Arco oil company will donate over $1 million to finance the construction of an auditorium in a new building that will house the John F. Kennedy School of Government, Don K. Price, dean of the school, said yesterday.

The donation is the third gift of more than $1 million that the Kennedy School has received in the past several months in its $21 million fundraising drive.

Politics in Red

Though the Kennedy School ran a $132,000 deficit in 1975 and was $181,000 in the red in 1976, Price said the recent grants placed the school in a much stronger financial position, although the school may still show a shortfall this year.

Last November, Hale Champion, former vice president for financial affairs, said that if the Kennedy School did not "catch-up" with its deficit soon, it would face "the threat of having to slow its development."

The International Business Machines Corporation and the Hewlett Foundation also gave $1 million gifts to create permanent chairs for the Harvard Program in Public Policy and Administration, a major branch of the Kennedy School.

The Institute of Politics, also part of the Kennedy School, will be responsible for organizing the events which will take place in the "Arco Forum."

"The forum will be sort of an am- pitheatre, similar to the Boston City Hall," Johnathan Moore, director of the Institute of Politics, said yesterday, and "we'll use it for lectures, speeches, films and television."

Price said many details of the grant have not been ironed out yet, but that there was little chance of losing the gift now. He added that the auditorium would probably not be built without the Arco donation.

Chase N. Peterson '52, vice president for alumni affairs and development, said yesterday the $21 million fundraising effort is an attempt to put the Kennedy School on "permanent founding by creating a considerable endowment."

"We had a very difficult first year, but in the last six months a number of things we've been working on have come through," Peterson said, adding that "You have to dig a lot of wells before you come up with any oil."

Peterson also said that "other large things" that have not been completely confirmed will probably come through in the next few weeks.

It is difficult to convince corporations and foundations to donate money to a school that trains "those damn bureaucrafts," Price said.

"But big business must come to realize that our bureaucrafts must be competent if they are going to keep huge government agencies efficient and responsive," Price said