Financial Oversight · Governance

Authorizing Expenditures — Spending Limits, Dual Signatures, and Approval Thresholds

Every association needs a written answer to a single question: who can spend the association’s money, in what amount, and with what approvals? The answer should be a board-adopted policy, not a series of practical understandings between the manager and the treasurer.

The Bottom Line

The board cannot personally approve every expenditure. It also cannot delegate unlimited spending authority to anyone — not the manager, not the treasurer, not the president acting alone. The defensible middle is a board-adopted spending authorization policy that establishes tiered thresholds, requires dual signatures above a defined limit, controls check-signing, addresses emergency expenditures, and aligns with the budget. The policy is part of the internal control environment an auditor will evaluate; it is also the document a fidelity insurer will request after a loss. Boards that adopt this policy as a formal resolution and revisit it annually convert what would otherwise be a series of informal practices into auditable governance.

Operational Context: Why a Written Policy

In the absence of a written spending authorization policy, three things tend to happen. First, the manager develops a working sense of what the treasurer or president will tolerate, and operates within that range — which may or may not correspond to what the board would actually approve. Second, when something unusual occurs, the manager calls one director (often the president), gets a verbal nod, and proceeds; the rest of the board learns at the next meeting, if at all. Third, when a loss event occurs — fraud, an unauthorized expenditure, a vendor overcharge that no one caught — there is no clear authority line to evaluate against, which means there is no clear answer to who failed to do what.

A written policy removes ambiguity. It tells the manager what authority the manager has. It tells the directors what the board has reserved. It tells the auditor what the controls are. It tells the fidelity insurer what the policy environment looked like at the time of loss. And it tells future boards what their predecessors decided, so the policy survives turnover.

Tiered Spending Thresholds

The core of the policy is a tier table. The tiers should reflect the size and risk profile of the association — the dollar thresholds for a 50-unit HOA are not the dollar thresholds for a 600-unit condominium — but the structure is similar across communities.

Tier 1: Budgeted recurring expenditures.

Payments for line items in the adopted budget, within the budgeted amount, for recurring vendors under existing contracts. Authority: the manager, acting under the budget the board already adopted. No additional approval required.

Tier 2: Non-recurring expenditures within the budget.

One-off purchases, maintenance work, or contracted services that fit within an adopted budget line. Authority: the manager up to a defined per-transaction limit (commonly $2,500 or $5,000); above that limit, the treasurer’s prior written approval (typically by email is sufficient).

Tier 3: Unbudgeted or above-line-item expenditures.

Expenditures that exceed the adopted budget for a line or that are not in the budget at all. Authority: the board, by motion at a properly noticed meeting, except for emergency expenditures handled under Tier 5.

Tier 4: Capital and reserve expenditures.

Payments from the reserve fund or for capital projects in the reserve study. Authority: the board, by motion, with the reserve study and project documentation referenced. Disbursements should follow the spending-authorization framework and the reserve segregation rules in the reserve funding policy.

Tier 5: Emergency expenditures.

Expenditures required to address an immediate health, safety, or property-preservation emergency where convening the board is impracticable. Authority: the president or treasurer (or both) acting under a delegated authority defined in the policy, subject to immediate notification of the rest of the board and ratification at the next meeting. The policy defines what qualifies as an emergency and what does not.

Dual-Signature and Check-Signing Requirements

The dual-signature rule is the most consequential internal control in a community-association environment. Multiple states’ community-association statutes encourage or require dual-signature practices above stated thresholds, and the fidelity insurance market has converged on dual-signature as a baseline expectation.

Recommended structure.

• Below the dual-signature threshold (commonly $5,000 to $10,000): a single authorized signature is sufficient. The signer is typically the treasurer or president, or in some associations, a manager under a board-adopted delegation.
• At or above the threshold: two authorized signatures are required. The two signatories should be directors (or a director and the manager, never two non-director signers in a board-governed association). Both signatures should appear on the check or wire authorization.
• For wire transfers and ACH out of association accounts: the policy should specify the verification and approval steps. Wire-transfer fraud is among the most common loss events in community associations, and the controls should reflect the elevated risk.

