EXAMINATION OF PAID CHECKS FOR ALTERATION OR FORGERY - 8041.1

(Revised: 03/2024)

 

Alteration

Agencies/Departments shall immediately notify the State Treasurer's Office (STO), Item Processing Section, when they find a check amount and/or payee name has been altered. Notify the Department of Finance, Office of State Audits and Evaluations (OSAE), and the California State Auditor’s Office, Investigations Division (State Auditor) within 30 days. For information on reporting fraud or errors, see SAM Section 20080. Alterations are generally discovered when the monthly reconciliation of the bank and the centralized State Treasury System accounts is performed. For more information on bank reconciliations, see SAM Sections 7923 and 8060.

Forgery

Agencies/Departments are responsible for reviewing checks for possible fraudulent endorsements. An endorsement is a signature or stamp on the back of a negotiable instrument (e.g., a check). Agencies/Departments will at least test-check endorsements for possible deviations. The purpose of this examination is to determine whether the payee’s name appears as the first endorsement and to attempt to detect fraud. Agencies/Departments shall give attention to deviations from the normal, such as:

• Endorsements in similar writing on several checks payable to different payees.
• The same subsequent endorser on several checks.
• An agency/department employee is a subsequent endorser.
• Effacement (erasing or wiping out) of endorsements.
• Manual endorsements where stamped endorsements would be normal.

Agencies/Departments that detect deviations from the normal shall investigate and notify the OSAE and the State Auditor within 30 days of any indication of fraud or errors determined by their investigation. For information on reporting fraud or errors, see SAM Section 20080.

Agencies/Departments shall send a letter, in duplicate, to the payee requesting acknowledgment of payment if there is a reasonable question concerning the authenticity of the endorsement. If an agency/department has been notified by a payee that a duly issued check has been lost, stolen, or not received, and the check in question is determined to have been paid by the STO, the issuing agency/department will then initiate the following action:

1. Obtain the Forged Endorsement Affidavit form, STO–CA–0034, from the STO, Item Processing Section at ItemProc@Treasurer.ca.gov. Complete section 1 - Description of Warrant/Check. In the “Name of Payee” block, type the name exactly as typed on the check. If initials were used, type the full name in parentheses, if known. For example, if the check is made payable to J. Doe, type “J. Doe (John Doe).” If using a post office box, indicate a street address whenever possible. On the top of the STO–CA–0034, indicate the agency/department address where the payee will return it.

2. Forward three copies of the STO-CA-0034, with a full and legible copy (front and back) of the alleged forged check attached to the top of each copy of the STO-CA-0034 for the payee’s signature. The payee must sign all three copies in ink. The payee’s signature must be either witnessed by two disinterested parties or notarized. Witnesses must sign all three copies; one notarized copy shall suffice. The payee will return all three copies to the agency/department.

3. The agency/department’s accounting officer or designee shall review and compare the payee’s signature with the endorsement on the check. Compare the alleged forged endorsement with any other material on file in the payee's handwriting. The agency/department shall, with reasonable justification and proper notice to the payee, refuse acceptance of the forgery affidavit if it is determined beyond reasonable doubt that any statement on the affidavit is perjured.

4. Forward, in triplicate, the acceptable affidavits and copies of the alleged forged check to:

STO Item Processing Section
P.O. Box 942809
Sacramento, CA 94209–0001

5. Upon receipt by the STO, the first copy of the STO‑CA‑0034 shall be charged back to the applicable bank. The STO shall return the second copy to the agency/department with the charge-back date indicated on the front. The STO shall retain the third copy.

6. The bank has 30 days from the date of the charge-back to protest. The STO shall immediately notify agencies/departments of any action by the bank. Reissuance by the agency/department before 30 days from the date of charge-back to the bank is at the agency/department’s own risk. For procedures on handling forged warrants, see SAM Section 8427.