The government office handling congressional inquiries on behalf of veterans operated "in an atmosphere of total chaos" and often didn't respond to lawmakers for months, according to a report by the Veterans Affairs Department's inspector general.

The blistering audit blames the former Office of Congressional Affairs director, Sheila Clarke McCready, for causing a "high degree of mistrust" among the staff and doling out improper raises to consultants who were empowered to make management decisions.

McCready, who earns $130,200 a year, was transferred from the office but still holds a management position as a special assistant to the VA's undersecretary for health.

She did not respond to messages seeking comment on the report.

The congressional affairs office links the VA to individuals who contact lawmakers about veterans benefits and the condition of the health care system.

John Hanson, a spokesman for the department, said yesterday the congressional affairs office receives 30 to 50 inquiries a week from lawmakers and their staff with questions such as whether a hospital is going to close or complaints about long waits to see a doctor.

But Hanson said he was "absolutely confident" that there were no delays for inquiries involving the delivery of any individual's benefits, saying those were handled by a special unit that was not part of the problems cited in the report.

The VA provides health benefits to 3.6 million veterans a year and cash benefits to 3.3 million veterans or their survivors.

"The impact of the workload delays has resulted in what both [Office of Congressional Affairs] managers and staff claimed was an atmosphere of total chaos or crisis management," the report said.

Despite the VA's insistence that individual claims were not affected, the caseworker for Rep. Terry Everett (R-Ala.) said it took more than three months to get a response to a letter she wrote last May about "a very sick veteran."

The VA has been the subject of several critical studies during the past year, and VA Secretary Togo West Jr. has announced he will leave before the Clinton administration ends.

In the report on the congressional affairs office, the inspector general found:

* The office overspent its fiscal 1999 budget of $2.3 million by nearly $390,000 because of uncontrolled salary increases, excessive overtime and the hiring of consultants and temporary employees.

* Complaints of favoritism toward consultants over permanent staff "were substantiated."

* The spending of $143,000 to hire consultants in fiscal 1999 was "excessive and inappropriate" because they were performing government work, even making key decisions such as approving leave.

* McCready made four "inappropriate purchases" on her government travel card and a consultant made another 17.

The VA's assistant secretary for policy and planning, Dennis M. Duffy, responded in the report that VA officials will recommend appropriate action relating to McCready's performance. The office's new leadership will complete a reassessment of the congressional operation by March 1, Duffy said.

Consultants' contracts were canceled effective last Nov. 20 and future consultant hiring will be limited, he said.

The report said McCready delayed a career staff member's promotion due to budgetary constraints while increasing a consultant's pay by $21,000, and hiring two other consultants and extending a temporary employee's appointment.