Top executives of a Washington consulting firm fraudulently collected at least $29,000 in federal funds after the government gave their firm a contract to study why there is so much waste in the administration of the nation's welfare system, according to present and former employes.

An examination of personnel records and interviews with 18 employes of Mariscal and Co., the consulting firm, show that four company officials billed and collected salaries from the government for at least 84 days in which they did not work on the consulting study.

The study itself, a one-year project that cost the Department of Health, Education and Welfare $184,000, was characterized as virtually meaningless by most of the consultants who worked on it, including the project manager.

Consultants said in on-the-record interviews that the study was hastily commissioned when HEW found itself with unspent money at the end of the fiscal year and that the firm, which was chosen by a process that does not require competitive bidding, submitted a proposal for the study that was written in less than 24 hours.

The interviews also disclosed that most of the people who worked on the study, including the project manager, considered themselves unqualified to conduct the research and that the data gathered was incomplete and ambiguous.

The consulting firm also ran out of its initial government money two months before the project was to be finished. So in July it asked for -- and was immediately given -- an additional $23,050.

Mariscal is one of hundreds of consulting firms in Washington, many of which survive on federal funds available for a seemingly endless variety of studies.

The federal government awards thousands of consulting contracts each year -- many on a no-bid basis -- totaling billions of dollars. There are no precise figures because the government has no central accounting system to track or audit consulting contracts.

In recent years, federal investigators and auditors in various departments have found growing problems of fraud, fund misuse and unaccountability in consulting firms. But the government has done little to control or even monitor the consulting industry.

Barry Rosenberg, a former vice president at Mariscal and Co., described his film's one-year study as a "complete rip-off. It's a terrible, terrible study. The taxpayer is just throwing money down the tubes."

Samad Hafezi, the project manager for the study, described the roles of both the federal government and the consulting firm as "chaotic and fruitless." bHe said he eventually refused to sign invoices from the firm to the government because he feared he might be authorizing the theft of federal funds.

"I couldn't do my job anymore because of all the false billing by company officials," Hafezi said.

According to company records and interviews:

The company's president, Manuel Aragon, a former deputy mayor of Los Angeles, billed the government for 23 days of work on the welfare study, for which he and the firm were paid a total of $8,167.93. Twelve people who worked on the study, including project manager Hafezi, said that to their knowledge, Aragon did not actually work on the project. Aragon denies that he billed falsely.

Three other officials of the firm billed HEW for days that they did not actually work, according to the project manager and others.

Roberto Moreno, a vice president, falsely billed HEW for 12 days totaling $3,482.31. Moreno denied in an interview that he ever billed falsely.

Rosenberg falsely billed HEW for 30 days totaling $9,397.31. Rosenberg said in an interview that false billing was a common practice at Mariscal and Co. "This was a black period in my life," he said. "I tried very hard not to compromise myself, to bill honestly . . . But I'm afraid I did compromise myself . . . I'm not proud of it at all."

William Holleran, an associate of the firm, falsely billed HEW for 18 days totaling $7,931.59. Holleran acknowledged that he had billed to the project for days he had not actually worked on it, but said he later worked nights and weekends to try to make it up.

Aragon's weekly timecards from Oct. 1, 1978, to Oct. 1, 1979, contain billings to several government agencies under contracts held by the firm for 160 days work, totaling $46,396.17 in federal payments. The timecards bear the company president's signature in several different handwritings. Secretaries said they routinely filled out and signed Aragon's timecards in his absence, billing to the numerous contracts arbitrarily, while Aragon at times did not even know what was on the timecards.

In an interview last Wednesday, Aragon insisted that all of his billings were accurate and that he personally signed all of his timecards. Yesterday, Aragon said that he had rechecked his records and found that he was "in error" during the interview. He said someone else signed his timecards on a number of occasions at his direction. He maintained, however, that the billings were accurate.

Robert Mariscal, the owner of the company, denied all charges of wrong-doing by people in his firm.

Mariscal acknowledged that he spent much of the past year in Las Vegas, where he oversaw the opening last summer of a new hotel and casino, the Nevada Palace. Mariscal is the chairman of the board and the majority stockholder of the casino.

"To my knowledge, there has never been anybody in the [consulting] company who has intentionally ripped off a contract," he said in an interview.

In a lengthy interview at the firm's Georgetown office, Aragon, Moreno and vice president Robert Graulek said the allegations against the firm were coming from a group of disgruntled former employes.

"There are about 20 former employes who are very unhappy," Aragon said.

"They hate us, there's no doubt about it," Moreno said.

Based on interviews with employes of Mariscal and of the federal government, this is the story of the welfare study contract:

In late August 1978, near the end of the fiscal year for HEW, several million dollars of contract money was still unspent at the Social Security Administration (SSA).

