The D.C. government's program to regulate the city's booming building renovation industry is losing at least $680,000 a year because of inadequate administrative controls, questionable conduct by permit examiners and widespread undervaluation of project costs by architects and builders, according to a staff report prepared for top city officials.

"The condition of many key elements of the [renovation permit] operation are such that their reform and improvement must be considered to be of an emergency nature and placed on a high level of priority," special staff investigator A. Jay Cooper concludes in a 46-page report supplemented by more than 100 pages of other data. "The activities of key personnel are such that the integrity of the entire plan review process may readily be said to be in jeopardy."

The investigation also found that the record-keeping process for filing permit applications and project plans "was in a state of collapse and represents an emergency situation."

Cooper's report recommends dismissal of Warner B. Jenkins, a permit examiner who investigators said lowered permit fees after accepting personal payments from applicants.

It also asks for an investigation of three other examiners or supervisors who investigators found occasionally performed renovation and design work as private citizens in addition to their jobs as renovation regulators for the city.

Moreover, in a sweeping criticism of the renovation industry, investigators concluded that architects, contractors and builders throughout the city regularly submit applications for renovation permits based on sharply undervalued cost projections which rarely are challenged by examiners and often result in the loss of thousands of dollars, the report says.

The project costs are the basis for the fees to the city, which assesses $38 for each estimated $1,000 of renovation work.

Among those cited in the report for possible undervaluations or other questionable permit practices were renovations in the Capital Hilton Hotel, the Republican National Committee headquarters, The Washington Post and a building at Dumbarton Oaks owned by Harvard University.

"The practice of reducing costs appears to be one which has invaded the entire fabric of the architectural, engineering and construction community of our city," the report concluded. "It is the exception that the value of the construction is adequately stated."

Mayor Marion Barry, whose administration launced the investigation following reports earlier this month in The Washington Post and an investigation begun by the U.S. attorney's office, has scheduled a press conference tomorrow to announce what actions the city will take.

Alan F. Grip, the mayor's press spokesman declined to comment yesterday on the findings of the investigation. Grip said that Barry will make public a copy of Housing Director Robert L. Moore's final report on the investigation at Monday's press conference. He said Moore's report is "the operable report" and there are no plans to release copies of Cooper's report, which was only a draft.

Cooper, reached at home by telephone last night, declined to comment and referred all questions to his superiors.

The special city investigation concluded that those who assess permit fees for the $15-million-a-year industry operate with virtually no written guidelines. The examiners routinely approve projects whose claimed value is clearly underestimated, the report says, and no supervisors review or challenge those approvals.

The current investigation was conducted over a period of about 10 days by Cooper, former mayor of Pritchard, Ala., and a former federal housing official who is now a senior policy adviser in the D.C. Department of Housing and Community Development.

Cooper was assisted by two city housing inspectors as he reviewed city renovation permit files, examined architectural plans submitted by applicants, visited work sites and interviewed several architects, builders and homeowners, according to the report.

The report was circulated among about half a dozen top city officials, including Barry, City Administrator Elijah B. Rogers and Housing Director Moore.

The city also gave a copy of the report to the FBI, which subpoenaed it as part of an investigation into Jenkins' alleged acceptance of personal payments.

The Post reported earlier this month that Jenkins, 47, three times lowered permit fees after receiving personal payments from applicants, according to canceled checks, documents and those who said they paid them.

A Post review of city records and numerous interviews with architects and builders found frequent instances where projects were either undervalued or estimated costs were lowered, resulting in lower fees paid to the city. In all but those three instances, however, there was no evidence that personal payments were made.

Jenkins, who earns $24,527-a-year in his city job, said at the time that he had done nothing wrong and said that any money he might have accepted would have been for interior design work unrelated to the applications.

Two persons who said they made payments to Jenkins told reporters that no such design work had been done or discussed. The third person who said he made a payment to Jenkins could not be reached for comment.

Two persons who said they gave payments to Jenkins confirmed it when interviewed by city investigators, according to the report, which includes copies of two canceled checks the applicants said they gave Jenkins. Investigators could not reach the third person mentioned in the newspaper article.

In addition to confirming that Jenkins did some renovation work in his off hours, investigators found that another permit examiner and two supervisors did outside jobs.

The report recommends that the city inspector general's office investigate the outside activities of permit examiner Ahmet Ozusta, W. Monroe Stewart, the acting head of the structureal engineering branch and Jenkins and Ozusta's immediate boss, and James E. Dickson, the acting head of the Building Regulation Division, who is in charge of the entire section.

The District's Merit Personnel Act forbids city employes from doing outside work that "would appear to conflict with the fair, impartial and objective performance" of their city jobs.

In Stewart's case, the report says, he prepared architectural plans for four churches. Those plans were later submitted to obtain building permits that were reviewed and approved by permit examiners who work for Stewart.

