Tammy Agee's body was found tied to a tree along the James River in Richmond last September. She had been strapped against the bark, hands behind her back, a gag in her mouth, a torn piece of her cotton shirt wrapped tightly around her neck.

She was 14.

A foster care child under the state's protection, Tammy paid a tragic price for the acute shortage of suitable shelter for the 6,000 neglected, abused and disabled children in Virginia whose parents cannot or will not care for them, according to a Richmond special grand jury that investigated her death.

Tammy, who was emotionally disturbed and mentally retarded, was reported missing from a state-regulated group home operated by Environments for Human Services, a for-profit company.

EHS staff workers told police they last saw Tammy when they allowed her to go swimming unsupervised in a neighborhood pool 20 days before her body was found. In March, the company was found guilty of felony child neglect.

An alarming decrease in the number of foster care parents has overwhelmed the child care system in the Washington area and across the country, widening the potential for abuse and causing a fundamental shift in the way thousands of children are cared for, social service professionals say.

More children must go into group homes, many of which are not monitored closely because of understaffing at state agencies, they say. In addition, they note, children are more likely to be placed with less suitable families.

Virginia has lost 30 percent, or more than 1,500, of its foster care parents since 1980, according to the state Department of Social Service.

In Maryland and the District the loss has not yet been calculated, but current figures illustrate the shortage. In Maryland there are 5,225 foster care children and 2,600 homes; in the District there are 2,200 children and 700 homes.

From Alexandria to Alaska, the story is the same.

In 1977, there were 594,000 children in foster care homes throughout the nation, according to the U.S. Department of Health and Human Services. In 1984, there were 187,680. While the decrease is attributable in part to efforts to keep more children with their natural parents, officials say, the major reason is the far greater drop in families willing to take in foster children.

"It's a genuine crisis," said H. Gordon Evans, director of information for the National Foster Parent Association in Houston. "I get calls and letters from every state asking how we can get parents and keep them, because we are losing them at a terrible, terrible rate."

"One of the real tragedies is that they are coming and going so quickly. There is 50 percent turnover per year in some places. We don't really know how many parents there are," said Jake Terpstra, chief foster care specialist at HHS.

Several factors have contributed to the decline: more working women; reluctance to care for the growing number of severely disturbed children now awaiting placement; food, clothing and housing prices that have outpaced the parents' compensation, and the perceived need for costly liability insurance. Last week California's corps of foster parents went on strike, refusing to take additional children until they are given government help to cover insurance costs.

"I hope this is not signaling the return of the tall, red-brick building with a sign outside that says 'Orphanage,' " Evans said.

Others worry that a shift from foster care to far more costly institutional care will mean a big burden for taxpayers. Last year, $2.4 billion in state and federal funds was spent on foster care, according to HHS.

In the early part of the century, orphanages teemed with children. But today, such children are placed either for adoption or into foster care, depending on a judge's ruling. An adoptable child is one whose parents are dead, have lost their legal rights to or have opted not to keep the child. Foster children need temporary care because of illness, homelessness, abuse or neglect and are expected to be reunited with their parents, who most often retain legal rights to the children.

The compensation of foster parents varies with the jurisdiction and the age of the child involved. In the Washington area, for example, a parent caring for a Prince George's County teen-ager receives $283.90 a month, while one in Loudoun County tending to an infant gets $167.50. Board at a group home often costs the state and federal government more than $1,000 a month.

But when police, doctors, teachers or neighbors inform social service officials of a boy burned by his mother, a girl sexually abused by her father or a youngster wandering the streets in rags, caseworkers say, they are relieved when they find a refuge for the young victim -- regardless of the price.

Virginia authorities had known since 1983 that EHS was negligent and even abusive to some children, the grand jury said in its report. Nevertheless, "The fact that there was a devastating need for such services and that EHS was willing to provide them" kept the 23 EHS facilities in Northern Virginia and Richmond operating almost without review, the grand jury concluded in a report that touched off a state evaluation of the child care system.

In the mid-1800s, when New York City orphans living in poorhouses were taken by train to the West to live among families and work on their farms, the seeds of foster care were sown. Since then, public opinion has favored families over institutions as the healthier place to raise children.

Now, however, many professionals are worried that the lack of foster parents and the growing number of seriously troubled children mean more institutional care.

Some think that parents who are still willing to take in foster children need more intensive training.

"What we have got to do is realize that we need more professional care," said Mary Lee Allen, child welfare director for the Childrens' Defense Fund. "Parents are being asked to take care of kids they are not equipped to."

