Mayor Marion Barry said yesterday he wouldn't rule out disciplining or firing Assistant Treasurer Fred Williams, who drafted and backdated a memorandum submitted to the D.C. City Council to justify a decision to begin investing with a firm that later went bankrupt.

Barry conceded, under questioning by reporters, that he had no way of knowing whether Williams was telling the truth when he said the document is a transcription of notes Williams made Dec. 7 when he and other officials decided to invest with Bevill, Bresler & Schulman Inc.

"I'm not sure," Barry said at his monthly news conference. "I wasn't in his office on Dec. 7. I didn't see any notes. I only asked for the notes after this became a controversy and he brought them over to me. In this government, I assume the best rather than the worst."

On another subject, the mayor announced that 32 persons have been charged in D.C. Superior Court with defrauding public assistance programs of more than $229,000, as part of a renewed effort to crack down on welfare cheating.

Nearly all of the defendants have been charged with failing to report employment income while receiving food stamps, Aid to Families with Dependent Children benefits and general public assistance. The alleged fraud was uncovered by a unit of the D.C. Department of Human Services and the charges were filed by the D.C. corporation counsel's Welfare Fraud Unit.

Barry declined to comment on the Philadelphia police assault on the headquarters of a radical group called MOVE that left at least 11 dead and caused a fire that destroyed 52 other houses. Mayor W. Wilson Goode, who ordered the bombing of the headquarters, has come under intense criticism.

"I was not in Philadelphia, I don't know all the facts, don't know the circumstances, don't know all the conditions which caused those decisions to be made," Barry said.

Much of the questioning yesterday focused on the administration's four-month involvement with BB&S Inc., involving short-term investments totaling nearly $100 million, and the submission earlier this month of the backdated memorandum.

The City Council, which held a hearing May 6 on the District's cash management practices, will resume the hearings on May 24 primarily to determine whether Williams and others provided the council with false testimony and documents to justify investing with BB&S Inc., despite warnings that the firm had financial problems.

Council Chairman David Clarke and council member John Wilson (D-Ward 2), who are leading the council investigation, said that Williams, Deputy Mayor for Finance Alphonse G. Hill and other administration officials will be asked to testify under oath.

Barry said yesterday that his administration will cooperate with the investigation and acknowledged that Williams was wrong to have put a Dec. 7, 1984, date on a document that he drafted April 11, 1985.

"I demand the highest of integrity and honesty in my administration," Barry said. "Mr. Williams was wrong in what he did. I think it was an honest mistake. It wasn't a deliberate, well-thought-out conspiracy to deceive the council or the public. It should not have happened."

The mayor also acknowledged that Hill and others may not have conducted an exhaustive review of BB&S Inc.'s finances and overlooked a 1980 case in which the federal Securities and Exchange Commission censured and barred the firm from trading in certain mortgage-backed securities for 60 days.

However, Barry stressed that D.C. did not lose any money by investing with BB&S Inc. because it required the firm to post collateral.