The District's troubled Youth Services Administration last fall renewed $558,000 in contracts with a Virginia developer to run youth shelters despite allegations of physical abuse of children in one shelter, which has since been closed, and misuse of city funds in three others.

The developer, David Dale, currently runs three Northwest Washington youth shelters for the city.

A D.C. Superior Court judge removed eight youths from a fourth home operated by Dale and his firm, Tricom Training Institute, in 1982 after city officials received reports that the youths were being physically restrained, including being strapped to their beds.

Last fall, a city audit found that Tricom was overpaid by $25,000 in one 12-month period in operating the three other homes. The audit also found that Tricom had used city funds to purchase a life insurance premium for Dale's wife, an officer in the company, and to buy newspaper advertising to rent a town house in Bethany Beach, Del.

In a recent interview, Dale disputed the allegations of abuse, overpayments and misuse of funds.

He said he fired all the employes of the home from which the youths were removed and repaid the city the funds used for the beach house ad. However, Dale said he charges the city for life insurance premiums for all of his board members, as a cost of doing business, and did not reimburse the city for that expense.

"They uncovered some stuff, but they have not come back," Dale said of the city audit. "We wrote a letter rebutting it point by point."

Department of Human Services officials said they referred the audit to the D.C. police and the city inspector general's office for investigation last fall. The officials said they were asked by the authorities to take no further action until the investigations were completed. About the same time, however, the city's youth agency renewed a total of $558,000 in contracts with Dale. Those contracts expire this summer.

Tricom's contracts with the Youth Services Administration are among many under investigation by the FBI and the General Accounting Office as part of a larger investigation of agency contracting and overtime abuse. Tricom has held contracts with the youth agency since 1977, according to Dale.

City officials said yesterday that they continued their contractual relationship with Dale after the 1982 allegations about Tricom's homes because Dale's three other facilities appeared to be adequately run.

The allegations of abuse were first raised in Superior Court when city lawyers asked Judge Gladys Kessler to remove eight children from the Tricom facility at 1531 P St. NW.

"Our concern was the children's safety and that they were obtaining the services that we the District were paying for," said Nan Huhn, now a Superior Court judge and then the head of the juvenile division of the D.C. corporation counsel's office.

Kessler never addressed the merits of the abuse allegations at her hearing, but ordered the youths removed. They were sent to other facilities in the District.

Dale, who has denied that physical abuse occurred, said, "There's a thin line between restraint and abuse." He said the city awarded him a contract without competitive bidding for the P Street home, which at the time was the only home in the city for emotionally disturbed youths. Usually such juveniles are sent to private facilities in other states at city expense.

"Tricom tried an experiment that failed, and that's freely admitted by Tricom. No bones about that," Dale said. "Emotionally disturbed delinquent kids in an inner-city setting -- it's just hard to deal with."

Each of Dale's youth homes houses up to about 10 youths, many of whom have been placed in the city's care because of neglect, abuse or delinquency.

A September 1981 fire closed another shelter run by Dale for at least four months, according to city memoranda, and Dale continued to receive payments on the contract during that time.

Dale said the youths were housed in another shelter while the 929 Kennedy St. NW building was repaired. But at least one city memo and one Youth Services employe stated that the youths were given bus fare and sent home for an undetermined period.

The 1985 audit, which was requested by then-Youth Services director Patricia Quann, stated that record-keeping in Dale's shelters was "sporadic -- making it difficult to reconcile the daily population with the monthly billings," and that receipts for food purchases could not be verified.

The audit also cited a questionable $214 premium paid in 1984 for a life insurance policy issued in the name of Dale's wife, Joanne F. Dale, who according to the audit was not listed as an officer of the company that year. City corporation records for 1984 are missing, according to the city's corporate records office.

Joanne Dale first appeared as a Tricom director in the firm's 1985 official annual report filed with the corporate records office. However, the firm dated that annual report April 10, 1984. Dale said the erroneous date on the document was inadvertent.

Dale said that none of Tricom's directors is paid and that he considers the life insurance premiums fair compensation for the hours the directors work attempting to raise money for the nonprofit firm. Dale pays himself a salary of $40,000 a year, and he said he donated $12,000 of that to Tricom last year. He said that the city owes Tricom $188,000 and complained about carrying the debt.