District of Columbia agencies would accept only cash or cashiers' checks from citizens paying traffic tickets or any other fees less than $50, under a regulation proposed by D.C. Controller Alphonse G. Hill.

Hill's proposal comes in the wake of a General Accounting Office report that sharply criticized the city government for failing to seek repayment on thousands of personal checks that were made out to the city and bounced. According to GAO, the city lost $2.1 million in revenue last year from uncollected bad checks.

Hill said he realizes that the new regulation might inconvenience many citizens, particularly those who handle routine permit transactions by mail. "But why should the city be continually subjected to dishonored checks?" he added. "Do you want us to have a big problem for the city or a little problem for the individual citizens?"

Hill said he is waiting for City Administrator Elijah B. Rogers to approve the recommendation about cash payments. Rogers said yesterday he has not yet seen Hill's proposal, and he does not know what his decision will be. "We have a responsibility to recover and recoup those funds ," he said.

In a report released yesterday, GAO auditors found that 11,126 checks valued at $3.5 million and sent to various city agencies to pay for licenses, permits and traffic tickets were returned to the District because of insufficient funds in the check writers' accounts.

The report said the city expects to recoup only about $1.4 million of the amount and criticized the District government for "not aggressively pursuing repayment of dishonored checks."

The report said the loss of revenue to the District is huge when compared to that of Fairfax County, Richmond and Baltimore, which strongly enforce their collection methods. Richmond issues warrants for persons whose checks for real and personal property taxes and traffic tickets bounce. Fairfax County and Baltimore place liens on bank accounts when bad checks are written for personal property taxes, the report said.

Hill noted that a large number of the bounced checks here had been made out for less than $20. Most of them went to the Department of Finance and Revenue, Department of Transportation and Department of Environmental Services as payment for such items as health records, automobile tags, driver's licenses and construction permits.

The GAO report recommended that the District consider requiring cash for over-the-counter payments for tickets and permits of less than $20.

Hill said the city will begin to keep an "updated list of continuous check offenders," and that cases of those who repeatedly refuse to repay the city will be referred to the Corporation Counsel's office for prosecution.

He said it will now be solely up to the D.C. Treasury, and not the various city agencies, to seek repayment on bounced checks. GAO investigators found that the agencies did not have the personnel to do an adequate job of collecting bad checks.

Hill said centralizing the records in one agency should speed up the collection process.

GAO recommended that the city charge fees to District agencies for every check sent to them that bounces, to give the agencies an incentive to seek repayment on the checks. But, Hill said "We don't think legally we can do that."

The auditors were not able to compute the amount of revenue that might have been lost from bad checks sent to the city for payment of income taxes since that information would have to come from citizens' income tax returns, which are confidential, the report said.

It was not clear yesterday how quickly Hill's proposed regulation might go into effect. Rogers said he did not know whether the city would be legally required to provide citizens 30 days notice before imposing the new requirements. However, he said that if formal notice is not required, he will "discuss the proposal with a number of people" before making a decision.