HOA board member reimbursement is one of those things that sparks questions in almost every community. Some people see it as shady, while others see it as totally normal. The truth is, board members do sometimes spend their own money on small items the HOA needs. The real question isn’t whether it happens, but whether it should be reimbursed and how to handle it properly.
What is HOA Board Member Reimbursement?
Homeowners associations incur a lot of expenses. Funding usually comes from regular dues, which cover everything from maintenance and landscaping to insurance and professional fees. Usually, vendors send invoices to the association, which the board must then pay.
That said, not every situation fits neatly into that box. Invoices aren’t always involved, and there may be times when a board member (or even homeowner) will need to cover the cost of small items or services first.
A lightbulb might burn out in a stairwell on a Friday night. A social committee could forget to order paper goods for a weekend barbecue. The clubhouse might need batteries for the thermostat. Nobody’s going to call a vendor for these things.
A board member might just stop by the store, swipe their own card, and grab what they need. Later on, they hand in the receipt and ask the association to pay them back. This is what HOA board member reimbursement means.
It’s not supposed to be compensation. It’s not a perk of being on the board. Instead, it’s just paying someone back for money they fronted for the HOA. When done right, it keeps the community running without interruptions. On the other hand, when done wrong, it could appear as favoritism and even lead to misuse of funds.
Is HOA Board Member Reimbursement Legal?
Yes, it’s legal in most states as long as it’s for the benefit of the association and not for personal use. HOA board reimbursements fall under the board’s authority to manage money responsibly.
In addition to state law, the association’s governing documents should address reimbursements. Many bylaws and CC&Rs have requirements (such as submitting receipts) and spending limits.
It is essential to maintain transparency in the association’s expenditures, including any reimbursements to board members or owners. Documentation is equally paramount, as the lack of it can result in a misuse of association funds.
HOA Board Member Reimbursement Process
Board members must handle reimbursements with care and in a structured manner. Without a process, people will undoubtedly start asking questions, and suspicions can build quickly. Here’s the proper way to deal with reimbursements.
1. Check State Laws and Governing Documents
Before anything else, the board should confirm authority with state laws and the governing documents. Some states limit spending amounts, while the bylaws may require board approval above a particular dollar figure. Skipping this step is asking for trouble.
2. Document Expenses
Board members and homeowners seeking reimbursement should document their expenses. Receipts are non-negotiable, and failure to submit them should lead to no reimbursement. Board members can’t just say, “trust me,” and get on with it. Proof protects both the board and the association itself.
3. Submit Expense Report
It is best to draw up an expense report to document all transactions. Even small purchases should be written down. It doesn’t need to be complicated, but a form or email will help keep the record clean.
4. Await Approval
The treasurer or the full board should always review reimbursements. This way, the board can ensure the reimbursement is legitimate before money leaves the account.
5. Receive Reimbursement
After approval, the association can pay the board member back, usually by check. A check helps create a paper trail for proper accounting. The board member must then confirm receipt by signing. It may seem like overkill, particularly for small amounts, but it maintains transparency and accountability.
Debit Cards, Credit Cards, and Petty Cash
Debit cards may look convenient, but they also come with many risks. In Florida, they’re not even an option. Under Section 718.111, condo associations can’t use debit cards. Misuse can even be treated as credit card fraud.
The reason for such a strict stipulation is that debit cards withdraw money immediately. There’s no review period, and no time to catch mistakes. Once the cash is gone, it’s gone.
Petty cash is also a bad choice. It’s almost impossible to track a stack of bills sitting in a drawer. Even $100 in petty cash can raise suspicion. For this reason, experts almost always recommend avoiding it.
Credit cards are a little safer, but only if they’re managed well. Associations can set spending caps, require receipts, and carefully review monthly statements. A credit card issued in the association’s name can work. That said, credit card use should come with stringent rules for control.
Still, many boards prefer the simple method: a director pays out of pocket, submits the receipt, and gets reimbursed. It’s a much slower process, but it ensures accountability.
Internal Controls for HOA Board Member Reimbursement
Without structure, reimbursements can get messy. One board member might start buying things constantly, almost like they’re running their own personal supply shop. An owner might make random purchases and then demand that the association reimburse them. Neither situation will end well.
Clear policies help avoid all that conflict. They set clear expectations, outline limits, and show the community that the board takes accountability seriously. When someone questions reimbursements, the board can point to the rules and the process.
Even with a process, associations need strict controls in the form of the following:
- Set a Purchase Limit. Decide how much can be spent without pre-approval—for example, $100 for small supplies. Anything higher should require board discussion.
- Require Submission of Receipts. Reimbursements without receipts shouldn’t happen. It’s a simple rule, but it can prevent conflict later on.
- Require Authorization for Fund Release. If a regular owner (not on the board) purchases the community, reimbursement should only be approved if the board authorized it first. Otherwise, anyone could spend money and expect repayment.
- Mandate Two Signatories for Large Disbursements. Bigger reimbursements should require two board signatures. This is one of the easiest ways to add accountability.
Common Practice But With Regulations
HOA board member reimbursement is okay when it’s controlled and documented. Board members sometimes spend their own money on behalf of the association, so it’s only fair to reimburse them. That said, reimbursements need receipts, purchase limits, and approvals. A firm policy can help ensure everything remains above board.
Cedar Management Group provides effective management services to HOAs and condo associations, including insurance assistance. Call us today at (877) 252-3327 or email us at help@mycmg.com to get started!
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