it.

"It was a compulsion, an itch," said Monroe, who always wanted to be an artist. "I was always doodling. Then you start picking up on what others are doing and it just becomes a part of you."

"Out here we can't afford the luxury of art for art's sake," Gregg said. "We're trying to expand these young people's worlds and prepare them to compete."