By MARIA NEWMAN

Even though he lost a bid in November to join city government when he ran for comptroller on the same ticket as Mayor Rudolph W. Giuliani, Herman Badillo nevertheless is about to become part of the City Hall machinery.

This morning Mr. Badillo will report to work as a mayoral counsel examining school finances, and will be Mr. Giuliani's eyes and ears over the finances of the embattled school system. His appointment came during several days of public feuding between the Mayor and Schools Chancellor Ramon C. Cortines.

Mr. Badillo said by telephone yesterday that the Mayor and Mr. Cortines share fundamental beliefs about the school system, despite the differences that set them apart. "Listen to what is going on," he said. "The fight has to do with the bureaucracy. We say do more for the children. Even Cortines admits that the bureaucracy is bloated."

Unpaid Deputy Commissioner

"It's only important that we have a system for verifying that the bureaucracy does not survive as it has survived over the years," he said.

Mr. Badillo will be an unpaid deputy commissioner in the Investigation Department, with a title of Special Counsel to the Mayor for Oversight of Education. The Mayor said last night that Mr. Badillo would work with Beverly Donohue, deputy director of the Management and Budget Office.

Such was the uncertainty over details last night that Mr. Badillo said he was unaware of any relation between his new position and the Department of Investigation. "I've never heard anything about it," he said. "All I know is that I'm a special counsel. But I don't care about titles. I'm not getting paid anyway."

Mr. Badillo, who is 64, is a partner in a law firm and a certified public accountant. He has also been active in politics for years, including a stint as a United States Representative and a Deputy Mayor under Mayor Edward I. Koch.

A lifelong Democrat, Mr. Badillo was hoping for a political comeback last fall after 15 years out of electoral office when he ran with Mr. Giuliani on the Republican ticket. He lost decisively to Alan G. Hevesi in the race for comptroller, 56 percent to 41 percent. Last week Mr. Hevesi suggested that the mayoral counsel might not be needed; he said he disagreed with the Mayor about the need for further financial oversight.

'The Mayor Trusts Me'

Mr. Badillo said the Mayor picked him partly for his expertise in financial matters but also because he and the Mayor found during the campaign that they work well together: "The Mayor trusts me and knows I'm a stand-up guy."

Council Speaker Peter F. Vallone expressed some hesitation over Mr. Badillo's role. Saying he was glad that Mr. Cortines was staying, he added: "In terms of Herman Badillo's role, we'll see how that works out over time. But if he can help the process, fine."

Cristyne Lategano, the Mayor's press secretary, said last night that it was unclear what kind of access Mr. Badillo would have to files outside his jurisdiction.

Asked if there were conflict-of-interest concerns, Ms. Lategano said, "If there is a conflict, I'm sure he will recuse himself from whatever areas might pose a conflict."

While many community leaders and parents saw the appointment of Mr. Badillo as a strong-arm tactic by the Mayor, Mr. Badillo said he was confident he would have a good working relationship with school officials. He said his job would be to gather facts, rather than to prosecute.

'I Want to Improve Standards'

"Everybody knows from last year's campaign that I want to improve standards in the schools," he said, adding that educators need not fear that he will look only at the bottom line when he begins his job.

He said he had long been concerned with education in New York. A product of the public school system, he is also a trustee for the City University of New York. And, he said, he has a longstanding friendship with the president of the United Federation of Teachers, Sandra Feldman. "She wants what I want," he said. "She agrees that the key people in the schools are the teachers, not the bureaucrats. She wants to get more money into the classroom, not the central office."

Copyright 1994 The New York Times Company