ASR of the Collingsworth County Appraisal District

Chapter 2
Findings of the Appraisal Standards Review

This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Collingsworth County Appraisal District in five sections:

2.1 Board of Directors

2.2 Appraisal District Policies, Procedures and Operations

2.3 Information Processing Systems

2.4 Staffing, Personnel Qualifications and Positions

2.5 Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards

2.1 Board of Directors

The quality of the property tax system depends on the appraisal district's Board of Directors. Individuals serving on the Board of Directors bring to the board knowledge, judgment and expertise in establishing policies and procedures for the district's organization and operation.

The appraisal district was formed in 1981 and became active in 1982. The district Board of Directors consists of five members. Members of the board are listed in Exhibit 4.

Exhibit 4
Board of Directors Members

Board
Member Represents Starting
Date

Eddie Orr, Chair Collingsworth County 1/1/2004

Jacque Garner City of Wellington 1/1/2004

Kathy Littrell City of Dodson 1/1/2004

David Conner Samnorwood ISD 1/1/2005

Michael Souder Wellington ISD 1/1/2002

Source: Collingsworth CAD.

Elected officials serving on the board of directors include David Connor, Samnorwood ISD board of trustee member, Michael Souder, Wellington ISD board of trustee member and Eddie Orr, Collingsworth county commissioner.

The Board of Directors hires a chief appraiser as the chief operating officer of the district.

The Board of Directors has the following primary responsibilities:

Establish the appraisal district's appraisal office;
Adopt the appraisal district's annual operating budget;
Contract for necessary services;
Hire a chief appraiser;
Hire a taxpayer liaison officer (districts in counties having a population of over 125,000);
Appoint appraisal review board members; and
Make general policy on the appraisal district's operation.

The Board of Directors hires a chief appraiser as the chief operating officer of the district.

Board of Directors received a written survey about board activities. One of the five board members responded. The survey was broken down into board policies and procedures, chief appraiser and staff, property appraisals, appraisal review boards, and budgeting and financial management. The board member gave the board and the district high marks, only noting that he felt the external financial auditor contract is not periodically bid and the auditor rotated.

FINDING
The district's two contracts with Pritchard & Abbott (P&A) for professional appraisal services do not include the dates when services will be delivered nor is there monitoring of contract performance, although the majority of appraisals in the district are performed by the external appraisal firm. The appraisal district does not have written procedures for monitoring contracts to ensure the contractor is delivering the contracted goods or services on time and that the quality and quantity are in accordance with the contract.

The first contract is entitled Contract for Appraisal Services, Real Property and Business Personal Property, Reappraisal and Keep Up Contract. This contract was signed by the Board of Directors chairman, the chief appraiser and Pritchard & Abbott on September 20th, 2002 and covers services for tax years 2003 through 2005. Payments under this contract total $30,700 annually. The second contract is entitled Contract for Professional Appraisal Services, Mineral-Industrial-Utilities-Personal Property. Payments under this contract total $6,000 annually. This contract was signed by the Board of Directors chairman, the chief appraiser and Pritchard & Abbott on December 11th, 2003 and covers services for tax years 2004 through 2005. The chief appraiser said the contract is not bid because of the small amount of money associated with it.

P&A is to provide appraisals for all real property, minerals, industrial, utilities and personal property properties connected to mineral production located in the district. The contractor also appraises 702 individual personal property accounts. The contract defines each of these properties. The chief appraiser is responsible for the appraisal of non-mineral business personal property, which are 127 properties.

The chief appraiser monitors the contracts and pays the invoices. All checks for payment are signed by the board secretary and the chief appraiser. P&A does not provide a written progress report for its annual work.

The contract establishes what records the appraisal firm will provide the district, including one copy of the appraisal records, two copies of notices of appraised value, one copy of the appraisal roll, one copy of the appraisal roll for each of the taxing units and one copy of division orders listing all current record owners of interests in oil and gas.

In order to get the appraisal roll ready each year, the appraisal district should have all of the appraisal information complete and in the appraisal district system before the appraisal notices are run. Without dates for specific deliverables, the district would have no recourse to compel the vendor to perform the services within a prescribed timeframe.

IAAO's Standard on Contracting for Assessment Services, Section 4, requires contracts have specific provisions, including the timeframes when services or goods will be delivered.