Two officials of the SSA's Office of Family Assistance, Ludwig Guckenheimer and Jacques Wong, had several ideas for contracts that could be awarded.

Earlier consulting studies had found that the largest portion of the nation's welfare system -- a program called Aid to Families with Dependent Children (AFDC) -- was costing the government too much money because of waste in administration. The annual budget for AFDC was $6.7 billion.

Guckenheimer and Wong decided to hire a consulting firm to study why administrative costs were excessive. They prepared a questionnaire that would be sent to welfare offices in all 50 states to attempt to determine where the waste was.

The money that was available to fund this study fell into a special category in which the contracts were to go to small, minority-owned firms, on a no-bid basis.

Mariscal and Co. is classified as such a firm because its owner, Robert Mariscal, is a Mexican-American. His company is one of the largest minority-owned firms in the nation eligible for this program, with offices in Washington, Los Angeles, San Francisco and Phoenix. It handles about $1.19 million a year in contracts, most of which are publicly funded.

When Guckenheimer and Wong decided to contact Mariscal and Co. about the possible contract, they called John Broglie of their procurement office. Broglie called Aragon at Mariscal.

"Aragon told me of the AFDC offer," recalls Rosenberg, who was then the vice president for administration at Marsical. "I had about 24 hours to write up a formal proposal to send to the government."

Barry [Rosenberg] and I spent a few hours writing the proposal," said Mitchell Diamond, a consultant at the firm. "It was obvious that the government didn't know exactly what they wanted. This was the end of the year money they had to spend so they could use up their budget.

"So we wrote a couple of pages that didn't say anything, but we knew they'd accept it," Diamond said.

They wrote three pages discussing the proposal in general terms, beginning with the sentence: "Administrative costs in AFDC have demonstrated a continuing upward trend in recent years which has exceeded the growth rate in caseload expenditures."

The proposal estimated that the cost of data collection and data analysis studies would be about $180,000.

Aragon negotiated with the government during the next few weeks over the cost of the contract. On Sept. 25, 1978, Mariscal was awarded a contract for $161,245. Rosenberg was to oversee the administration of the project at Mariscal. The firm hired Hafezi, a former welfare official in Iran who had applied for a job earlier that summer, to be the manager of the project.

According to the contract, the government would collect the data -- the questionnaire results from the states -- and the consulting firm would analyze it.

"From the beginning," Hafezi recalled, "it was obvious we were going to face a lot of problems with data reliability and credibility. The questionnaire was not designed in a professional, proper way."

"There was no instruction manual for the survey," Rosenberg said. "The states were not told how to answer the questions. The data coming back would not be uniform and might well be useless."

Rosenberg and Hafezi voiced their concerns to Guckenheimer and Wong. But it was too late. The questionnaires had already gone out. They could not be changed.

Hafezi said that he did not know what to do. He wanted to keep the job -- which paid him $25,050 -- but he was afraid it was meaningless work. He told Rosenberg of his concern.

Rosenberg, who says that in retrospect he is not proud of his role at Mariscal, recalls telling Hafezi: "Look, they're paying us a lot of money to do this. Don't complain. Do your job. I don't know what they [the federal government] want, either, but as long as they keep giving us money I won't complain."

For the first several months of the contract, Hafezi and others went to several states to meet with AFDC officials to discuss the questionnaire. Each month Hafezi wrote a "progress report" that went to the federal government. In it, he would say the study was advancing with no serious problems.

"I know the reports didn't really say anything," Hafezi recalled. "But what could I do? I wanted to keep my job."

In January, about three months after the study began, Guckenheimer and Wong decided to cut off the survey. At that point, 28 states had been contacted. The original plan was to survey all 50 states, but the federal officials thought that 28 states would be sufficient.

"I don't understand why they cut it off," Hafezi said. "This was not a representative sample or anything else scientific. It made no sense."

Many of the questions addressed to the 28 states were left unanswered.Statistical experts hired to compile and analyze the data found that on some key questions, as few as eight states had responded.

"The answers were in no way uniform," said one data analyst, who asked not to be named. "The same question was answered in four different ways by four states: in one, the response was in dollars; in another it was dollars per case; in another it was in manhours, in the fourth, the answer was in percentages. The data was useless."

Richard Clark, an attorney who works for the Department of Housing and Urban Development but formerly worked at Mariscal, was one of those who reviewed the data in the AFDC study.

"It was inadequate, no one can doubt that," Clark said in an interview. "We told the government all those things, but they didn't do anything about it."

So the firm continued to process and analyze the data, although the consultants believed the project was meaningless.

Hafezi admits that he had no statistical background, and he realized that he was not actually qualified to do the job assigned to him.

"Almost everyone working on the project was not properly qualified," he said.

But by April, Hafezi had other worries. One of his jobs each month was to gather and approve employes' billings for the project. He would sign the invoices to the federal government.