Stewart said in an interview with a reporter yesterday that he did not personally review the churches' permit application when they were submitted to the city and they were handled routinely. He said he did the work to help the churches and because he enjoys drawing architectural plans. However, he said, he has now decided to stop doing outside work because it might give the appearance of being a conflict of interest.

Both Dickson and Ozusta told investigators that they occasionally did outside work for architects, but they said the projects were outside the city and did not require city permits, according to the report.

Dickson and Ozusta could not be reached for comment yesterday.

The report included investigations of more than two dozen specific renovation projects. For example, the report said, a permit examiner decided last August that the total cost for the renovation of a 14-unit luxury condominium complex at 1810 and 1818 Wyoming Ave. NW was $4,000, even though the actual cost is more than $200,000, according to the report and interviews with the owners, James F. Sollins and Dianna Brochendorf.

The owners paid the city $152 for their permit, as a result, the report says, the city lost more than $5,000 in fees on this one project.

Sollins and Brochendorff said they did not obtain the permit themselves and were unaware of the undervaluation at the time. The two have since told city officials that they will pay the city whatever additional fees are due.

In the Capitol Hilton's case, the projected cost for the remodeling of a restaurant on the city-approved permit application was $5,000, but investigators, after reviewing the plans, estimated the actual cost was about $30,000. "That a complete interior alteration of a major hotel restaurant could be accomplished for $5,000 stretches one's credulity," the report says.

The hotel general manager, Frederick J. Kleisner, said Friday he did not recall the job, but said he would look into it. However, Kleisner said, all permits for work at the hotel are obtained by the contractors, not by hotel officials.

In the case of Dumbarton Oaks, the application for renovation work on a hall at 3245 S St. NW originally estimated the cost at $1,000, the report said, and a city permit examiner raised the estimate to $10,000.

City investigators who reviewed the plans said the work would cost between $40.000 and $50,000. "How a licensed architect and a licensed contractor could conclude that the work . . . could only cost $1,000 and how a [city permit examiner] could arrive at a figure of only $10,000 is unfathomable," the report says.

The director of Dumbarton Oaks, Giles Constable, said yesterday that the permit was obtained by the architect and contractor, and he did not know the details.

In addition, the report says, substantial renovation permit fees go uncollected because some contractors simply don't bother to take out permits, while others only get permits for portions of the actual projects.

For example, city investigators, who were trying to determine whether a 1979 permit for alterations at the Republican National Committee offices at 310 First St. SE was undervalued, discovered in a recent site visit that additional improvements were under way.

There was no permit issued for the new work, the report says. Richard Richards, the chairman of the national committee, promised full cooperation with city investigators, the report says. Richards could not be reached for comment yesterday.

City investigators found that city officials often allowed fees to be reduced based on an unwritten tradition, apparently 20 years old, which allowed certain costs, such as those for plumbing, electrical and mechanical work, to be excluded from the overall project values.

"There can be found nowhere in writing either a regulation or law which authorizes . . . any sum other than the total cost of construction to be used in the computation of fees for the issuance of a building permit . . ." bthe report says.

The report notes that city officials had failed to implement the recommendations for improved administrative controls contained in two earlier staff studies of the permit process.

In interviews with Post reporters, permit officials said they adopted the policy of eliminating such costs as plumbing and electrical work because the city also requires additional fees for separate permits for that work. The officials said they excluded such costs to avoid what they felt would be double-billing.

But in some cases, the report says applicants who had their fees reduced because city examiners eliminated plumbing and electrical costs did not obtain those permits.

The investigators confirmed that architects, contractors, builders and even city officials all have different interpretations of what should be included in the estimates and what type of permit should be obtained for different projects.

For example, the report questions whether The Washington Post should have been allowed to obtain two permits for a $70,000 expansion of an employe entrance area.

The Post obtained a renovation permit valued at $10,000 for work on the existing structure and a permit for a new addition valued at $60,000. By calling the major part of the work an addition, the Post paid only $8 for that portion of the work, and $380 for the renovation work.

Fees for additions to already existing buildings or for new structures are based on their size -- less than one cent per cubic foot -- and generally are lower than the fees for renovation permits. Had The Post treated its entire project as a renovation as the report suggests it should have done, the total permit fee would have been $2,660.

Ed Ames, director of operating services for The Post, told city officials that the company believed the major portion of the construction was properly treated as an addition and not a repair, according to the report. CAPTION: Picture 1, Report says work on these Wyoming Avenue condominiums was greatly undervalued. By Joel Richardson -- The Washington Post; Picture 2, Report questions whether The Post got the correct permit for the entranceway at left. By Larry Morris -- The Washington Post; Picture 3, Work at Dumbarton Oaks was originally undervalued by $39,000, report says.; Picture 4, City report says work on the Capital Hilton was underestimated by $25,000.; Picture 5, City says work was done at Republican National headquarters with no permit. Photos By Lucian Perkins -- The Washington Post