Pentagon auditors, in an unusual internal report that has fueled controversy over defense spending priorities, have found conflicts of interest and cronyism in the Defense Science Board that advises the military on future weapons programs.

The auditors reported that the board is violating federal conflict-of-interest law by allowing defense industry executives who serve on it to vote on decisions that might benefit them. The report also said membership on the prestigious board appeared to be based on "personal knowledge" among Pentagon and industry officials rather than just on technical expertise.

The Pentagon's research chief, Richard D. DeLauer, sharply rejected the most serious criticisms and suggested the inspector general's office would damage its "credibility" and "usefulness" if similar reports become public in the future. Members of Congress who read the report have threatened to withhold the board's funding this fall if problems are not corrected.

The audit presents a new problem for the Pentagon's already embattled multibillion-dollar research and procurement operation. Critics have said the Pentagon is paying far too much for spare parts, and Congress voted this summer--despite Pentagon objections--to establish an independent testing office for new weapons.

Advice from the 30-member Defense Science Board has a "major impact" on decisions on new weapons and other planning issues, according to Alvin Tucker, deputy assistant inspector general in the Pentagon. During the past several years, the board has studied the MX missile, laser weapons and scores of other controversial subjects.

Senate Minority Leader Robert C. Byrd (D-W.Va.) and Sen. David H. Pryor (D-Ark.), who said the board "reeks of conflict of interest," threatened to try to cut off its funding this fall unless the Pentagon's inspector general assures them it is following the law. "I wonder how much objectivity we are getting," Pryor said.

In an interview this week, DeLauer, who is undersecretary for defense research and engineering, defended the Defense Science Board and said of the controversy, "It's a goddamn mess." DeLauer sat on the board when he was a civilian working for defense contractor TRW Inc.

"We might have been sloppy about filling out the forms right, which we've fixed, but there's never really been a problem with conflict of interest," DeLauer said. "You've got to pick the people with the best information."

DeLauer declined to discuss specific criticisms while the Pentagon's inspector general prepares a response for Byrd and Pryor. Norman R. Augustine, chairman of the Defense Science Board and president of Martin Marietta Aerospace, a major defense contractor, failed to return several telephone calls seeking comment.

Augustine asked for the review of the board's regulations and how well they are being followed. In a memorandum to the inspector general, DeLauer sharply criticized the auditors for allowing that internal review to be read outside the Pentagon. "One question is, therefore, the appropriateness of this report, done in response to an internal request for a review, being distributed outside the department," DeLauer wrote.

"It appears that the credibility of, and indeed the usefulness of your office to the DoD, will be eroded if this practice persists."

DeLauer also said he was "concerned about the biased tone and misunderstanding of the facts" in the report. He objected to the "many inflammatory statements made that do not logically follow from the stated facts, that are not true and that could be harmful."

The report said that none of the 33 advisory task forces appointed by the Defense Science Board have met legal requirements for disclosing meetings, keeping minutes and filing personal disclosure forms. Mandated conflict-of-interest reviews were "superficial" and "perfunctory," the report said, and often took place after a board member had begun his term.

In one case where a conflict of interest was found to exist, the member disagreed and ignored the finding. "No further action was apparently taken and the individual did in fact participate on the task force," the report said.

Of the 124 disclosure forms that were filed by board members and their task force appointees, 106 revealed a significant interest in a company or organization doing business with the Defense Department. Among those most frequently represented were the University of California, TRW, Hughes Aircraft, Bell Laboratories and the Raytheon Corp.

"It perturbs me to a great extent," Pryor said, "that this board . . . is comprised of individuals who have some of the largest and most profitable, lucrative defense contracts within the entire spectrum of the Pentagon."

Pentagon auditors studied one task force that was supposed to find a way to keep overseas civilian defense workers on the job in times of crises if their work is important to the armed forces. Instead, the task force--with members from Hughes, General Dynamics, Raytheon, McDonnell Douglas and other defense contractors--emphasized the rights of those civilians and the Pentagon's obligation to them.

"There was no indication in the minutes or in the final report that the military's point of view had been considered . . . ," the auditors found.

In addition, the executives and officials on the board cited each other as references, and frequently had held each other's jobs in the past. Pryor called it "the good ol' boy network" in action.

"It appeared that the membership of the DSB and the task forces was based on personal knowledge rather than based on a group of technical experts drawn from a universe of knowledgeable individuals," the report said.