Hafezi became worried because he continually received billings to the project from people whom he had not asked to work on it, and who had not, in fact, worked on it on the days for which they had billed.

Among those who falsely billed were Aragon, Moreno, Rosenberg and Holleran, Hafezi said.

Rosenberg and Holleran worked on the project, but they did not work all of the days that they billed for, Hafezi said. Moreno did almost no work on the project, he said. Aragon did no work on the project, he said.

Hafezi's assessment of the roles of those four men was confirmed by 11 other people who worked at Mariscal.

Hafezi complained to his superiors about what he saw as false billing.

Moreno, in an interview, said he knew of no false billing, and said that Hafezi and the others who complained of it were being "ridiculous."

Holleran said that at one point, he conceded to Hafezi that he had billed for work on the AFDC project. He said he agreed to work nights and weekends to make up the work.

Others at the firm described Holleran as a "hard working" and "honest" man who was caught up in a dishonest system. They said that he, like others at Mariscal, was told to bill to certain contracts even if they did not work on the contracts.

Rosenberg said he was aware that false billing was a common practice at Mariscal.

"I refused to have anything to do with money. I refused to sign invoices," Rosenberg said. "We had constant difficulties with the West Coast offices -- people always billing for work they hadn't done. This was much worse in other federal contracts."

William Elsey, another former vice president of the firm who quit because he was not paid, said in an interview: "Frankly, as far as I know, that [the AFDC study] was one of the cleaner contracts at the company . . . There was false billing all the time in the CSA [Community Service Administration] contact. And a lot of false billing from the West Coast."

Aragon's account of his work at the firm differs sharply from the accounts of many staff members.

Aragon said that he worked an average of five or six days a week in the office, usually putting in 10 or 11 hours a day. He said he kept track daily of the projects he worked on, and filled out and signed his timecard at the end of every week.

Eighteen other employes of Mariscal said they never saw the president in the office five days a week. At an average, they said, he was in the office one day a week.

Frances Estes, formerly an office manager at Mariscal, said:

"I handled the time sheets for probably two years. Manuel [Aragon] would say, "Fill it out the opposite of the way it was filled out last week. Whichever contract had the most money on it, he would want to bill to it, whether he worked on it not . . .

"I think he probably worked once in awhile, but it wasn't on the contract he billed to. He wouldn't even know half the time what he was billing to. I'd have to tell him."

Others in secretarial positions also said they filled out and signed timecards for Aragon.

An examination of Aragon's weekly timecards during the 12 months of the AFDC study showed that his signature differs quite dramatically on different weeks.

Asked last Wednesday to respond to what employes said of his working hours and billing, Aragon said: "There's a conflict here." Asked then about the discrepancies in his signatures, he said "Well, you know, sometimes you sign these things quickly."

He insisted in that interview, however, that he -- and no one else -- signed all of his time cards.

Yesterday, Aragon said he rechecked his records, and found "I was in error" during the first interview. He said that in May, June, July and half of August, "I didn't sign any of my timecards." He said secretaries signed for him.

"I was working mostly in my home during that period because of the pressure at the office," Aragon said. "I called in and asked secretaries to sign for me. It's not ideal practice, but as far as I can determine it's not illegal."

He said he chose not to come into the office because so many employes were unhappy. He said the company had "money problems," and could not pay all of its bills or expenses to employes.

Aragon billed to the AFDC contract for 25 days. Project manager Hafezi said that he knew of no work Aragon did on the study. However, he said Aragon might have been justified in claiming salary for two days over the course of the year for any informal conversations or phone calls he had in connection with the project. Thus, Hafezi said, Aragon falsely billed for 23 days.

By mid-July, because more people had billed to the project than had been planned, the project ran out of funds. It used up its $161,245 budget two months early.

So the company wrote to the federal government asking for more money. Hafezi, who said the reason for the overspending was false billings, refused to sign the letter to the government. Moreno signed the letter. In it, he explained that the government could actually save money by authorizing another $23,050 for the project.

By September, Hafezi refused to sign any invoices to the government. Rosenberg, Elsey and several others he had worked with had already quit in frustration. Still others had been fired for lack of funds or because they complained too much.

Graulek and Moreno took over Hafezi's financial duties.

In late September, Aragon fired Hafezi.

"Samad," he told him, "we have no more billings for you. You can leave on October 1."

The report was supposed to be completed and in the hands of the government by Oct. 1. But it was not ready.

In late September, Wong and Guckenheimer read a partial draft of the report. They rejected it, and asked for changes. The consultants are still working on the report.

"They're not paying us for the work now," Aragon said. "The cost is coming out of our pockets. In the end, we're going to take a loss on this thing. We're going to be $3,000 or $4,000 in the red on this project in the end."