The vice president of a firm that holds a $114,000 contract with the District government to find apartments for mentally ill people has been living for five months at an emergency shelter at a cost to the city of nearly $3,000 a month.

Isadore Lane was forced to move out of a home he rented with his wife and three children a few weeks before the firm of Coates & Lane Enterprises Inc. won a contract in January to counsel and house homeless patients from St. Elizabeths Hospital. Since February, the family has been living in the Capitol City Inn at 1850 New York Ave. NE, a city shelter, with meals and maid service also provided.

Lane, who earns $1,148 a month after taxes as an officer of the firm, declined to comment on his family's circumstances. Gale Coates, president of the firm, said, "If there is any way financially that he could have been out of there, Mr. Lane would have been. It's hard for him, but what could he do? Just get up and leave his children and family in the street?"

Officials of the D.C. Department of Human Services, which awarded the contract, said they learned the city was providing shelter for the Lanes about a month ago during a survey of homeless families.

Robert Keisling, director of the agency's emergency psychiatric division and administrator of the contract, said he was concerned about Lane's situation and would "certainly have some questions" about how well qualified he was to fulfill the requirements of the contract.

But he said that the firm was selected through a standard contracting process involving an evaluation panel, and that "as far as I know the credentials of the individuals who are running the contract are appropriate." Lane formerly worked for the city assessing employment prospects for disabled individuals.

Keisling said the firm had accepted only four clients so far and it is too early to judge its performance.

Coates & Lane is among about 10 firms or organizations selected in January to help prevent homelessness among the mentally ill. Under the contract, the company is to house 15 clients in group homes immediately after discharge from St. Elizabeths, then, with the help of a real estate agent, find apartments the clients can afford. Most of the clients live on Social Security checks of from $300 to $400 a month.

Lane's job, as vice president and director of operations for the company, is to interview and help counsel clients and help Coates find apartments.

The company was formed in May by Coates, who previously worked with mentally retarded people at the Hospital for Sick Children. Coates said she met Lane through her work and asked him for help in drafting a proposal to prevent homelessness among the mentally ill.

In August 1985, Lane resigned a $21,299-a-year job with the Department of Human Services he held for four years evaluating disabled people for job opportunities. According to his personnel records, he planned then to seek a career in the ministry.

Coates said she began paying Lane $574 every two weeks in February, after the contract had been approved. She said she believed his three children and credit problems might have hampered his search for a place to live, adding that she thought medical bills for the children might have sapped some of Lane's income.

Coates said she did not believe that Lane qualified for the city's tenant assistance program for low-income residents, which Coates & Lane plans to use to subsidize rent costs for its clients under the contract. But city housing officials said that on the basis of Lane's income, his family should qualify for a rent subsidy of $665 a month from the city.

Coates said Lane's personal situation should not be an issue because he is an officer of the company, not an owner. She said Coates & Lane is named partly for members of her family who are named Lane, not after Isadore Lane.

Besides its contract for mentally ill clients, Coates & Lane received a $56,734 one-year contract in April to house mentally retarded people in the community. Lane also serves as the firm's director of operations for that contract.

The city pays the Capitol City Inn $49.50 a day to house the Lanes and $12.48 a day for food for each family member. The District does not exclude families from shelters on the basis of income. About 22 percent of the families in emergency shelters have some income from employment, city statistics indicate.

The average stay in an emergency shelter is 45 days, according to Eric Easter, a spokesman for the office of emergency shelter.

Coates said that Lane had promised her that he would move out of the shelter by mid-July. "He has a lot of pride," she said. "He will get back on his feet."