Homeowners Association (HOA) Payment Approval Process: Who Approves Bills and Who Handles Payments?
Homeowners Associations (HOAs) play a crucial role in maintaining the functionality and aesthetic appeal of a neighborhood. One aspect that often comes into question is the payment approval process for bills. Is the HOA treasurer supposed to approve each bill, or is it common to leave the whole payment process to the HOA manager? This article explores the varying processes in different HOAs and provides insights into the roles and responsibilities involved.
Who Approves Bills?
When it comes to approving payments, the process can vary widely depending on the specific board and rules in place. For instance, our HOA manager sends each invoice to the related committee chairman for verification that the service or product was authorized and delivered satisfactorily. An approval from the chairman is then required. Only after these steps, the manager prints the check, attaches all necessary backup documentation, and mandates two board officers to sign the check. The HOA manager himself/herself does not sign checks.
Such a structured system has been in place for 15 years, ensuring transparency and accountability. However, it's important to note that this isn't a one-size-fits-all solution. The rules governing payment approval can be customized based on each HOA's preferences and requirements.
Role of the Management Company and Treasurer
Management companies often handle the bookkeeping aspect of HOAs, but the approval process still relies on the board and treasurer. In some HOAs, the management company is responsible only for bookkeeping and not the property management. For example, our HOA management firm processes all regular bills immediately, such as water and electricity, without requiring approval for these recurring expenses.
For exceptional bills that may arise, our management firm advises getting approval from the board. This approach ensures that neither the management company nor the treasurer has unchecked financial authority. If a management firm does handle the property, it becomes even more crucial for each bill to be reviewed and approved by a board member to prevent any vendor from increasing prices without transparency.
Rule-Based Approvals
HOAs can tailor their payment approval processes based on the rules established by the membership. For example, in the HOA I was president of, all bills required my approval unless they were regular monthly expenses like landscaping or security services. These recurring bills were automatically processed after internal verification by the treasurer. However, for any uncommon or one-time bills, the approval of the board president was mandatory.
This system was designed to maintain financial oversight and prevent misuse of funds. It highlights the importance of having a clear, well-defined process that can be customized to suit the specific needs of each HOA. Ultimately, the board and management company are held accountable for their actions, and this accountability is ensured through various layers of approval and oversight.
Conclusion
The payment approval process for HOAs can vary significantly. Understanding the specific rules and roles in place is crucial for both the HOA members and those responsible for management. Whether it's the treasurer, the management company, or the board members who handle approval, it's important to maintain clear, transparent, and accountable systems to ensure the financial health and stability of the community.