Labor Secretary Ray Marshll, conceding major flaws in the operation of the government's $10 billion jobs program, said yesterday it is undergoing a top-to-bottom overhaul to eliminate mismanagement, waste and fraud.

"Rapid expansion and basic flaws in program design have placed great strains on the CETA system," said Marshall, referring to programs conducted under the Comprehensive Employment and Training Act (CETA). "CETA's record over the last two years has not been unblemished."

Although Marshall called it s "new CETA," most of the changes, including targeting more money on the hard-core unemployed and on job expansion in private industry, were already proposed or in place. Most were included in the fiscal 1980 budget and in legislation passed last year by Congress. What was new was the Labor Department's portrayal of a bornagain CETA, strengthened by the awareness of failures in the past.

Since the start of the Carter administration, spending on job training, public service jobs and other CETA programs has doubled, playing a major role in reducing unemployment but drawing criticism for slack management, misdirected priorities, fraud and political abuse.

"Any program as large, diverse and decentralized as CETA will encounter problems," Marshall said. "But I strongly believe that government can -- and should -- learn from its mistakes. Particularly in a time of tight budget dollars, we cannot afford to continue wasteful and ineffective programs."

The new focus for CETA was endorsed by President Carter's chief domestic affairs adviser, Stuart Eizenstat, during a news conference at which Marshall's announcement was read by Assistant Secretary of Labor Ernest G. Green. Marshall was absent because of what aides described as the "continuing serious illness" of his cancer-stricken 16-year-old son, Christopher.

Eizenstat stressed the president's continued support for CETA, despite a $700 million budget cut and 25 percent reduction in the 625,000 public service job slots, and said the program's problems "pale in significance compared with the benefits it has provided."

Among the changes Marshall noted were tighter eligibility standards for public service jobs, tax credits and training subsidies for private employers of the hard-core unemployed, more stringent monitoring and auditing programs, continued efforts to crack down on fraud and abuse, and "widespread management changes" at top levels.

Along with acknowledging that CETA should be doing more for those in greatest need and working closer with private industry, Marshall said the program has had "serious management problems.... It sometimes seemed that each of our regional offices was marching to a different drummer."

He noted that Sen. William Proxmire (D-Wis.) recently gave his "golden fleece of the month award" to a CETA program that was supposed to conduct a census of Samoans in Orange County, Calif. Such projects, he said, have been "simply misguided or ill-administered."

Department officials said Green, assistant secretary for employment and training, will not be affected by the personnel shake-up but said a "substantial number" of the top officials under him are being transferred or weeded out. The number could go as high as 50 percent, one offical said. A new deputy assistant secretary, Lawrence E. Weatherford, was appointed recently.

The crackdown on fraud and other abuses began last year and an expanded investigation is planned. Over the past 12 months, the department reported yesterday, the effort has resulted in 67 indictments and 24 convictions.