HOA Hall of Shame: Homeowners question $20,000 plus petty cash budget (2024)

LAS VEGAS (KTNV) — Homeowners' associations, or HOAs, are supposed to protect your home's value and theoretically make life a little nicer, if not a little easier.

But 13 Investigates has reported for years on HOAs and management companies that have made it difficult and stressful for neighbors to be at peace in their own homes.

A latest member is inducted to the HOA Hall of Shame after residents of a northwest valley neighborhood raised red flags, concerned about how their HOA is spending funds and frustrated with what they call a lack of transparency.

HOA Hall of Shame pt. 1: Homeowners question $20,000 plus petty cash budget

Samuel Covelli is an original Four Winds HOA homeowner, having bought his house in this quiet community near Durango and Grand Teton 23 years ago.

After retiring from public service as a sergeant with the Nevada Department of Corrections, Covelli still had a desire to serve, this time in his immediate community.

"You want to know how your money and your neighbors money's being spent?" Darcy Spears asked.

"Right," he said.

Covelli completed the Nevada Real Estate Division's online classes but wanted to review the HOA's budgets before getting actively involved by running for a spot on the board.

"You don't want to jump into a mess," Covelli said.

So he asked to see a recent audit..

"They didn't send it to me," he said.

But he kept asking as, according to state law, access to financials is a basic right for homeowners in HOAs.

Spears: "If you're meeting resistance when you're asking for financials, what does that say?" Spears asked.

"Red flag," he said.

Attorney Bruce Flammey who specializes in HOA law, said he's seen it before.

"The managers may not want to be bothered by anybody. 'Let me do my job, leave me alone.' And so they perceive any request--in some instances--from a homeowner as being an unwarranted interruption," Flammey explained.

Eventually, Covelli said some of the requested documents began to trickle in.

"It just didn't make any sense."

Covelli reviewed audit reports created by an independent accounting firm.

"Something's wrong here. Something's really wrong here," Covelli said. "The $27,000 petty cash expenditure by one board member."

"One board member? $27,000? What's petty about that?" Spears asked.

"Nothing," Covelli said. "That's a lot of money."

According to the audits, Four Winds HOA spent over $80,000 in petty cash over just three years from 2019 to 2021.

"Typically, in a business environment or even the common interest community scenario, a petty cash fund is going to be measured in the hundreds," Flammey explained. "Generally, it's less than $500.

"I think these numbers, standing on their own, generate a lot of legitimate questions," Flammey said.

"I sent another email and said, 'Would you please provide me the ability to inspect and copy the receipts that would go along with this petty cash expenditure?' Again, crickets," Covelli said.

Covelli grew so concerned that he sent Attempt to Resolve letters to his HOA, then filed multiple complaints with the Nevada Real Estate Division (NRED).

Three complaints were closed because the division found there were no statutory or code violations. At least two are still under review.

Covelli never got the receipts he asked for, but he did get canceled checks cut from the HOAs bank account.

Several were paid to businesses including Home Depot and Lowes, which of course could be for legitimate maintenance in common areas.

But at least eight checks, adding up to over $2,300, were written to Four Winds Board President Jerry Shaner. Some checks were signed by him and a second board member, but others signed by Shaner alone, which state law does allow for money coming from the HOAs operating account.

Covelli and others see that as concerning, especially when someone is writing checks to themselves.

"And he was asking for gas, gas money."

Former board member David Horn said these checks are Shaner reimbursing himself, "...for the mileage on a monthly basis. It ran anywhere from $450 to $600 a month."

It's common and acceptable for board members to be reimbursed for incidentals. But the homeowners we spoke to say the amounts and the frequency that Shaner was being reimbursed are suspect.

"One of the premises when you serve on the board is, it's volunteer. It's unpaid," Horn said. "You're not to sit on the board to enrich yourself."

When Horn was on the board, he said Shaner convinced the other members to dump the HOA's maintenance and landscape company, ostensibly to save about $1,100 per month by opting to use a committee of volunteer homeowners. Instead, "...it became an avenue that they could drive more money down the road to spending, regardless if we needed it or not as a community," Horn said.

Throughout his years serving the Four Winds community, "...I saw an increase in spending that was going to happen with Jerry because he seems like he has an insatiable amount of… want to spend more and more money," Horn said.

If the board president has a valid explanation for all this, he's not giving it to the homeowners or to us. We called all the board members and spoke briefly to Jerry Shaner, who said he'd be happy to talk to us if their lawyer approved. We left multiple messages for board attorney John Leach. We also tried their property management company, FCCMI, but they did not respond.

Though he didn't respond to us, Leach did send a letter to all Four Winds homeowners dated May 10, the day after 13 Investigates made a second round of calls and emails requesting comment.

The letter accuses Covelli of circulating misinformation and making defamatory claims about multiple issues, including the board embezzling homeowners' money.

Leach blames Covelli for an increase in homeowner dues, saying it was necessary in order to fight what he calls "false and frivolous claims" with the state.

Covelli has uncovered a laundry list of other red flags at Four Winds that he believes the board, its attorney and management company should answer to.

While they're not responding to us, they are making disparaging comments about homeowners during an HOA executive session, which can be heard in Part 2 of this HOA Hall of Shame report.

HOA Hall of Shame pt. 2: Homeowners outraged over comments recorded in a board meeting