Lorethea Davis, whose husband is D.C. City Council Chairman Sterling Tucker's mayoral campaign treasurer, works as an administrative aide in Tucker's council office.

Absalom Jordan Jr., a political associate of council member Douglas E. Moore, now is running for a council seat himself while he remains on the payroll of the council's committee of the whole.

Alan Winter, the son of council member Nadine P. Winter, is employed as a computer specialist on the council's administrative staff.

All three are among 60 city council employes currently being paid with funds from the federal government's Comphrehensive Employment and Training Act (CETA) program, which is designed to provide work for unemployed and disadvantaged people.

The U.S. Department of Labor's regional office reported yesterday, after a four-month investigation, that the council's participation in CETA is riddled with favoritism and abuse.

The department said it found at least 78 instances in which the hiring of past or present CETA-paid council employes violated government guidelines or lacked written justification. It told the city to justify payments in all 78 cases, or be prepared to repay the money - possibly several hundred thousand dollars - to the U.S. Treasury.

J. Terrell Whitsett, the Labor Department's regional administrator, handed the report to Mayor Walter E. Washington during a 70-minute meeting in the mayor's office yesterday.

When both emerged, the mayor described himself as disturbed by the findings. He said he had instructed City Administrator Julian R. Dugas and Acting Corporation Counsel Louis P. Robbins, the city's top legal officer, to prepare a report for delivery to the Labor Department within a 30-day deadline.

Although all the findings in the report dealt with CETA employment on the staff of the council, which is a branch of government independent of the mayor's office, the mayor has overall direction of the city's participation in the CETA program.

The report was issued at a time that is politically sensitive for both Mayor Washington and Council Chairman Tucker, who are among a field of seven seeking this year's Democratic mayoral nomination.

An aide to Tucker said the chairman would not comment until he had read the report, Robert A. Williams, secretary to the council, who is in charge of all staff hiring, said he probably would comment today.

For Lorethea Davis, Absalom Jordan and Alan Winter, the report may result in the loss of their jobs. The report, which mentioned Jordan by name and referred to the others in a way that made them clearly identifiable, said all three should be terminated.

The report said Davis, the wife of Dr. Howard C. Davis, Tucker's campaign treasurer, was hired to work in Tucker's office at $11,000 a year after a short-cutting of normal application procedures.

Jordan, the report said, was employed as "a direct result of his friendship with and support to" Douglas Moore. (Jordan, in addition to seeking an at-large council seat, is the treasurer of Moore's campaign for council chairman.)

Winter's hiring was a direct violation of nepotism rules, the report said, although he does not work under his mother's supervision.

Nadine Winter reacted angrily to the report. She said she was not aware of her son's hiring until after he was on the payroll, and would have recommended against his applying. "I think it's so unfair," she said.

The Labor Department began its investigation in March after an account published in the Washington Star alleged extensive and sometimes illegal use of the CETA program by the council.

In its report, the department said the executive branch of the city government, headed by the mayor, had failed to insist upon the council's adherence to CETA rules.

It said the city's Employment Service, now part of the D.C. Department of Labor, "was negligent in fulfilling its role" in screening and referring prospective employes. Often, it said, the employment service certified people who had been requested by name by the council's staff.

The mayor said attempts had been made, as early as the CETA-council program began in 1975, to assure council compliance with the rules.

The report made one basic recommendation that could poke a large hole in the council organization. It said the city must terminate the employment of CETA employes as members of city council committee staffs, since this brings them too close to the partisan politics that is practiced by committee chairmen and members. That would cause the firing or transfer of 37 CETA employes who now work for the committees.