Signature card maintenance.

The signature cards at the bank should match the policy. Departed directors should be removed promptly. The treasurer or secretary should confirm the signature card status annually and report it to the board.

Manager authority.

Some associations grant the community manager limited check-signing authority below a threshold. This is operationally efficient but raises an internal-control concern: a single party who prepares and authorizes payments has segregation-of-duties exposure. The policy should address how this exposure is mitigated — typically through monthly review of disbursements by an independent party, dual-signature above a low threshold, and verification of new vendors by someone other than the manager.

Procurement and Vendor Authorization

Spending authorization is not only about signing checks; it is also about contracting for the work the checks will eventually pay for. The policy should cover the procurement side.

Texas § 209.0052 procurement framework.

Tex. Prop. Code § 209.0052 addresses procurement and contract considerations for residential subdivisions. The board’s spending authorization policy should incorporate the § 209.0052 framework for contracts requiring it.

Competitive bidding thresholds.

The policy should set a dollar threshold above which competitive bidding (typically three written bids) is required. Many associations set this threshold at $10,000 to $25,000 depending on size. Below the threshold, the manager has discretion; above it, the bidding process is required and the board reviews the bids.

Contract execution.

The policy should identify who has authority to execute contracts on the association’s behalf. Typical practice: the president or secretary executes contracts approved by the board; the manager executes contracts within the manager’s delegated authority (Tier 1 and below the Tier 2 threshold). Two signatures on long-term contracts (multi-year, auto-renewing, or above a defined dollar threshold) is sound practice.

Conflict of interest screening.

Before a vendor is engaged, the manager and the board should screen for director or family-member interests. Texas § 209.0052 and Florida § 718.3027 / § 720.3033 address conflict disclosures. The spending policy should incorporate the screening step.

The Spending Resolution: What It Should Contain

A defensible spending authorization resolution adopts the policy by reference and addresses:

1. The recital citing the declaration and bylaws authorizing the board to delegate spending authority.
2. The tier table with dollar thresholds.
3. The signature framework (single below threshold, dual above).
4. The procurement and competitive-bidding requirements.
5. The emergency-expenditure mechanism, with defined triggers and ratification requirements.
6. The reporting requirement (the manager reports all expenditures monthly; expenditures above a threshold are reported individually).
7. The review cadence (annually, at the budget adoption meeting).
8. The signature card maintenance requirement.

The resolution should be retained with the corporate record, posted to the manager’s reference materials, and reviewed by the auditor each year.

Why This Matters

Unauthorized expenditures are the most common loss event in community associations. The most frequent fact pattern is not the manager who steals — though that happens — but the manager or director who exceeds delegated authority because the delegation was never documented. A board with no written policy cannot prove the manager exceeded authority; the manager cannot prove the manager did not.

Fidelity insurance presumes a policy environment. Fidelity (employee-dishonesty) coverage protects the association against employee or board-member theft. After a loss, the insurer evaluates whether the policy environment was sufficient. A board with a written spending-authorization policy, current signature cards, and documented disbursement review supports coverage. A board without these supports a coverage dispute.

Auditor evaluation depends on it. The audit (or review) includes evaluation of the internal control environment over disbursements. Without a written policy, the auditor has no controls to test against. With a policy, the auditor can confirm whether the controls were followed. The latter is a stronger record by every measure.

Director liability tracks the policy. A director who signs a check above the dual-signature threshold without a second signature, in violation of a board-adopted policy, has departed from the policy environment. The departure is harder to defend than an absence of policy in the first place — because the policy named the rule.

