Gratuities to Vendors

Did this board member act on his or her own in giving the tips or was this authorized by the board? Is there a vote recorded in board meeting minutes authorizing the tips – when I was on my board, we passed the hat and bought gift cards for our property manager and security offices as a thank you for their work. We didn't use association money, which is the easiest way to do this.

The board should already have policies and procedures instructing the treasurer (you) how to handle stuff like this. To wit, you don’t HAVE to give the employees a tip – they’re already being paid (or should be) by their employer, the landscaping company. Tips can be counted as income, so the board should have already consulted with the association accountant or tax preparer how this should be addressed.

If you don’t know the answer, I suspect the board doesn’t either and since this IS association money, they need to get the answer before anyone's reimbursed for anything. After than, I suggest they prepare a formal policy regarding gratuities, adopt it via a board resolution passed in an open meeting and then you proceed from there.

I realize there are HOAs that tip vendors, buy flowers for funerals, donate funds to non profits ect., but it is totally an improper expense of HOA funds.

Generally, your declaration provides for the board to collect assessments for the maintenance of the community, not tips and gifts. Now as the treasurer you are searching for the best solution for a bad decision.

I would have each board member submit a signed self prepared invoice for a vendor tip. All funds should be accounted for. If a member of your HOA wants examine the books, they should be able to discover your board is needlessly giving away HOA money and there should be a paper trail back to those people.

For cash holiday bonuses for our mailman and porter, I am written a check for the amount needed. It is coded as an office expense. I cash the check and give out the bonuses. My bonus as property manager is included in my salary but written as a separate check and the clubhouse cleaner bonus is included in her salary and I just write the amount extra on that weeks check.

Hope this helps!

Hi EdwardE, I would record it the same as the landscaping expense.

I agree with DeanJ's suggestion that the board member who paid out the tips should write a memo, to stand-in as a receipt/invoice for the transaction.

I disagree that tips are improper. (assuming the tips were approved by your board, are not causing you to exceed your budget, and that the overall cost for the landscaping service is still reasonable, including the tips).

Boards generally have wide latitude to select vendors based on factors other than lowest price. Eg if bids for a service come in for $10,000; $12,000; and $15,000 - the board is well within their rights to choose the vendor at 12k or 15k, if they provide a better overall value. (faster service, higher quality, whatever). This isn't public procurement - there isn't a requirement to take the lowest bidder.

Conceptually, choosing to pay tips is similar to choosing the $12k vendor. Its just fine as long as the board approved it.

No, I get it. But, how do you document the reimbursement? If a board member buys toner cartridges, they have a receipt. If they drive down the street tossing money out the window, not so much.