Pat Kennedy was formally released from the final two years of his contract as Iona's basketball coach, clearing the way for him to take over as head coach at Florida State.

"We will take no legal action against Pat," Iona's president, Brother John Driscoll, said. "We feel disappointed that he is leaving us, but we will not hold him to his contract."

Saturday, Driscoll said neither Kennedy nor Florida State officials had contacted him and that they were failing to fulfill their obligations on job shifts as outlined by the NCAA. Yesterday, Driscoll said he had not asked Kennedy to explain his actions and no explanation was offered. He said a search for Kennedy's successor has begun . . .

Michigan State guard Scott Skiles, who helped the Spartans eliminate Georgetown from the NCAA tournament, has been selected college basketball's player of the year by the weekly publication Basketball Times.

Joining Skiles on the publication's first-team all-America squad were forward Len Bias of Maryland, center Kenny Walker of Kentucky, forward Walter Berry of St. John's and guard Johnny Dawkins of Duke. Dawkins' coach, Mike Krzyzewski, was named coach of the year . . .

United Press International also named Krzyzewski its coach of the year. In a nationwide balloting of 125 sportswriters and broadcasters, Krzyzewski received 39 votes, followed by Dick Versace of Bradley with 24 votes and Lou Carnesecca of St. John's with 22 . . .

Georgia Tech basketball player Craig Neal has been reprimanded along with other students who had advance knowledge of a problem on a test, but the reprimand will not affect Neal's eligibility to play for the Yellow Jackets.

Georgia Tech, No. 6 in the nation, will face Louisiana State in the NCAA tournament Thursday night.

Neal said he received an anonymous telephone call last month from a woman who described to him a problem that was to appear on a test in a management class the following day.

He said he discussed the problem with friends taking the course and left an outline of the problem in his girlfriend's apartment. A friend, also in the class, made a copy and told Professor R. Earl Green his test had been compromised.