Good procedures identify the contract monitor and the duties that the contract monitor is to perform for each contract. Without contract monitoring, the district cannot make a decision on the quality of services rendered by the contractor.

IAAO's Standard on Contracting for Assessment Services, Section 5, requires monitoring contract performance.
RECOMMENDATION 1
Revise the professional appraisal services contract to include delivery dates and develop a contract monitoring process and include it in future contracts.

2.2
Appraisal District Policies, Procedures and Operations

In organizing and administering an appraisal district, the chief appraiser is responsible for hiring, firing, and training personnel, for ensuring compliance with a wide range of legal requirements and for the maintenance of policies and procedures for effective appraisal district office operations. The district is also required to comply with Comptroller rules concerning application forms and appraisal records.

The chief appraiser is required by law to prepare and certify an appraisal roll for each taxing unit participating in the district. Certification of the appraisal roll for the 2003 tax year by the district was completed according to the law.

FINDING
Collingsworth CAD has no written policy and procedures manual for district operations, such as developing budgets, running and issuing payroll, reconciling bank accounts and making purchases. The chief appraiser is the appraisal district's only employee and all of the appraisal work except business personal property is done by Pritchard & Abbott. The chief appraiser has been with the district as the chief appraiser for 23 years and will likely retire in the not too distant future. The chief appraiser is responsible for developing the annual budget, reconciling the district's monthly bank statements, making purchases of goods and services, and preparing checks for purchases and payroll. The chief appraiser and the board secretary sign all checks.

Instead of policies and procedures, the chief appraiser, as a long time district employee, has a series of memos, notes or long term memory to guide her through the day-to-day processes. Policies adopted by the board are recorded in board minutes, but it is unclear how certain policies are translated into practice in the district, nor is it clear that the chief appraiser is responsible for monitoring day-to-day operations to ensure that policy decisions of the board are carried out.

A policy tells a person, department, or group of individuals what they must do, whereas as procedure enumerates how it can be accomplished.

Well-written and organized procedures:

implement and assure compliance with board policies as well as document the intent of those policies;
protect the institutional knowledge of an organization, so that as experienced employees leave, new employees have the benefit of the others' years of experience;
provide the basis for training new employees; and
offer a tool for evaluating employees based on their adherence to procedures.

In the absence of well documented procedures and policies, the work of the appraisal district may come to an abrupt stop if key personnel leave a position as a result of sudden illness, death or other personal tragedies. Other examples abound of whole departments without trained back-ups for critical positions like payroll, and of poor training techniques that show new employees how to perform a task, but not why.

To be effective, policy and procedure manuals are updated and kept current at all times. This means setting up a system for regular updates and distribution, as well as periodic reviews to ensure that all old policies are removed when no longer needed.

The Jefferson County Appraisal District, recently reviewed by the Comptroller's office, maintains a current and comprehensive policy and procedure manual detailing procedures for payroll, accounting, purchasing, budget, travel, bank reconciliations and similar procedures. While Jefferson is not of comparable size, the manual could be used as a guide to address the key policies and procedures that would need to be written.
RECOMMENDATION 2
Develop a written policy and procedures manual for district operations.

2.3
Information Processing Systems

Appraisal districts use information technology to provide detailed records that are easily accessible to staff and the public. Information technology systems allow staff to effectively manage large amounts of data on individual properties and make the appraisal process more efficient.

FINDING
The district's appraisal system and its mapping system are separate, stand-alone systems and are not integrated. The Collingsworth CAD's computerized appraisal system allows the appraisal district to analyze its appraisals through ratio studies within and among property classifications.

The chief appraiser manually updates the maps with parcel numbers/owner names when deeds are processed. The chief appraiser feels entering information separately into the appraisal system and the mapping system works pretty well because there are not a lot of deed changes.

The chief appraiser runs ratio studies within property classes and by neighborhoods. Ratio studies are conducted continuously and results are used to evaluate cost schedules. Sales used in the ratio studies are verified by local realtors, abstract companies and appraisers. Outlier ratios are flagged and researched through physical inspections and, if needed, owners contacted. Categories of properties included in the ratio studies depend on the availability of sales. Collingsworth County is a rural county and has limited commercial properties resulting in the ratio studies primarily evaluating Categories A, C and D. Statistical measures included in the ratio study process include range, mean, median, absolute deviation, and coefficient of dispersion.

