When Donald Graham won national recognition last month as an exemplary school principal, more than 200 jubilant parents, teachers and students from his Rockville school cheered him at a school reception. But another group of parents shunned the event, saying the award would detract from their efforts to focus attention on what they see as fundamental problems with the school, they said last week.

Last month Graham, the principal at Candlewood Elementary School, was one of 54 principals honored with the National Distinguished Principal's Award. The recognition has inflamed an already stewing battle between his supporters and his critics and further divided the community, which is normally active in school issues.

"We have people who are very hurt and discouraged that other people are not willing to admit to problems, they are willing to ignore them," said Trish Olin, who did not let her son attend the event. "It is just reinforcing and acknowledging this award and I just can't do that."

"There's a cautiousness in the community now," said Joan Collins, a past president of the PTA who supported Graham's nomination. She called the controversy a "petty, vindictive thing" that has "polarized" people and resulted in some "nasty PTA meetings."

"We have a good school with children learning, with teachers who care . . . . The principal sets that tone," Collins said.

Some parents said they have taken their children out of school or are considering removing their children because they disapproved of Graham's administration, citing ineffectiveness and academic standards they find mediocre. A survey by the Education Committee of the PTA, of parents who have withdrawn children from the school or who chose not to send them there, found that "dissatisfaction with the general leadership qualities of the principal was a significant factor to some of the parents surveyed."

Of the 46 households surveyed last summer, representing 75 children withdrawn or withheld from Candlewood in the past six years, nine households said discontent with the principal had led to their decision. Thirty-two families cited poor academic quality and 26 cited discipline problems.

The number of students who left Candlewood for private schools or other public schools is not unusual in comparison to other schools in the area. Twenty-seven students left the school last year. The average among the 30 elementary school in that area of the county was also 27, according to school system figures.

Graham, who has been principal at the 380-student school for six years, rejected the survey's findings. "I think I have provided the leadership," he said. "I'm not saying I'm perfect."

Graham said he used the survey to identify and begin to resolve some of the parents' concerns. But, he added, "You're not going please everybody every time."

In an earlier interview, Graham said he was given the award because he represented principals. "I don't see myself as outstanding," he said. There are a small number of parents who "are really not satisfied. They are trying to get rid of me for some reason," he said. "They think things should be run differently."

Assistant Superintendent Harry Pitt said he would not comment on the matter except to say the PTA committee's report was "not very informative and not helpful."

The award to principals was presented for the first time last month by the National Association of Elementary School Principals, the U.S. Department of Education and the Tandy Corp.

"The criteria . . . makes you think these people walk on water. Donald Graham is far from a water-walker," said Gary Ellis, president of the Candlewood PTA and father of a fourth-grade Candlewood student. "This throws into question the whole question of the authenticity of the awards."

The survey pitted the 25 members of the PTA executive committee against one another, and the disagreements over the way the school was run have been brought out into the open during some "tense" meetings, according to executive board members. Graham's award, which critics said was kept a secret from them by school system administration officials who they approached with their complaints last spring, reignited the disagreements.

"They took advantage of it, threw it in our face," said Olin of the school celebrations following the award announcement.

"School officials obviously knew this award was in the works," Ellis said. "At no time did they ever say, 'We think you are off base; we think he's outstanding and this is why.' They gave us lip service."

Roberta D'Oyen, a parent of a student at Candlewood and a recent finalist in the school board's search to fill a vacancy on the board, said she intended to take her child out of school in the coming month because the school staff expected too little of students. She blamed Graham for not insisting that teachers assign more homework.

"What I am upset about is that the principal is not distinguished," she said. "It's sort of sad. He's a nice guy. But nice guys don't always make good administrators."

The controversy over Graham's nomination for the award has prompted the Maryland Association of Elementary School Board Principals to reexamine its selection process. An official, although supportive of Graham as a choice, said recently the selection was made in haste.

Al Gatis, executive director of the Maryland Association of Elementary School Principals, said Graham was the only Maryland candidate considered because the committee had "only two months" to find a principal. The association was solely responsible for nominating a principal for the national award following a broad national criterion.

"We weren't picking the best [principals], but a representative of the principals," said Sam Sava, executive director of the national association. "There are so many good principals in the state that to say one is better than the other" would be unfair. He said the award was meant to attract attention to elementary schools, the needs of which have been upstaged by secondary school needs in recent years.