Best-Practice Guidance

1. Calibrate thresholds to the association’s budget.

Dual-signature thresholds set absurdly high (e.g., $50,000 for a 75-unit HOA with a $400,000 budget) provide no control. Thresholds set absurdly low produce operational drag. A defensible default: the dual-signature threshold is approximately 1–2% of the annual budget for a small association, with the manager-discretion threshold at roughly 0.5%.

2. Run a monthly disbursements review independent of the manager.

The treasurer (or another director) reviews the monthly check register, ACH log, and wire activity against the bank statement and against vendor invoices. This review need not be exhaustive; it needs to be regular. A standing line in the minutes confirms it happened.

3. Verify new vendors out of band.

New vendor banking information should be verified by phone using a number obtained independently (not from the email requesting the change). This single control prevents the most common wire fraud scheme in the industry.

4. Adopt the policy at the budget adoption meeting.

Pair the spending authorization policy resolution with the budget adoption. The two documents work together — the budget defines what is authorized in advance; the spending policy defines who can spend it.

5. Refresh signature cards after every board turnover.

The first meeting after a board election should include a signature-card review and update. A departed director still on the signature card is a control gap.

6. Define the emergency mechanism precisely.

An emergency is a condition that threatens immediate health, safety, or property. A roof leak after a hurricane is an emergency. A vendor offering a one-time discount is not. The policy should give examples on both sides of the line and require notification of the full board within 24 hours of an emergency expenditure.

Common Mistakes & Pitfalls

Actionable Takeaways

1. Adopt a written spending authorization policy by board resolution.
2. Establish tiered thresholds (Tier 1 budgeted recurring, Tier 2 non-recurring within budget, Tier 3 unbudgeted, Tier 4 capital/reserve, Tier 5 emergency).
3. Set a dual-signature threshold calibrated to the association’s budget.
4. Confirm signature cards at the bank match the policy.
5. Verify new vendor banking information out of band.
6. Run a monthly disbursements review by a director independent of the preparer.
7. Define emergency mechanism with examples and ratification requirements.
8. Incorporate procurement and competitive-bidding requirements per § 209.0052 (Texas) and conflict-of-interest screening per § 718.3027 / § 720.3033 (Florida).
9. Review and re-adopt the policy annually at budget adoption.

Related CIC-SC Resources

• Spending Authorization Policy (Board Resolution Template)
• The Board’s Fiduciary Duty Over the Annual Budget
• Approving the Annual Audit, Review, or Compilation
• Reading and Approving Financial Statements at Board Meetings
• Reserve Funding Adequacy Standards (CICSC FIN-001)
• Annual Budget Calendar (Template)

References & Sources

1. Texas Property Code § 209.0051 — Open board meetings and notice.
2. Texas Property Code § 209.0052 — Procurement and contract considerations.
3. Texas Property Code § 82.108 — Texas Uniform Condominium Act, board powers.
4. Florida Statutes § 718.111(15) — Condominium contracts for products and services.
5. Florida Statutes § 718.3027 — Condominium conflicts of interest.
6. Florida Statutes § 720.3033 — HOA conflicts of interest.
7. Florida Statutes § 720.303 — HOA powers and duties.
8. Texas Business Organizations Code Chapter 22 — Nonprofit corporation procedures and director standards.
9. AICPA, Audit and Accounting Guide: Common Interest Realty Associations — internal control over disbursements.
10. Community Associations Institute, Best Practices Report: Financial Operations — spending authorization and dual-signature guidance.

Tags: spending authorization · dual signature · check signing · tiered thresholds · emergency expenditures · procurement · § 209.0052 · § 718.3027 · internal controls · fidelity insurance · segregation of duties

CICSC publishes this article for educational and informational purposes only. It is not legal, tax, accounting, engineering, insurance, or financial advice and does not establish an attorney-client relationship. Statutory references and operational frameworks are intended to support informed governance, not to substitute for advice from qualified legal counsel and other professional advisors familiar with your jurisdiction and your association's facts. CICSC, its authors, and its members assume no liability for actions taken in reliance on this content.