The consultants who designed and installed the District of Columbia's new but faltering $38 million computerized accounting system have concluded that it cannot work in the "operating environment" of the District government, and the firm will no longer help the city operate it.

American Management Systems Inc. of Arlington concluded that shortcomings in the "hardware, management and staff" of the District government make it "impossible for the system to meet its objective."

"We do not see how we can in good conscience propose to provide ongoing, day-to-day operating support in an environment which, in our professional judgment, is unlikely to permit the system to be operated satisfactorily," the firm said in a letter to Edward G. Winner, assistant city administrator for financial management.

The probable result of the AMS decision, in the opinion of officials familiar with the complex, highly sophisticated bookkeeping system is that the city, which has already encountered serious difficulties in implementing it, will go through many more months of errors and breakdowns.

The city suffers an acute shortage of personnel who know enough about data processing, accounting, city management and the assumptions about finance on which the system was contructed. Winner said yesterday, "We are riddled with vacancies, and therefore heavily dependent on contractor support in running the system.

Winner said that "if the Lord is willing and the rivers don't rise," the District would operate the system effectively in the coming fiscal year by hiring another data processing contractor to provide the assistance.

But other officials familiar with the subtle and sophisticated workings of the system were less sanguine. "The people at the District Building will be like the characters in 'No Exit.'" one said, referring to a play by Jean Paul Sartre in which the characters discover that the increasing complexity of technological advancements often create more problems than they solve.

The consultants will continue to work with the city for several months under their contract with the Temporary Commission on Financial Oversight, the panel established by Congress to bring order out of the chaos of the city's financial record-keeping. But that work involves refining objectives and reprogramming some of the functions of the system, not operating it.

The city government's position can be likened to that of a hotel owner who, about to take possession of a nearly completed hotel, finds that the desk clerks, waiters and elevator mechanics he hired to run the place are inadequate or incompetent, so he asks the contractor to help out. The contractor, believing that personnel is not his responsibility and that the owner will never rectify the problems anyway, says no.

The AMS decision was contained in a letter to Winner from Ivan Selin, the firm's chairman, announcing that AMS would not bid on a contract to provide the staff needed to operate the system.

Selin recalled that his firm has been telling Major Marion Barry for months that "changes in staffing, computer hardware, management, and the basic aproach to SHARE operations (the District's computer center) would be necessary" for the system to be successful.

"We are unable to escape the conclusion that theses changes will not be made and therefore that the system as it exists today cannot be fully implemented by the District government," Selin said.

The changes the consultants wanted, according to sources familiar with the situation, involved city hall politics as much as computer operations. w

For example, AMS is said to have recommended that the financial controllers of individual city departments be made responsible to City Controller Alphonse Hill, instead of to the department heads who appoint them, but that has not been done.

Selin's letter was made public by City Council Chairman Arrington Dixon, who has been dealing himself into the city's fiscal poker game with increasing regularity. Dixon has been conducting hearings on Barry's overall financial plan for the city, and by coincidence Winner was scheduled to be yesterday's only witness.

Dixon, a former computer science instructor who described himself as "a specialist in data systems," said, "It has become apparent that a major reason why the District is running deficits is because it cannot keep track of its spending levels.

"While our budgets may be balanced on paper, the District departments continue to overspend. This gets to the very heart of the topic of our hearings today: is our Financial Management System (FMS, the official name of the system), working? 'it is our sense that it is not working."

Dixon asked Winner, "I know we are not back where we started, but how far ahead are we?"

"It's hard to say," Winner replied. "There are innumerable problems."

He said, "We need additional staff and training of our own people. We need GS15s right on down to oilers and wipers," but the city is having trouble recruiting personnel to operate FMS because "we are not in the best competitive situation in a cutthroat field."

Winner said, however, that other computer firms have responded to the city's request for bids on a contract to provide staff support "to do the work we should be able to do ourselves."

Robert Stephens, executive director of the Financial Oversight Commission, which initially hired AMS, could not be reached yesterday.

Sources knowledgeable about the commission pointed out that AMS was supposed to finish its work this month anyway, and was never expected to stay on to operate the system.