Board Meeting at local Restaurants on HOA dime

Hello,

Is there ever an appropriate time to hold a lunchtime or dinnertime Board meeting at a local restaurant with the HOA picking up the bill?

I know that our previous board used to hold lunch/dinner meetings at restaurants. I strongly suspect that the HOA picked up the bill for the "working meeting". I'm working on getting records to find out if my suspicion is right.

What is the difference of those HOAs that give dinner gift cards and those who pay for meeting meal?

I am against either practice. However each HOA is different and separate on how things are done and accepted. It may be acceptable to your HOA members they spend their money this way. Who am I to judge?

Michael

No, a resounding no, and just stop it.

Some of our clients have tried meeting in restaurants with the participants paying their own way. No problem there.

Based on those experiences, absent the use of a separate room with a door which can be closed, I cannot think of a more unsuitable place to conduct a Board meeting due to background noise and privacy concerns.

In general, it is totally normal for a Corporation to expense things like meals when needed, like if work is needed to extend into the night or over a meal hour.

Also, a Corporation is free to choose how it wants to spend its dollars, per authority given and monitored by the Shareholders (AKA the Membership).

If an HOA decides to pay for meals, and everything is public in the minutes and open and transparent, and the Membership is OK with it, then its just another operating expense, like paper, lawncare, etc.

However, there are general guidelines, principles, and ethics about this. Free lunch delivered every day just because? Buying rounds of shots at the bar? Trips to the strip club? Holding a working dinner at Ruths Chris instead of getting Chinese Takeout? There is a line that can be crossed, but again, its all up to the Corporation and the shareholders to decide.

Now, given all that, in general, HOA's, as a small non-profit, really shouldn't have a need to do this. Is this some mega-HOA with 10,000 homes and full-time employees? Or is this just a 30-home street? Like Augustin said, usually HOA's should be boring and dry and volunteer...not freebies and perks. As a shareholder in my HOA, I certainly would not approve of these types of expenses.

Not true!

I don't believe these federal protections apply to a HOA. An HOA is a not-for-profit, not a non-profit as defined by a 501(c)4 or government entity.

I agree with Tim on this one. Maybe they *can* do it, but that doesn't mean they *should*.

There is the issue of compensating directors. And I also think that directors should avoid even the appearance of wrongdoing. Given how tight many HOA/COA budgets are, I can't justify paying for meals. (

I also don't think that restaurants are suitable locations for business meetings unless the directors are in a private room with closed doors. In open meeting states, this would be a non-starter.

There are others who see it differently:

Community association directors beware! Practical and legal issues regarding director compensation from a law firm

HOA Volunteer Standard of Care: 5 Layers of Immunity to Litigation from a management company blog.

PROTECTION AGAINST VOLUNTEER LIABILITY from davis-stirling site

When Good Intentions Go Wrong: Immunity under the Volunteer Protection Act For anyone that really wants to dig into it, an abstract from the journal nonprofit policy forum

Also, under the definition section of the act:

(4) Nonprofit organization.--The term ``nonprofit
organization'' means--

(B) any not-for-profit organization which is
organized and conducted for public benefit and operated
primarily for charitable, civic, educational, religious,
welfare, or health purposes and which does not practice
any action which constitutes a hate crime referred to in
subsection (b)(1) of the first section of the Hate Crime
Statistics Act (28 U.S.C. 534 note).

We just went through all this on the other thread. Operational Expenses.....

Yes, the authority comes from the Governing Documents, which is ultimately controlled by the Membership. You're arguing semantics here.

Yes, in general, the Board is given authority to spend HOA funds to manage and operate the HOA. Buying stamps, signing lawncare contracts, renting a PA Speaker, etc. Buying/Expensing food for work meetings is totally kosher.

Yes, most HOA's prohibit compensation of Directors and Committee Members (but not officers). so what? this isn't compensation.

You are totally wrong about calling expenses and food the same as compensation. (to a limit) Your statement is flatly wrong, and can be verified six ways from Sunday, including on IRS.gov.

All of this is just foundational technicalities. The bigger question is SHOULD. What does the membership deem reasonable and what do they agree to pay for?

You do know that people often are given company vehicles to drive around, or google workers get 3 meals a day at the company cafeteria, or when I attend the quarterly 4-hr meeting of the local charity I participate in I get chick-fil-A for lunch....these are business expenses to the corporation.


This is soundly incorrect. And I bet the IRS govvies would laugh you off the phone if you reported someone getting an expensed lunch as illegal compensation

TL;DR:

food expenses are completely fine and legal; however most HOA's probably don't like doing that. I personally would campaign hard against any leadership that is expensing their lifestyle to the HOA budget. As a current President, I would not agree to host a meeting at a restuarant or pay for food delivery, unless we had some sort of marathon meeting that required a meal break....and even then, The Board could just walk back to their house for lunch...

Here's what the Florida statute that governs HOA says:

COMPENSATION PROHIBITED.—A director, officer, or committee member of the association may not directly receive any salary or compensation from the association for the performance of duties as a director, officer, or committee member and may not in any other way benefit financially from service to the association. This subsection does not preclude:
(a) Participation by such person in a financial benefit accruing to all or a significant number of members as a result of actions lawfully taken by the board or a committee of which he or she is a member, including, but not limited to, routine maintenance, repair, or replacement of community assets.
(b) Reimbursement for out-of-pocket expenses incurred by such person on behalf of the association, subject to approval in accordance with procedures established by the association’s governing documents or, in the absence of such procedures, in accordance with an approval process established by the board.
(c) Any recovery of insurance proceeds derived from a policy of insurance maintained by the association for the benefit of its members.
(d) Any fee or compensation authorized in the governing documents.
(e) Any fee or compensation authorized in advance by a vote of a majority of the voting interests voting in person or by proxy at a meeting of the members.
(f) A developer or its representative from serving as a director, officer, or committee member of the association and benefiting financially from service to the association.

