Labor Day at the Oak Hill Youth Center outside Laurel, where the District sends its most dangerous juvenile delinquents, was a day for family, friends and drugs.

Some visitors had smuggled marijuana, PCP and cocaine into the maximum-security facility, and residents were smoking behind the gym, in the far reaches of the football field, in the bathrooms. "You should have seen them," said Joseph Eccles, a counselor who was working that day. "It was a fact that we knew just about the whole grounds was high."

Eccles and other officials acknowledge that drug trafficking at Oak Hill -- a 20-acre complex operated by the District government in Anne Arundel County for 150 young males -- has become widespread, and that drugs are available for the asking.

"Drugs and Oak Hill -- it's the thing that keeps this place alive," said a delinquent who is at Oak Hill for a second time.

The drug problem, some Oak Hill officials said, is thwarting the institution's stated mission: to "change the behavior patterns and attitudes which resulted in these young men being placed here."

In interviews during the past several weeks, counselors and youths described an institution that has almost given up trying to combat the drug problem, where administrators and staff members feel powerless to act, where a few counselors allegedly use and deal in drugs themselves.

One of the head counselors, Edward Morgan, said he caught a staff member snorting cocaine in a dormitory, Cottage 8 -- but that the administration's only action against the man was to transfer him to another cottage.

More than a year ago, Manrose Nickens, an investigator for the Youth Services Administration, the agency that runs Oak Hill, told high-level officials in a memorandum that juveniles "were complaining about staff bringing in drugs to youths" in Cottage 9. The problem in that cottage has not been solved. It, among others, was cited by those interviewed as a place where drugs are available today.

Counselor Melvin Crawley said he tells his boys: "We know that the drugs are here on grounds, but give us that much respect that we don't have to have it done in this cottage."

Audrey Rowe, a top-ranking official at the D.C. Department of Human Services, which has authority over Oak Hill, said she knows of the allegations about drug dealing by counselors. She said she wants to stop the flow of drugs by searching staff members as they enter each day and by tightening security on visiting days.

"I think the institution is wringing its hands about it rather than throwing its hands up," said Rowe, who is commissioner of social services.

Told about the extent of the drug problem, D.C. Superior Court Judge Gladys Kessler, who presided over the juvenile court from 1981 until June of this year, said, "It makes a mockery of the notion that children are being sent to Oak Hill for rehabilitation."

Oak Hill's record as a place for rehabilitating juveniles has been in question for more than a decade, as judges found that staff members were abusing youths and ordered the institution in the 1970s to take steps to stop it. As recently as two weeks ago, government investigators testified at a congressional hearing that Oak Hill was violating federal law by not providing special education to emotionally or mentally handicapped youths.

The juveniles at Oak Hill -- who include murderers, armed robbers and drug dealers -- are tried under an entirely separate system from adults. Their hearings are closed and the terms are usually shorter, ranging from several months to several years; in no case can a youth be held past his 21st birthday.

A Washington Post reporter interviewed juveniles and counselors at Oak Hill for the last several weeks. The juveniles were assured confidentiality, in keeping with the general practice of The Post and the city's courts that teen-age offenders not be publicly identified by name.

Most of the youths interviewed did not see drug use as a major problem. For them, drugs provide a temporary escape from the long days in Oak Hill's school and long nights behind locked doors, in rooms that would be called cells in an adult prison. $/ Test Results Staggering

During the summer, the Youth Services Administration opened a halfway house for delinquents in the final 30 days of their sentences. The halfway house is a restored farmhouse several hundred yards from Oak Hill's imposing double fence, with its barbed wire and razor wire guarding the top and bottom.

The idea was simple: to provide the youths with advice on getting back into school, looking for a job, managing money. First, however, James Robinson, a veteran Oak Hill counselor who helps run the halfway house, decided to test for drugs as soon as each youth arrived.

Robinson said he was staggered by the results. During the 14 years he has spent at Oak Hill, he has seen youths using drugs, but had never tried to document it. When the results came back on the first 27 delinquents, 15 had shown positive -- "dirty," as Robinson put it -- for PCP, marijuana or cocaine, according to records Robinson provided.

Confronted with the results, virtually all 15 admitted they had been using drugs at Oak Hill, Robinson said.

