An employe of the D.C. Department of Finance and Revenue is being investigated by a Superior Court grand jury for allegedly trying to cash forged city checks, city officials revealed yesterday.

The employe was identified in police and court records as Rachael Hill Payne, 40, of Seat Pleasant. The records indicated that Payne, a city tax examiner, was arrested in her office on March 3 and arraigned March 17 on a charge of passing fraudulent checks.

The case is now before the grand jury, and Payne is free on her own recognizance.

City Administrator Elijah B. Rogers said yesterday that staff members of the Finance Department discovered last July that "an individual had been forging D.C. income tax refund checks." Officials said the amount embezzled was "between $400 and $500."

Rogers said the charges were first investigated by the Finance Department staff and later by the Police Department. He said the case was then turned over to the U.S. attorney's office, which is now seeking a grand jury indictment.

Coworkers said Payne was on leave yesterday and she could not be reached for comment. Rogers said city finance director Carolyn L. Smith is trying to determine whether Payne should be suspended.