Dorcas R. Hardy, the assistant secretary of Health and Human Services for human development services, created "the appearance of a lack of impartiality" by participating in decisions to award grants to her former employer, a General Accounting Office report says.

The grants involved, including nearly $500,000 in 1983 and somewhat less in 1982, went to the Center for Health Sciences Research at the University of Southern California Medical School, where Hardy worked before joining the Reagan administration.

"The assistant secretary's involvement in grant awards to a former employer was not improper, but does give the appearance of a lack of impartiality," the Sept. 27 report said. ". . . After independent review results became available, Hardy's staff prepared lists of grant applications . . . recommended for grant awards. Hardy approved these lists and participated in meetings where final award decisions were made.

"She told us, however, that she did not discuss the pros or cons of her former employer's grant applications at these meetings."

Two out of the three USC center grant applications were given preference over applications that had received higher rankings from experts in the field, according to the GAO report.

A spokesman for Hardy's office said last week that a response to the report is being prepared.

The report also said Hardy did nothing wrong when, for some grant applications, she pooled funds from different OHDS programs.