"All along, you suspect the situation may be like that. Then, when you see a report like that you start realizing the stark truth," he said. "It means Oak Hill is dirty . . . . It's gotten out of hand."

Other counselors said they do not need a laboratory test to confirm that the problem is widespread.

"I've pulled so much dope out of here it's a shame," said James Baker, the recreation counselor.

When Baker and other counselors find drugs, they report it to the superintendent, and the drugs are locked in a safe in his office. On a recent Thursday afternoon, Edward Mahlin, the deputy superintendent, pulled from the safe 24 sealed envelopes labeled PCP, marijuana and cocaine.

The youths may be disciplined -- seven days in seclusion is a common punishment -- but criminal charges are rarely brought.

"There's no way that we can stop either staff or students from bringing them in," said Rayford Myers, the superintendent.

Myers said Oak Hill has a harder time than adult prisons such as Lorton in controlling the actions of its residents and visitors. A few youths are allowed to go home on a weekend. Parents and visitors can mix with the youths, and search procedures are not as strict. For example, female visitors often are not patted down because Oak Hill has few female guards, he said.

"I think it would help to have more guards in the visiting area so parents cannot do as much passing of drugs like they do now," Myers said.

Patricia Quann, who as head of the Youth Services Administration is Myers' boss, said, "Drugs and jail -- it's always there. It's always a war. It's always a problem. At least I don't have heroin like I had in the Maryland penitentiary," where she formerly worked.

Quann said it is likely that a majority of youths at Oak Hill use drugs at some point during their incarceration. "It wouldn't surprise me," she said. "That's their behavior on the street."

Of the drugs used at Oak Hill, Quann said the most dangerous is PCP, phencyclidine, a hallucinogen that causes violent reactions and is blamed for much of the behavior that results in juvenile crime.

Recognizing the extent of the problem and doing something about it has become a point of contention among Oak Hill counselors. For instance, Robinson, who started the drug testing at the halfway house, said he has recommended that the delinquents be tested periodically for drugs while staying at Oak Hill as well, but Oak Hill's top counselors rejected his proposal.

"We have staff that look the other way," Morgan, the head counselor in Cottage 8, said. "There's a lot of profiteers."

Morgan's assertion about profiteering is supported by interviews with other counselors and delinquents. One counselor was cited by three staff members and six youths as a drug user and extensive supplier; four other counselors, a social worker and a kitchen employe were each named in at least one interview as being involved in drugs. There are 57 counselors at Oak Hill.

Earlier this year, a staff member was sent to jail on drug charges. John F. Brown, a counselor, was arrested in December while speeding on the Baltimore-Washington Parkway. U.S. Park Police, who patrol the parkway, reported that they found heroin and drug paraphernalia in his car, according to court records.

Brown pleaded guilty to possession of the paraphernalia, and the heroin charge was dropped.

Brown was caught outside Oak Hill's grounds. Inside the institution, it is a different story.

When counselor Morgan alleged that a colleague was using cocaine inside a cottage, he said the administration's action -- a transfer -- merely moved the problem elsewhere. Superintendent Myers, responding to Morgan's account, said he checked his files, and that the man was transferred because of a personality dispute.

Twice, the institution has allowed undercover narcotics agents to look into drug trafficking by counselors and youths. Both investigations went awry when the agents had their covers blown, according to two city officials. 'Making a Killing'

Cash is central to drug dealing on the streets, and it is the same at Oak Hill -- except it is harder to come by and more coveted.

Oak Hill prohibits youths from carrying either cash or drugs. Any money earned by the youths in jobs at the institution, or given to them by their families, is supposed to be turned over to counselors for banking. The juveniles cannot withdraw money without going through a counselor.

As a result, a black market has sprung up at Oak Hill, counselors and youths said. Money and drugs are the chief commodities. A few delinquents use their drug profits to curry favor by making loans to counselors. Recreation counselor Baker said he knew of cases in which youths lent as much as $200 to counselors, and occasionally, those loans were repaid in drugs, not cash.

"It's a good deal for the staff member ," Baker said. "He can give a kid a little amount of drugs for a large amount of money that he borrowed and can't pay back."

Early this summer, some delinquents went to authorities with complaints about counselors shaking them down for money, Oak Hill officials said. The youths were apparently unconcerned that their complaints were also an admission that they had carried cash in violation of the rules.

