Note: This story was updated after initial publication to include additional details and links to public records, including HSWD bank records and Crook County property records obtained by the Prineville Review. It also was updated to provide additional information regarding what special districts, like water districts, are in the form of local government.
Prineville, Ore. – A Crook County water district is facing severe financial and governance issues following allegations of misappropriating thousands of dollars, general mismanagement, and potential ethics violations by its elected board—nearly half of which has now resigned.
Financial records recently obtained for the Highland Subdivision Water District (HSWD), a special district in Crook County just south of Prineville, show that approximately $23,400 was diverted last year alone to a private property owners association (POA) by the elected officials.
The discovery is now raising serious concerns about the district’s fiscal oversight, accountability, and potential conflicts of interest. Notably, HSWD’s board members also benefit as members from the private Highland Subdivision Property Owners Association (HSPOA) through their property ownership within the district.
For clarity, this article will primarily refer to the private property owners association as the “POA”.
The controversy surrounding HSWD has been further compounded by multiple recent resignations within the special district, including that of Board President George “Bud” Stuart, who stepped down in December. Stuart’s resignation followed his repeated refusals and delays in disclosing public financial records and meeting minutes requested by The Prineville Review under Oregon’s public records laws.
The Prineville Review began investigating after a source—who spoke on the condition of anonymity, fearing retaliation from district officials and the POA president—alleged that the district’s management and oversight “seemed illegal and unethical.”
Just yesterday, HSWD Acting President Richard Mayers informed the Crook County Board of Commissioners that the district was facing an imminent “state of failure.” Mayers explained that the board would soon be left with only two members after his impending resignation, as he planned to move out of the district. He also claimed that no other community members had stepped forward to fill the recent vacancies despite advertisements to voters within the district.
Mayers said the board was not aware of his statement to the Board of Commissioners. We asked if any communication about any of the current issues or possible dissolution had been brought to the attention of their customers, to which Mayers said they had not.
Another board member reportedly resigned in recent weeks, further destabilizing the district’s elected body, which now has only three of its five seats filled. The positions will be up for election in May to fill the remainder of the existing terms, but with a March 20 filing deadline for the upcoming election fast approaching, it remains unclear whether any candidates will step forward.
“Special districts are funded by local property taxes and/or fees for service,” according to the Special Districts Association of Oregon’s ‘What is a Special District?’ brochure.
“A strong board is essential to the successful governance of a special district. Board members must follow state requirements regarding public meetings, record keeping, ethics, and more.”
Official claims “nothing going on” that the public needs to know about
In December, HSPOA President Dianna Scheffler contacted the Prineville Review regarding our original records request—one that then-HSWD President George “Bud” Stuart had refused to fulfill. She demanded that the newspaper cease making records requests, claiming they amounted to “harassment” against the elderly. Initially, she said she was calling on behalf of HSWD because it’s board was “afraid” to do so, but later stated she was not affiliated with the district.
For clarity, we will refer to the Schefflers using their full name to avoid confusion throughout most of the article.
Dianna Scheffler also repeatedly asserted that neither The Prineville Review nor the public was entitled to access HSWD’s financial records. This was despite our clarification that the HSWD, as a public entity, is subject to Oregon’s public records law, unlike the private POA. She also claimed that meetings of the public water district were “not public”.
“And there is a journalist [with the Prineville Review] that keeps coming to a meeting that is only intended for certain people within that group—it’s a water district,” Scheffler told the Prineville Review.
Dianna Scheffler also balked at the request for the production of the special district’s meeting minutes. Those minutes are subject to disclosure pursuant to both the public meetings law (ORS 192.650) and the public records law.
“He wanted copies of our minutes–now why?” Dianna Scheffler stated. “This cannot be put in the paper, this is only for the people of that water district.”
Despite her claim that she was only with the POA, and not an official of the HWSD (which we later learned was mostly untrue due to her budget officer role), Dianna Scheffler went on to demand the Prineville Review “cease & desist”.
