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What Is Voucher Control
 This was one of the questions that vexed me when I moved to Las Vegas twenty years ago. Voucher control, construction control, fund control - they're three names for the same process.
I spent my adult life working in the construction industry in the Midwest. Contractors did the work, Owners paid the General Contractor, the general paid the subcontractors and the subs paid their laborers and suppliers. We rarely signed a release, and "mechanics lien" was a phrase reserved for the rare instance when payment was withheld or delayed by the general contractor or Owner. Nevada was a whole new world to me. My first job was as the controller of a development company. Voucher control was like payroll. You pretty much just did it every Friday. We gathered invoices, subcontractor, supplier and labor releases from subcontractors, prepared vouchers for them and submitted the whole batch of papers to the voucher company. The voucher company cut checks to the payees. Sometimes there were "joint checks" (another new term!), which were payable to both the subcontractor and his supplier. This process began in the early 80's, when Nevada banks decided to take a page from California's book. In an effort to ensure construction loan funds were disbursed for the intended purpose, the lenders began to disburse those funds through a process known as voucher control, rather than giving the funds directly to the Borrower. The bank employees processed the disbursements. However, as the amount of construction projects in Nevada grew, it became too labor-intensive for the banks to process the volumes of paperwork. The lenders began to retain an outside agent to perform this service. That agent was known as a voucher control company.
The reasoning was that Voucher Control would act as the lender's agent to avoid a possible situation in which:
- The loan funds had been completely disbursed, but there was nothing but dirt on the parcel.
- Front-loading had occurred. While half the loan funds had been released, the project was only 25% complete
- The project was complete, but not all of the subcontractors and suppliers had been paid for the labor and materials supplied to the project
The voucher control company would:
- Inspect the collateralized project, comparing the actual construction to the bank- appraised plans
- Enter a bank-approved budget to specialized software
- Collect fully executed contracts and subcontracts
- Compare those contracts to the budget to assure there were sufficient funds in the loan to complete the project
- Submit periodic reports to the Lender for approval and funding, consisting of a summary of the budget to date, a line - item breakdown of the current request for funds, a site inspection report and photographs of the project at the time of the inspection
Voucher control would also disburse the funds directly to the general contractor and subcontractors. In the process, the agent would review invoices and contracts to determine what, if any, supplier releases would reasonably be expected before releasing checks to subcontractors. For example, in the construction of a wall, the agent would expect a block supplier, but there would also be concrete, rebar and grout in the wall construction, and possibly some rented equipment to move that block around the job site.
Collection of supplier releases is critical to the voucher control process. Nevada statute leans heavily in favor of material suppliers. If the block wall subcontractor is paid for his work but neglects to pay the equipment rental supplier, the equipment supplier will record a lien against the project. Next, the supplier will file suit against the Owner for the amount he is owed and attorney's fees. In Nevada, the courts are almost guaranteed to rule in favor of the supplier, even if he has not served a Notice of Preliminary Intent to Lien on the Owner. This means the Owner will ultimately pay for the wall, and he will also be legally bound to pay the wall contractor's equipment rental supplier, who should have been paid by the subcontractor.
At VCS, our main goals are to:
- Ensure that your project remains lien-free throughout construction and at completion
- Ensure that all checks issued from the loan are for costs related to the project
- Assure that the work is complete before the invoice is paid
Most importantly, we believe every client, contractor and subcontractor deserves to be treated with courtesy and respect.
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