I guess you could stretch (b) to say that dinner at a meeting was an out-of-pocket expense, but it would be a stretch.

I was upset because a previous board member expensed a coffee maker that he placed in our clubhouse kitchen so he could have coffee every morning while he "supervised". Our documents do not allow any kind of compensation outside the statute above.

To me, having the HOA pay for a meal for directors doesn't pass the "smell test". When something smells rotten, it ends up with people like the OP writing in to see if it's really allowable.

I would definitely bring this up a board meeting.

I decided to take some time and read some of the IRS rules.

Under fringe benefits, meals may be taxable if they are regular (every meeting as an example) and not offered to all employees (committee members for example).

Was this done for the convenience of the Association or simply as a perk? There is a difference.

Basically, it's complicated (especially since the issue changed a lot in 2018).

Granted, I don't think the IRS will be concerned about a $20 meal. However, if having monthly meetings and a meal at each one, that amount is now $240. If unreported over several years it adds up quickly.

References:

Fringe Benefit Guide from IRS

IRS Memorandum 201903017

The IRS Says Let Them Eat Snacks - Strict rules must be met to avoid taxes on free meals at work, but snacks get a pass from a legal firm

26 U.S. Code § 119 - Meals or lodging furnished for the convenience of the employer

The Exclusion for Meals and Lodging from tax adviser site

Interesting resources provided by many and I'll sure read them later.

MichaelT, the OP, is prez of his HOA. Is he suggesting that a board meeting, which must be OPEN to owners in Washington, be held in a restaurant (private room or not) where all directors get meal service paid for by the HOA? But Owners sit and watch board members chow down courtesy of their dues?

That's what I was asking about earlier. How can you have an open meeting in a restaurant? The restaurant itself may not be able to handle a large influx of patrons, and the homeowners would probably order their own food, and the waitstaff will be coming and going, and the casual atmosphere will encourage talking and other un-businesslike behavior, etc. etc.

This sounds like a recipe for a chaotic and unproductive meeting, even without the poor optics of the HOA paying for the directors' meals.

Well said. You cannot learn and improve unless you are willing to consider alternative views.

The governing documents are not controlled by the membership on a day by day basis. The governing documents say what they say until amended by the membership. That's a bullsh-t line you posted above.

Huh? It's the HOA/COA governing documents, and not the Internal Revenue Code that by far controls here.

I have yet to see any HOA/COA governing documents authorize payments from membership assessments for directors' lunches. Typically the governing documents do authorize payment to directors for reasonable expenses they incur in the course of performing duties. Here at HOATalk, office expenses comes up a lot as an expense that a HOA should compensate (reimburse) a director. If you feel meal expenses are a reasonable expense directors incur in the course of their duties (like executive sessions), fine. But I have a right to my disgust with HOA/COA directors who think like this.

I skimmed through each of these. TimB4, excellent work.

Bottom line: Under many circumstances, meals for which one does not pay out of one's own pocket may be taxable as income.

Right, I too wondered about the open-meeting part waaaay above. It does seem that MichaelT wants to call such a meeting a "work meeting" or some such. There is no such thing in an open meeting state though some boards try it so those pesky owners won't intrude with their silly questions & comments. In reality, they are secret meetings hidden from owners.

to have owners foot the bill for an executive session with lunch seems even worse. For one thing, most executive session matters can be handled in less time than a restaurnat dinner takes.

I think MichaelT has shown by the big changes to email chatters & open board meetings his board has made due, I think to this forum's advice, that he is fairly open to comments here.

To be clear, I am not proposing to do it today. I am just curious what others think of what I believe a past practice is.

No, our Board meetings are run like business meeting. No drinking. Powerpoint presentations. Motions introduced, seconded, and voted upon.

Last month, a new board member wanted us to start e-mailing an invite to every homeowner to attend via Zoom, which we voted on and approved. So our homeowners will receive an e-mail a few days in advance that a Board meeting is coming up. I expect there will be a decent crowd (maybe 10 - 15) at the next meeting because it's the first invite that has been e-mailed out to everyone. It'll be interesting to say the least to have that size of crowd listening to us conduct our mundane business.

To my fellow BOD Members reading on here. Our April BOD Meeting at Ruth Chris's has been changed to April 14th.

5:30PM Cocktails paid for by our MC.
6:00PM Dinner paid from April Budget.
7:00PM Call to Order.
7:15pm Adjourn.

You may bring a guest.

Instead of a "doggy" bag can I bring my dogs? They need fed too and they share my HOA house with me...

Absolutely.

To save money (a little bit), I suggest you order a bunch of tomahawk steaks. The ones I've seen run 34 oz, enough for two or three to share. If anyone's vegan, they can come for drinks, leave and return for dessert. Skip the steak sauce- when you spend over $75 for a steak, all you need is salt and pepper, maybe garlic and butter.

Just me, but I wouldn’t dine with my fellow Board members unless they also paid for a food-taster.

Seriously: back in the days when I was gainfully employed by {Monolithic Global Computer Corp}, my boss took everyone plus their spouses out to a fancy Christmas dinner. My boss considered himself quite the wine connoisseur, so the final bill approached 5 digits to the left on the decimal point. Which - surprise! - triggered a flag somewhere such that the IRS came after everyone who attended got held up to pay taxes on this “additional compensation”. Personally, I took it as yet another SNAFU in a long line of SNAFUs - but my wife was seriously ticked off because neither she nor I drink alcohol - yet we ended up partially subsidizing everyone else’s consumption. Oh well.

BillD

lol Wow. I guess the boss must have reported the dinner as a business expense. Maybe an audit occurred. Said corporation and its employees all got busted.