“And we would like you to cease & desist,” said Dianna Scheffler, before we then asked again what her role was, before she claimed she had no role within the HSWD. “I have none—I’m just aware of the problem—I am married to someone on the board,” said Dianna Scheffler.
When explaining that we were entitled to attend public meetings and that the water district is a special district subject to the meetings law, as well as public records, Scheffler again inaccurately claimed the meetings were not public and we were not entitled to public records.
“This is not considered a public meeting, it is not a public meeting” she stated again. She further confirmed her understanding that the water district and the POA were indeed separate but further argued neither were open to the public.
“Well, I think we deserve to know what [you] intend to do with this information, and we need to have that in writing,” said Dianna Scheffler. “He’s not getting the information—he can’t have this information until we know your intent.”
Dianna Scheffler then claimed she was going to contact an attorney for the HSWD, before again stating the Prineville Review would not receive the records.
“I think the bottom line is that we want [you] to mind your own business. There is nothing going on at that board that anyone in the public or your newspaper needs to know about,” Dianna Scheffler also remarked.
Further investigation revealed that, despite earlier claims, Dianna Scheffler was, in fact, an official with HSWD—serving as its legally appointed budget officer in recent years and as chair of the district’s budget committee. She resigned from the budget officer shortly following the district’s initial release of financial records to the Prineville Review.
In her resignation statement during the public meeting, Scheffler cited “harassment” by The Prineville Review as the reason for stepping down but indicated she would reconsider if the newspaper agreed to stop requesting records—a request seemingly tied to her previous claim that public records requests amounted to “harassment.”
HSWD board member Romona Lang politely criticised Scheffler and said she felt that Scheffler was the only one being aggressive towards this reporter, to which Scheffler then acknowledged and made an apology.
Until the date of her resignation in late February as budget officer, the Prineville Review had not had further conversations with Scheffler since the December phone call.
Ultimately, the HSWD provided most of the requested records following Stuart’s resignation in late December, facilitated the release of financial records and meeting minutes through 2024. However, these records came only after months of delays. Even now, HSWD has yet to produce, or in some cases even acknowledge, additional requested documents.
Yesterday, Mayers implied that the HSWD was going to wait for the Prineville Review to submit a public records appeal petition with the Crook County District Attorney before taking any more apparent action on our requests for records.
Misdirecting public funds to the private property owners association
In early 2024, the Highland Subdivision Water District (HSWD) finalized the sale of a section of district-owned property to a homeowner within the district. The property sold for $50,000, though county records indicate its assessed value was approximately $80,000 immediately after the sale.
Minutes from HSWD’s February 21, 2024, board meeting show that the board agreed to split the proceeds with the Highland Subdivision Property Owners Association (HSPOA) but provided no details or rationale for the decision. Oregon law requires that while written meeting minutes do not need to be an exact transcript, they must “give a true reflection of the matters discussed at the meeting and the views of the participants.” (ORS 192.650).
To date, HSWD has neither provided nor formally acknowledged our specific request for records of communications involving Dianna Scheffler in her capacity as budget officer and subcommittee chair, including any communications she had with HSWD on behalf of the POA — communications that could provide further insight on the decision.
Meeting minutes from the sale state:
“The sale of the vacant land at the south end of the subdivision to Travis Perala is now complete with the proceeds amounting to $50,000 minus expenses of $3200 [sic] leaving a net of $46,800.” the written minutes read. “The Board has agreed to split the proceeds with the Highland Subdivision POA giving each entity a sum of $23,400“
The motion was made by Stuart, and seconded by Larry Scheffler, husband of the POA’s president. The minutes then say it passed unanimously.
There were no notes in the minutes of any board members declaring any potential or actual conflicts of interest despite each board member also being a member of the private POA.
Last month, Mayers revealed to the Prineville Review that the district shared the proceeds from the sale with the POA because the POA had originally owned the property. However, he stated that the POA transferred ownership to HSWD long ago to avoid tax obligations that would have otherwise applied under POA ownership.
We repeatedly asked Mayers and the Schefflers whether this amounted to intentional tax evasion by the POA. According to the HSPOA’s own website, Mayers is also listed as a voting officer on its board—a position he has repeatedly denied holding, raising more questions on potential ethics violations from conflicts-of-interest.
