The National Foundation for Cancer Research has grown quickly in a decade as a center that supports cancer research around the world. But these days, the Bethesda-based foundation has become a center of controversy as well.

Part of the controversy involves how much money the medium-sized foundation claims to have donated to cancer research. The foundation, in its latest annual report, says it "spent or allocated more than $8 million for research" at 50 institutions in more than 14 countries in the financial year that ended in September 1982. Actually, the foundation itself spent only $5.1 million.

The discrepancy occurs because the foundation gave money largely to projects already under way at the 50 institutions, and then included in its $8.3 million statement the money that those other institutions had spent on the projects.

This practice, explained in a footnote to the report, has been criticized by various state officials.

"The feelings are uniform," says Robert Tingler, chief of the charitable trust division in the Illinois state attorney general's office and a recognized expert on charity regulation. "Donated services . . . are not something they should put in to affect their . . . expense ratios."

The foundation, however, says it is appropriate to include such institutional support because the foundation's grants induce the institutions to provide additional support for the research projects. The institutions' commitment to this support is stated in the grants contracts.

The foundation has come under fire for other practices as well, particularly from the Better Business Bureau (BBB) and the National Information Bureau (NIB), a self-monitoring group set up by charities after World War I. Those critics say the foundation spends too much money on fund-raising, makes exaggerated claims about the research it supports, and makes investments with money it should spend on cancer research.

Foundation supporters respond that their fund-raising methods are effective, allowing their little-known organization to raise millions of dollars quickly in the fight against cancer. Foundation officials cite significant research programs that the foundation has supported, such as those at Temple University and Beth Israel Hospital in Boston. Investments, they say, will guarantee research funds for the future.

And they go further than simply responding, having filed three libel suits against their critics--the BBB, the Boston-based Daylight News Service, and Newsweek magazine. Newsweek is owned by The Washington Post Company.

Foundation director Franklin C. Salisbury probably had little idea his organization would generate this kind of controversy when he started it. Salisbury, a lawyer and entrepreneur, had gone into professional fund-raising in 1971 after running various businesses, including a firm that replaced water buffaloes with tractors in Southeast Asia.

Salisbury heard about an aging Hungarian-born scientist and Nobel Prize winner, Dr. Albert Szent-Gyorgyi, who was having trouble getting funds to research his theory that cancer starts at the level of the electron.

Salisbury sent Szent-Gyorgyi a $25 check and in January 1974, began an organization to fund research by Szent-Gyorgyi and other scientists. Szent-Gyorgyi's theory is still a theory, but the foundation has grown rapidly in 10 years in the pursuit of other theories. The foundation says it now finances more than 150 scientists in different projects.

One early recipient of a foundation grant was Dr. Douglas Thornes, a scientist at St. Laurence's Hospital in Dublin, Ireland, who first received a grant in 1977. The Thornes project is one example of the foundation's procedures that have raised questions.

The foundation gave a grant of about $50,000 in fiscal 1981 to St. Laurence's Hospital, according to Thornes, for his ongoing evaluations of two chemical compounds.

The foundation then estimated that more than $985,000--or almost 20 times the amount of the grant-- had been provided by the hospital in salaries, materials, travel costs and laboratory costs to support that grant, according to a New York state financial report. The foundation included the $985,000 in its annual report as part of $7 million it listed as its research expenses that year.

That same year, West Virginia University received an $80,000 grant from the foundation, according to William Reeves, the university's grants director, for research on a new compound that inhibits the growth of tumors. When the fiscal year ended in September, the foundation asked the university for an estimate of how much of the professor's time had been spent working on the research project. Reeves said the university estimated about 15 percent.

Based on that, and on laboratory and other overhead costs related to the research, the foundation figured an additional $43,000 (for a total of $123,000) that it "donated" to the project. The figures are taken from the financial report submitted to New York state, which required the foundation to separate the two figures.

"If that's how they wind their clock, fine," Reeves said. "They can call it anything they want. I've argued and decided the hell with it."

The American Institute of Certified Public Accountants approves the foundation's method of including support from other institutions in the foundation's support figures.

