Action, the federal government's umbrella agency for domestic and overseas volunteer organizations, has been seriously hurt by waste and mismanagement, and some volunteers have been illegally working in political campaigns, according to a House subcommittee draft report.

Excerpts of the draft, including a complete summary of it, were made public by Rep. Robert H. Michel (R-Ill.), the House minority whip, who also serves on the labor, health, education and welfare subcommittee of the House Appropriations Committee.

Michel said in a news release accompanying the excerpts that the full report details "the existence of widespread mismanagement and a blatant disregard for the [Action] agency's mission by its senior executives."

Michel's release of the material was immediately attacked as premature and political.

"We were all told very clearly and very strongly that this particular draft report was not to be released until it was approved by the subcommittee," said Scott lilly, legislative assistant to Rep. David R. Oey (D-Wis.), a member of the Labor-HEW subcommittee.

"Hanging an agency on a draft report, let alone the excerpts of that kind of report, is not a very good way to bring about change," Lilly said.

Action Director Sam Brown, whose leadership has come under attack recently because of his dismissal of ranking Peace Corps officials, said, "It is apparent that Congressman Michel is attempting to use this draft report as a political tool to fight antipoverty programs.

"He is trying to water down the commitment of this administration to helping the poor... [with the] premature and inappropriate release of this report."

Brown said his agency has cooperated fully with the subcommittee investigators, and that it "stands ready to correct any legitiamte problems they may address."

The report said, "The investigating staff's findings demonstrate the apparent weaknesses in Action's overall management of its personnel, procurement and budget finance programs." And it said the findings also demonstrate "the improper use and ineffectiveness of grants in meeting intended goals to reach low-income communities."

The latter finding "raises the question of whether Congress should rederect or discontinue" Action's $4 million National Grants Program, the report said.

The grants program was established to provide direct aid to poor communities in Action's VISTA (Volunteers in Service to America) project without going through state or local governments. Twelve such grants, totaling $4 million, were awarded to community groups in 1977 on a noncompetitive basis, according to the report.

In awarding the grants, the report said Action ignored rules governing the selection of VISTA sponsors -- grantees -- "in numerous instances."

"The investigative staff found volunteers working in many communities and with many constituencies that would not qualify under the... poverty income guidelines for participation in federal programs disigned to help the poor," the report said.

Under the National Grants Program, according to the report: "A combination of poorly trained supervisors and inadequate monitoring... resulted in national grant VISTAs becoming involved in restricted staff-related work, union organizing and political ativities."

The report said the involvement in union and political activity violated the Domestic Volunteer Service Act.

Action officials also had a tendency to violate government regulations in awarding federal procurement contracts, the report said.

"Action program officials involved in the procurement process have engaged in imprudent activities," the report said. "These have included authorizing commencement of work without a contract, developing statements of work jointly with contractors, and obtaining budgets from contractors for use as in-house estimates.

"As a result of these actions, contractors have been exposed to the risk of not receiving payment for work performed without the proper approval; and preselection of contrrctors has been fostered," the report said.