District Mayor Marion Barry said yesterday he has accepted Deputy Mayor Alphonse G. Hill's resignation but will not fill the key financial management post until after September. Hill last week admitted accepting $3,000 from a city auditing contractor.

Barry, characterizing Hill's acceptance of the funds as improper but not illegal, contended that the events leading to the deputy mayor's resignation Saturday have not undermined the credibility of the city's financial management system and do not reflect deep-rooted corruption in his administration.

He said there was no need to rush to fill Hill's post and that he will take a more active role in the city's finances along with middle- and upper-level D.C. financial officers.

In a related development, an attorney for the contractor disclosed yesterday that his client did not make a single lump payment but instead made a series of payments -- all in cash -- to Hill last year.

Attorney Adam Bourgeois, who is representing James Hill Jr., a longtime friend of Alphonse Hill and the head of the Hill, Taylor & Co. accounting firm, said his client cashed company checks before making the payments to the deputy mayor.

"They were always in cash," Bourgeois said. "I told that to the government."

A federal grand jury is investigating whether Alphonse Hill received kickbacks or other financial considerations from James Hill, whose Chicago-based firm has received hundreds of thousands of dollars in city auditing contracts since opening a branch office in the District. Federal law enforcement officials said yesterday that Hill's resignation would not stop the investigation.

Bourgeois, who said the payments were not kickbacks, characterized them as a "courtesy" in return for a business referral made by Alphonse Hill to James Hill that was unrelated to city business. The deputy mayor has strongly denied receiving kickbacks.

Hill's resignation followed Bourgeois' disclosure of the payments a week ago to reporters. Barry, who was asked in an interview Thursday for his reaction to the revelation, said: "I have never seen anything like that in all my life. Why would James Hill's attorney in a public forum be discussing his client's business? I don't understand it. It's like trying to save your client's behind."

Barry, who said in the interview that he does not condone anyone in his administration taking money from city contractors, said yesterday that Hill's acceptance of the money did not violate the city's conflict-of-interest laws.

"It was legal in the sense that our conflict-of-interest laws allow you to receive money from a contractor to the city so long as it does not influence you," Barry said.

The mayor, defending his administration, added, "You are not going to find much corruption . . . . When all is said and done, this administration will come out of this intact."

The Barry administration has been stung during the past year by a series of corruption probes conducted by U.S. Attorney Joseph E. diGenova's office.

In January, Ivanhoe Donaldson, a former deputy mayor and top political adviser to Barry, began serving a seven-year prison sentence after pleading guilty to federal charges of fraud and cover-up. Four top D.C. Department of Employment Services officials, cited by prosecutors for playing a role in Donaldson's $190,000 fraud scheme, were placed on administrative leave with pay by Barry shortly after Donaldson's sentencing.

The mayor, who has been criticized by political rivals for delaying final action on the four officials, said he plans to make a decision on the fate of agency Director Matthew F. Shannon, Deputy Director James George and the two others by the end of this week.

Barry, in an impromptu news conference with reporters yesterday, said the recent spate of corruption allegations pales in comparison to the spreading scandal in the New York City government, the conviction last year of former San Diego mayor Roger Hedgecock and corruption charges against Philadelphia and Miami police officers.

"Mayors all over the country are experiencing pain and agony," Barry said. " . . . If I had what Ed Koch had, I would be appalled."

City Council Chairman David A. Clarke said yesterday that while he has seen no evidence that Hill acted illegally, previous cases suggest that the city must move to strengthen its ability to uncover corruption. Asked if he thought the mayor's response to corruption allegations had been appropriate, Clarke replied, "We all need to be doing more."

He said he plans soon to introduce legislation that would establish an agency outside the mayor's control to conduct criminal investigations into municipal corruption.

Brian Moore, a Ward 2 health care consultant who lost a bid in 1984 for an at-large City Council seat, said yesterday he plans to challenge Barry for the mayor's seat and will make the corruption issue the centerpiece of his campaign.

"There is a moral vacuum illustrated by the corruption and imprisonment and accusations and indictments that have been going on over the months regarding people in the Barry administration," Moore said.

Mattie Taylor, a Democratic candidate for mayor, accused Barry of "either permitting people to be corrupt and crooked or a total abdication of the responsibility to be a leader."

"Mr. Barry does not do anything until diGenova moves," she said. "In other words, he takes the position that if it is not illegal, his folks can do what they want. That's no way to run the city . . . . He has no right to pay Matt Shannon and Jim George full salaries to sit home and do nothing."

Hill, whose resignation is effective March 31, said he was quitting to relieve Barry of criticism and to preserve the credibility of the city's financial management system and its principal officials.

Barry said yesterday that he did not pressure the deputy mayor to step down. But Barry, when asked whether he wanted Hill to stay on, replied, "I didn't say that."

Barry, who has deferred finding a replacement for Hill until after the mayoral primary election in September, said Hill's departure would not be disruptive to the city's financial management -- in part because Barry expects to appoint an acting budget director in mid-April to fill the slot vacated last fall when Budget Director Betsy Reveal took a position at Harvard University.

Barry said that filling the position of budget director, a role Hill had performed in Reveal's absence, will enable the city's critical financial operations to continue smoothly on an interim basis.