For Better or Worse: Bill Pay to Strengthen HOA Relationships

Payment controls that protect association funds and build trust

The relationship between a board and its management company rests on trust, and few things test that trust more than money. How invoices are approved, how payments are made, and how the board can see what was paid all shape that relationship. A sound accounts payable process protects the association's funds and keeps vendors willing to do good work.

This article is general information and is not legal or accounting advice. The association's attorney and accountant should be consulted.

What Accounts Payable Covers

Accounts payable is the process of receiving, approving, recording, and paying the association's bills. It includes landscaping and pool contracts, utilities, insurance premiums, repairs, and reserve projects. In a managed community, much of the work is done by the management company, but the money belongs to the association and the board remains responsible for it.

Transparency for the Board

Directors should be able to see what is being paid and why. A good process provides:

• Online access to invoices, approvals, and payment records at any time
• Monthly financial statements that compare actual spending with the budget
• A check or payment register showing every disbursement, the vendor, and the amount
• Copies of contracts so invoices can be compared with agreed prices

Records of receipts and expenditures are official records of the association, and owners have the right to inspect them. Clear, organized records make those requests simple to answer. More on owner access is covered in who can access HOA documents.

Controls That Prevent Fraud

Paper checks and informal approvals are vulnerable to error and theft. Electronic workflows reduce those risks when they are paired with sound controls:

• Approval limits. Invoices above a set amount should require approval by one or more directors before payment.
• Separation of duties. The person who enters an invoice should not be the only person who approves and releases the payment.
• Vendor verification. New vendors, and any change to a vendor's bank account, should be verified directly by phone using a known number before payment.
• Regular reconciliation. Bank statements should be reconciled monthly and reviewed by the treasurer.
• Restricted access. Only authorized people should be able to create vendors or release payments.

Florida law adds its own protections. Associations and their officers, directors, employees, and agents may not use a debit card issued in the association's name to pay association expenses, under section 720.303(13) for homeowners associations and section 718.111(15) for condominiums. Associations must also maintain insurance or a fidelity bond covering the people who control or disburse association funds, sized to the maximum funds in the custody of the association or its management agent at any one time. A homeowners association may waive that requirement only by an annual vote of the members. Warning signs of misuse are described in HOA fraud: know the signs.

Paying Vendors on Time

Good vendors are a community asset. When invoices are processed promptly and paid on schedule, vendors are more willing to respond quickly in an emergency and to bid on future work. Late or lost payments damage those relationships and can lead to late fees or suspended service. A clear process also helps resolve disputed invoices before they become disagreements.

Owner Payments Matter Too

The same principles apply to money coming in. Owners should have secure options for paying assessments online, by automatic draft, or by mail, with prompt posting to their accounts and clear statements. Accurate owner ledgers reduce disputes and support fair, consistent collections.

Questions for a Management Company

Boards comparing management companies should ask:

1. How are invoices received, coded, and approved?
2. What can the board see online, and how often are financial statements delivered?
3. What controls separate the person entering invoices from the person releasing payments?
4. How are vendor bank account changes verified?
5. How are owner payments received and posted?

Accounting Support for Associations

Accounting, accounts payable, and owner payment services are part of the management provided by Condominium Associates, including an online portal for owners to pay assessments securely. To talk about your association's financial processes, contact us.