State inspector general needs better tools to dig up government fraud.

Corruption-free government is not an impossibility even in Massachusetts, which has had its share of scandals over the years. But one fraud-fighting agency, which could be a major but relatively inexpensive way to guard against misuse of state and municipal contracts, faces an uncertain future.

Massachusetts lawmakers, who four years ago created a state Office of Inspector General at the behest of a special commission, must now decide whether that agency is to have the tools it needs to do an effective job.

To uncover and prevent wrongdoing such as bid-rigging, contract cheating, and yes, even political payoffs, the inspector general especially needs to be able to subpoena people to testify during investigations.

It is not a question of granting new authority; it's a matter of retaining what already exists but is scheduled to end June 30.

While some legislators have been cool to the idea of giving subpoena power to investigative agencies outside the judiciary, it is questionable how many would vote against the pending legislation. For opponents, then, an attractive alternative would be to let the matter languish in committee - along with the inspector general's right to compel reticent witnesses to testify under oath.

It should be noted that for several years state Attorney General Francis X. Bellotti has unsuccessfully tried to have the subpoena power vested in his office to assist in probes.

The legislation that established the Office of Inspector General also gave the subpoena power - but on a limited, temporary basis. To subpoena someone to testify at agency proceedings, advance approval must be given by at least six of eight members of the inspector general's council, which oversees the investigative agency's operations.

This advance authorization appears to have worked well. The proposed legislation would not change the procedure under which 74 people have been subpoenaed during the past 15 months in conjunction with 10 investigations of misconduct involving various state or local government contracts.

It's probable that only a small proportion of the complaints being investigated by the Office of Inspector General will lead to findings of wrongdoing. But in the interest of safeguarding taxpayer dollars from unscrupulous activity - by public employees or people doing business with state, county, or municipal governments - suspicious matters brought to the agency's attention cannot be ignored.

Joseph R. Barresi, the commonwealth's inspector general, has not in any way abused the powers of his office by embarking on witch hunts. Those who are critical of the concept of an inspector general, with or without subpoena power, cannot fault Mr. Barresi's performance or the sensitivity with which he has handled the agency's responsibilities. Barresi's current term will expire in June 1986, and there is nothing to suggest the highly respected incumbent will not be reappointed for another five years.

But someday the seat will have another occupant, perhaps one with a very different approach. This possibility, however, should not cause concern that a future inspector general would go beyond the call of duty in the use of subpoenas at agency hearings: Subpoenas would still require approval by three-fourths of the inspector general's council.

That bipartisan panel - made up of the state attorney general, state auditor, state comptroller, secretary of public safety, plus four appointed members - is not likely to agree to engage in frivolous probes or to subpoena people whose testimony is not needed.

Despite the apparent merits of the proposed legislation, the bill may need a big outside push. Prospects for passage could hinge on the degree of attention Gov. Michael S. Dukakis gives it.

Having filed the bill, along with two companion measures aimed at strengthening the inspector general's office, Governor Dukakis cannot assume it will be approved by legislators. Indeed, he may need to lobby hard to prevent the measures from getting lost in the shuffle as legislators try to wind up the 1984 lawmaking session by midsummer.

The legislation would in no way alter the safeguards provided in the inspector general statute. The identities of those called to testify will still be secret, the discussions during the closed-door proceedings will not be made public, and witnesses will retain the right to be accompanied by their attorneys.

These protections of confidentiality have been scrupulously respected by Inspector General Barresi and his aides.

Besides making permanent the inspector general's subpoena authority, the governor, whose 1982 campaign for the Democratic gubernatorial nomination was largely keyed to the anticorruption issue, is seeking to:

* Clarify the inspector general's investigative authority to include all types of public contracts, regardless of whether government funds are directly involved.

* Protect public employees and government contractors from retaliation that may stem from their complaints about fraud abuses. In the past, potential ''whistle-blowers'' have been unwilling to come forward with incriminating testimony, lest they lose their jobs or become subject to mistreatment by those involved in the alleged misconduct.

The Dukakis proposal prescribes a $1,000 penalty for anyone who attempts to retaliate against a public employee or contractor for reporting wrongdoing to the inspector general. In the absence of such a penalty, it is sad but realistic to expect that some embittered bid-riggers and contract cheats would seek revenge on their accusers.

If state lawmakers are timidly unwilling to make permanent the inspector general's limited power to subpoena, they could at least extend it for another four years.

Anything short of this would take the teeth out of the inspector general's bite. In addition, lawmakers would be squandering taxpayer dollars on a toothless watchdog, too feeble to ferret out corruption in public contracts.