While the POA is a private entity, the HSWD is a separate legal government entity—specifically, an Oregon special district. As a special district, HSWD’s board members are elected through the state’s election process and are subject to all standard transparency requirements.
Public property records show that water service was split from the POA and transferred to the newly formed HSWD decades ago.
A property owners association (POA) is similar to a homeowners association (HOA), though the terms are sometimes used interchangeably. In some cases—including within Crook County—certain POAs continue to provide water service.
According to Frank Stratton, executive director of the Special Districts Association of Oregon (SDAO), some POAs providing water services have taken these steps for perceived financial advantages, including tax incentives. However, Stratton noted that in some cases, individuals involved with a POA fail to recognize—or outright ignore—the additional oversight and transparency obligations that come with forming a special district.
“What happens is, you have these homeowners associations, right? And they have a water system, and then they can’t maintain their water system, usually, because there are not that many people. But also they get help with health violations or whatever, and they’re forced to upgrade their water system. So they can’t get grants, they can’t get federal funding or state funding to upgrade a water system as a private entity,” explained Stratton.
“So what they’ll do is they’ll create a water district to be able to essentially get those funds, upgrade their systems, and get them into shape where they comply with health requirements.”
Stratton also explained a bit about how the SDAO works to provide resources and training to special districts and their elected boards, which includes the HSWD as a current member.
The decision by the HSWD Board to direct the funds to the POA likely violates clear provisions of Oregon’s ethics law.
We have not yet obtained any financial records or minutes from before 2023 to see if the HSWD has any other history of providing funds to the POA. We asked Mayers and the Schefflers if the HSWD and POA had engaged in the practice previously. Mayers said he did not believe so, while the Schefflers’ responses did not address the question.
Our questioning of the Schefflers after the HSWD board meeting eventually led to Larry Scheffler becoming extremely agitated and making threats to sue this reporter and the Prineville Review should we report on the redirection of funds to the POA.
Ethics issues aside, there were still no straight answers from the HSWD or HSPOA justifying giving 50% of the property sales proceeds to the private POA which does not have the same level of transparency and oversight as the HSWD.
“One provision, which is the cornerstone of Oregon Government Ethics law, prohibits public officials from using or attempting to use their official positions or offices to obtain a financial benefit for themselves, relatives or businesses with which they are associated if that financial benefit or opportunity for financial gain would not otherwise be available but for the position or office held,” according to an ethics guide for Oregon public officials.
Following initial publication, Larry Scheffler claimed in social media posts that the property was actually jointly owned by both the HSWD and POA, a claim which conflicted not only with early statements made by several HSWD and POA officials that ownership was solely transferred to the HSWD to avoid tax obligations, but also conflicted with recent property record information for the sold tax lot to the new owner.
The payment for the property went solely to the HSWD before it then made payment to the POA. The entirety of funds were paid from Western Title & Escrow Company to the HSWD, according to its own bank records.
Those documents appear to confirm that the property was owned 100% by the HSWD, although historical records do confirm that at one time the POA did appear to have an ownership stake.
Nepotism & transparency in contracting practices
The released financial records further revealed that the Stuart’s wife, Donna Stuart, had been “contracted” at a flat rate to provide billing services for the district. According to HSWD’s written replies to our records requests after Stuart’s resignation, there were no documented employment agreements, contracts, or public meeting minutes indicating when or how Mrs. Stuart was hired.
According to statements made by one board member after its December 2024 meeting, Mrs. Stuart worked directly under her husband who was serving as a de facto manager since the district had not official manager. Her employment, along with the compensation she received, raised concerns about conflicts of interest and procedural transparency required under Oregon’s ethics laws.
In late December, two board members inadvertently revealed to the Prineville Review that Mrs. Stuart was the district’s billing manager. Board Member Ramona Lang, upon realizing the disclosure, remarked, ‘Oh, I don’t think we were supposed to tell you that.