In the Washington area, 3,700 children are in foster care. About half are teen-agers with medical, emotional or physical handicaps, according to a report presented to the Metropolitan Washington Council of Governments in June.

Largely because of Public Law 96-272, which was signed by President Carter in 1980, the number of children who need care outside the family has dropped significantly here and nationally. The law required more emphasis on preventive services such as family counseling to keep natural families together, making foster care a last resort.

But while the number of children who need foster parents has decreased, the pool of foster parents has shrunk at an ever-faster pace. And because the healthiest and least disturbed children are no longer entering the system, the remaining children are often not as desirable to foster parents.

Carolyn Sampson, a foster care mother in Prince George's County, has witnessed the change in the past two decades. Since 1967, she has cared for a total of 97 foster children. Few of the earlier ones were as challenging as recent foster children Kimberly Mason and Tanya Wilborn.

Paralyzed since birth because of the radiation treatment her mother received for cancer, Kimberly lived with Sampson from the time she was 5 months old until her death at the age of 5. Sampson gained permanent custody of Tanya, a retarded child whose mother was paralyzed and could not care for her.

"When I first started, I'd have babies. One was 3 days old," Sampson said. "Now more kids are older and more confused. They don't talk, they've been sexually abused, they're handicapped."

With the help of her husband, Theodore, Sampson, 47, hopes to continue her work. Social service officials say she is unlike many parents who signed up before 1970 and are now too exhausted to continue.

Not everyone can be as accommodating as Sampson, who has opened her door at 2 a.m. for an infant rescued from parents too drugged to know the difference between a screaming baby and a blaring television. Nor can many be as tireless as Edith Kerns, a Prince William County foster care mother who has cared for 1,361 children since 1957.

But Deanna Phelps, the home-finder for Prince George's children who is helping COG plan a foster parent recruitment campaign, believes that aiding just one disadvantaged child can be rewarding.

Said Sampson, "I love it. My heart goes out to them. Some have been left alone at night. They don't ask to come here, but I just listen and reassure them, and very few forget me on my birthday even long after they're gone . . . . I don't serve cake on a platter, just kindness."

Fairfax County Supervisor Nancy Falck (R-Dranesville), who last month voted with other local officials to authorize COG's $37,000 recruitment effort, advocates a "two-pronged approach" to the problem: more money for preventive services to further decrease the number of children who must be separated from their natural parents, and more compensation and training for foster parents.

Providing parents with constant help from professional caseworkers is equally important, HHS's Terpstra said. Often swamped with more than 40 children each, caseworkers must deal with an unmanageable number of people, including the children's natural and foster parents.

"It's absolutely impossible to do a good job under these conditions," said Nancy Abell, Loudoun County's foster care home-finder.

"One of the biggest shockers was realizing what a mess it the foster care system was in," said Assistant Commonwealth's Attorney David C. Eberhart III, who led the Richmond grand jury investigation into Tammy Agee's death. Eberhart said he would not be surprised if similar abuses are occurring elsewhere.

John D. Bryant, president of the now-defunct EHS, pleaded guilty to 20 misdemeanor counts of making misrepresentations to agencies in connection with illegal use of some of the $18.5 million in federal and state money the company received since 1978. He was given a five-year suspended sentence and fined $20,000. In March, EHS was found guilty of felony child neglect in Tammy's death and fined the maximum $1,000.

Eberhart said Bryant might have gotten stiffer penalties. But because the state had so many warnings of improprieties and because "there were too many other dirty hands around," Eberhart said he believed that it would have been unfair to single out Bryant.

EHS is not the only recent example of abuse and tragedy in overextended child care systems. In the District and Baltimore, other problems have surfaced.

In Southeast Washington, five foster care children died in a house fire just before Easter. The foster care mother had left the city the weekend the fire broke out, and a man who police said had served a manslaughter sentence in Lorton Reformatory and was drunk at the time of the fire had been left in care of them.

Despite a city guideline to place no more than two infants and a total of four children in a single foster home, there were three infants and five children in the home.

In Baltimore, a multimillion-dollar federal lawsuit filed on behalf of six infants is pending against the city Department of Social Services. It alleges that the children were abused or neglected in foster homes.

"The department's practice of assigning excessive caseloads to workers and leaving cases uncovered for substantial periods of time" contributed to the mistreatment, the suit alleged. The city denied the charges; afterward it ordered inspections of all of its foster homes.

Social service professionals say the answer lies not only in recruiting more parents but also in training them, as well as in informing the public about what is at stake.

"Foster care parents are asked to take in unlovable children and love them into being lovable, and then they're asked to give them back," said Evans of the foster parent association. "It's not an easy job, but it's the next generation we're talking about it."