But the Internal Revenue Service says that, for its purpose, a foundation cannot include donations from other institutions in the foundation's figures for how much it donates to research. It is difficult for auditors to verify the dollar amounts claimed for materials and time donated by those institutions, the IRS says.

State officials in New York agree. In 1981, they ordered the National Foundation for Cancer Research to stop including such donations from other institutions as foundation donations on the forms submitted to New York. Illinois' Tingler said he has sent the foundation a similar letter.

Another reason this accounting technique is controversial, says Tingler, is that it distorts the picture of how much the organization spends on research compared to how much it spends on fund-raising.

For example, the foundation says in the fiscal year that ended in September 1982, it spent $4 million raising money, according to its annual report. In comparing that figure with the $8.3 million the foundation listed as its research expenses, one might think that for every dollar the foundation spent raising money, it spent $2 looking for a cure for cancer--unless one reads the footnote saying that the foundation includes financial support from other institutions in its own support figures.

Most of the $5.1 million the foundation itself spent on research went to pay foundation employes and outside scientists working on foundation-sponsored projects. Actual cash grants for fiscal 1982 totaled $744,806, according to IRS forms.

The foundation also characterizes the labs where the research is being done as "NFCR laboratories," and the scientists doing the work as "NFCR scientists."

"According to them the foundation , they have laboratories all over the world," Reeves said. "But if you come on the campuses and look for a sign, or try to find the NFCR lab in a university telephone directory, you'd have a helluva time."

For example, this year, the foundation gave Temple University's Dr. Peter Magee $100,000 for his study of the environmental causes of cancer at Temple's Fels Research Institute, according to Magee. While he appreciates the grant, Magee said, it is "a small percentage"--especially when compared to money the Fels Institute receives from the federal National Cancer Institute (NCI) for the same research. The Fels Institute is scheduled to receive $1.3 million from NCI in the coming fiscal year.

The foundation's relatively small contribution did not stop the foundation from identifying Magee's research as its own. In a promotional newsletter called "Cancer Basics," the foundation called Magee an NFCR scientist. His work on the cancer-causing effects of the chemical nitrosamine, the newsletter said, was done "in his NFCR laboratory."

Magee disagreed with those characterizations. "We are a part of Temple University," he said. "They foundation officials support some of the research. I don't think it's correct to say it's their lab."

At the University of California at Berkeley this year, a university scientist received $35,000 from the foundation. Said Bob Edwards, assistant manager of the Berkeley grants office, "Some of the terms of their agreements are rather bizarre. We don't like them calling it their laboratory--it's our lab which they are providing support for. And we don't like their use of the name University of California at Berkeley."

The university just negotiated a $110,000 contract with the foundation for next year, Edwards said, on the basis that the foundation not say in any of its literature that university labs are foundation labs or that university scientists are foundation scientists. Also, the university will not provide the foundation with estimates of time spent on foundation-sponsored research, Edwards said.

Yale University made a similar arrangement with the foundation for $52,000 given this year to Yale scientist Csaba Horvath for his study of cancer tissue, according to Joseph Warner, grants director at the university until recently.

"They wanted to portray this as their laboratory located at Yale University," said Warner, who said he negotiated three years with the foundation before agreeing to a contract.

Warner said he wrote a May 1982 letter to foundation deputy director Tamara Salisbury, wife of the director, making clear that the foundation could not claim credit for Horvath's ideas and work, which began long before the foundation approached him.

Nonetheless, in its annual scientific progress report published in mid-1983, the foundation lists the Yale lab under "NFCR laboratories," and Horvath under NFCR "regional directors/principal investigators." The foundation's lawyer and spokesman, Mac S. Dunaway, declined to comment on the Yale situation.

Though they may criticize the way the foundation portrays its grantsmanship, few university officials reject the money. An exception is Harvard University, which when offered a grant in 1981, refused to take it on grounds that it could not accept the terms of the contract. Next: Troubles with the Better Business Bureau. CAPTION: Picture, Franklin C. Salisbury, director of National Foundation for Cancer Research, founded the organization in 1974, after sending a Nobel prize-winning scientist $25 to help him do cancer research.