Except for the apparent slip, we were unable to confirm that Mrs. Stuart was a compensated contractor or employee until the release of financial records nearly two months later. While also reportedly being misclassified as a contractor and not an employee according to Oregon and federal labor laws.
During a meeting earlier this year on staffing replacements, board members suggested that only district residents should be hired as employees or contractors. However, in a late February meeting, they appeared to retreat from that stance after reportedly consulting with the Special Districts Association of Oregon (SDAO).
According to the OGEC, public officials are generally prohibited from making personnel decisions involving a relative or household member. ORS 244.177(1)(a) bars officials from appointing, promoting, or employing a relative within the public body they serve, unless they comply with conflict-of-interest disclosure requirements. Additionally, ORS 244.177(1)(b) prohibits officials from participating in discussions or interviews related to such personnel decisions.
“ORS 244.177(1)(a) provides that a public official may not appoint, employ or promote (or discharge, fire or demote) a relative or member of their household from a position with the public body that the public official serves or over which the public official exercises jurisdiction or control, unless the public official complies with the conflict of interest requirements of ORS Chapter 244. Even if the public official discloses a conflict of interest, a public official who takes such a personnel action for a relative or member of their household could still be found in violation of the use of office provisions of ORS 244.040(1),” reads the OGEC’s ethics guide.
“Separately, ORS 244.177(1)(b) directs that a public official may not participate in any interview, discussion or debate regarding such personnel actions involving a relative or member of the public official’s household.”
Other notable concerns on public meetings and governance practices
The district is gradually attempting to address ongoing violations of Oregon’s public meetings laws. However, multiple meetings last year, including a November meeting of the HSWD board, failed to comply with key transparency requirements. The district did not provide remote attendance options, failed to take recorded votes on multiple motions despite claiming in its minutes that they had passed, and documented only a motion and a second without a formal vote.
Additionally, the district failed to provide proper meeting notices with clearly stated agenda items. Former board president Stuart had previously assured the Prineville Review that meeting minutes would be available upon in-person attendance. Yet, when we arrived at a meeting, Stuart refused to provide them, despite copies being distributed to both board members and members of the public.
At the same November meeting, the HSWD board attempted to enter an executive session but failed to cite the statutory provision under ORS 192.660 that would authorize it. Instead, the board claimed it would move scheduled financial discussions—originally set for the public portion—into the executive session, apparently in response to the presence of news media. This was further supported by the subsequent claims made in the call with Dianna Scheffler.
When challenged, Stuart refused to justify the session’s legality but still demanded that our reporters leave the meeting. Even if the executive session had been lawful (which it was not), Oregon law requires that news media be allowed to attend. Stuart and other board members became visibly frustrated before abruptly declaring the meeting over and stating they would reschedule the executive session. However, after we exited, it appeared that board members remained at the location and continued discussions, prompting the Prineville Review to submit a formal public meetings grievance for the apparent illegal executive session and scheme to deny media and public access.
In response, Stuart later claimed that the board had merely engaged in casual conversation as “neighbors.”
“The meeting was adjourned, there were several neighbors still at the residence. Natural conversation of the tensions of the meeting may have been spoken, but no deliberating [sic] or decisions were made. The fact that you parked outside the premises for 15 or 20 minutes to see if we left seems extreme,” Stuart stated in response to the grievance.
Stuart also claimed that the district’s formal response to the grievance was copied to the Oregon Government Ethics Commission (OGEC), as required by law. However, our inquiry with the OGEC revealed that it had only received informal email inquiries from Stuart about the law—not an actual copy of the board’s response to the grievance.
Further, Stuart and other board members later admitted to discussing and deciding to approve the grievance response itself in an improperly held, unpublicized meeting—another violation of public meetings laws.
We’ve reached out to Stuart multiple times since his resignation by email and phone and have not heard back.
We had also asked Mayers, ethics questions aside, why the HSWD would divert money to the private POA when that money could have been spent to hire help if volunteers were an issue. Mayers said he did not have an answer.
This is a developing story that we will continue to update you on. If you’re a voter within the HSWD and would like to speak with us, please get in touch via our Contact Us page.