One youth alleged that a counselor took $50, kept $41 and banked the remaining $9 in the delinquent's personal account. On July 9, Greg Tyler, a youth services investigator who was looking into the complaints, visited the Oak Hill school, the best way to reach the most youths.

Whether their complaints had merit, Tyler told the delinquents, they should know better than to carry cash -- everyone at Oak Hill knows that it was drug money.

Tyler's visit was confirmed by other officials, but Tyler would not discuss the details of his investigation.

A few hundred dollars can go a long way inside the institution. It can be gambled away at informal casino nights, spent in the canteen or used to buy expensive tennis shoes -- the only personal clothing a delinquent may wear with his institutional uniform of T-shirts and blue jeans. Fancy sneakers have become a status symbol among the delinquents; youths who cannot afford to buy their own must wear those issued by the institution.

By the same token, those with money -- a small group of delinquents who sell most of the drugs -- have higher status as well.

"It's common knowledge on the grounds exactly who the dope dealers are," said counselor Eccles. "They're mostly the ones who've got the most power . . . . It's just like on the street . . . . You've got the 'Godfather' and his lieutenants that run each and every unit and sell drugs for him."

To hear the delinquents tell it, it is easy to smuggle drugs into Oak Hill.

In their interviews, they described how outsiders take hollow tennis balls, fill them with marijuana and PCP, and fling them over the double fence under the cover of darkness. They talked about visitors hiding drugs in socks and underwear to avoid detection, and how one youth manages to stash away drugs for boys incarcerated at Cedar Knoll, a nearby facility for younger children that does periodic drug testing on its residents.

The youths' stories -- many plausible, others harder to believe -- are difficult to verify. On certain details, they were consistent.

For example, the youths, who were interviewed independently, all agreed on the going price for drugs at Oak Hill: A "nickel bag," which contains enough marijuana for 20 "joints," costs $5; the 20 joints bring in $40, at $2 each. A PCP-laced cigarette is $5.

And they all remember Labor Day.

"Everybody made a killing," said one youth, referring to the sales made that day. He compared it with the scene on Seventh Street NW, site of many drug arrests. The youth, who claims to have used PCP four times at Oak Hill this year, said he and another youth have been dealing in drugs.

"Me and my boy, we made $600 in the last six months," he said.

Another youth said he was earning as much as $300 a week, and sometimes $100 a day, selling drugs this spring. He said he stopped at his mother's insistence. "I made about $1,000 out of the institution," he said. "I had people in every cottage selling stuff for me . . . . I had 15 pairs of tennis shoes."

His supplier was an Oak Hill counselor, he said, who gave him marijuana that "looked like real gold, hard stuff." The money he made won him a special standing with his own counselor, he added.

"If my counselor sees me selling something, a joint, reefer, he won't do nothing to me," the youth said confidently, explaining that he lends his counselor money as a way of gaining immunity.

A delinquent who said he does not use drugs now, counted off 17 of the 20 youths in his cottage who do. The delinquent said he complained about the drug problem when he appeared this summer before Judge Henry Kennedy in Superior Court, but he said nothing happened.

Kennedy said he recalled the case, and that he felt the court was not in a position to address the issue. "I didn't take any action on it. I think I may have said if there are drugs, he should bring it to the attention of his lawyers or higher-ups in the department of human services ," Kennedy said. A Lack of Counseling

Administrators in the juvenile corrections system say they are well aware that the drug use does not begin at Oak Hill. The juvenile court tests delinquents for drugs shortly after their arrest; for PCP alone, 50 percent have tested positive, court officials said.

On a recent tour of Oak Hill, superintendent Myers pointed to a drug counseling session being held for about 15 youths. He said such sessions are rare; the institution provides them only when a judge orders them for a particular delinquent. The counseling takes place about twice a month; in August, though, no sessions were held.

As for the other 135 youths at Oak Hill, "it's a problem," Myers said. "Probably all the kids could use it."

The situation has posed a dilemma for Quann, who said more money will be made available for drug counseling. Ultimately, she felt, the answer would be to add programs to relieve the boredom and aimlessness inside Oak Hill. Yet, those programs would be thwarted by the presence of the drugs, she added. "How do you deal with vocational problems if everybody's walking around high?"