Collingsworth CAD has implemented a computerized mapping system, which the district uses to locate and map property within the district. The computerized mapping system displays section lines, block lines, property lines, roads, highways, and owner's name. It is the owner's name that links the mapping system to the appraisal system. The system was installed in the district in June 1994.

The mapping system provides complete coverage of the district and is kept current through processing deed transfers. Deed transfer data is captured and entered into the system on a regular basis. Having this data available for the district's use helps the district capture and verify more sales information, which the district uses to improve its valuation of properties.

The computerized mapping system, with its ability to display and print selected geographic areas, provides the appraiser with a systematic work plan with which to follow. Another aspect of the computerized system benefits the discovery and appraisal of agricultural land. The appraiser uses the mapping system to plot irrigated wells during reappraisal inspections, which assist in the valuation of irrigated land.

This system allows the district to meet the requirements of Section 23.01 of the Tax Code, which requires that all appraisals must consider the individual characteristics of the subject property. This system has all of the required elements of a complete mapping system.
RECOMMENDATION 3
Evaluate integrating the district's appraisal system with its computerized mapping system and develop a plan and a timeline for integrating the systems.

2.4
Staffing, Personnel Qualifications and Positions

Personnel and human resources management are a critical function of appraisal districts. Successful management of personnel includes efficient recruiting, hiring, classification and compensation, benefit administration, training and development, and performance evaluation. Compliance with equal employment opportunity statutes and other applicable federal and state laws and the establishment of fair and workable policies, procedures and training are important for the recruitment and retention of competent staff.

The Collingsworth CAD staff is organized as outlined in Exhibit 5.

Exhibit 5
Collingsworth County Appraisal District Staff, Positions,
Certifications, Years with Collingsworth CAD and Salaries

Name Position BTPE Certification Years with Collingsworth CAD Salary

Ann Wauer Chief Appraiser RPA and CTA 23 Years $22,200

Source: Collingsworth CAD, April 2005.

Appraisal district staff who appraise property are required to be Registered Professional Appraisers (RPA) or to be working towards certification as an RPA. Staff must be certified within five years of their hire date. Interim certifications include Class II and Class III. In addition, RPAs must re-certify five years from the date of first certification and every five years while registered. The chief appraiser is the district's only employee. In addition to managing the district, the chief appraiser is also responsible for collecting taxes for four taxing districts. Collingsworth County Appraisal District contracts with Pritchard & Abbott for the appraisal of all real property, minerals, industrial, utilities and personal property accounts associated with mineral production. The chief appraiser appraises the non-mineral business personal property accounts.

FINDING
The board does not have written policies or procedures for hiring a chief appraiser nor any policies or procedures for evaluating the chief appraiser. The district was unable to provide a job description for the chief appraiser or any written evaluations of the chief appraiser. The chief appraiser said that informal communications were in place, allowing board members to voice any request or criticism to the chief appraiser at any time.

The chief appraiser has been chief appraiser for the district for 23 years. She has developed working relationships with her board over the course of that time. The chief appraiser has run the district using oral policies and procedures she developed to meet the district's needs. The chief appraiser will eventually choose to retire and the board will need to hire someone to replace her. Since the chief appraiser is the district's single employee, there is no in-house successor being groomed to take the chief appraiser's place. This will require the board to conduct an outside search for a successor. The board will need to have a job posting and a mechanism for processing applications and interviewing candidates. The board will also need to have a means of communicating its assessment of any new employee's performance.

Chief appraisers are responsible for ensuring that competent staff is hired, procedures are documented, appraisals are performed, employees are evaluated and all other functions performed by an appraisal district. Having a qualified chief appraiser is important to effective district operations.

Without an objective system in place to ensure that the board and the chief appraiser are in agreement as to what is expected of the chief appraiser, performance evaluations may be subjective and based on emotion rather than actual performance.

In Nueces CAD, for example, the board has developed a well-defined job description for the chief appraiser and constructed an objective evaluation tool for measuring the chief appraiser's job performance. The chief appraiser's job description contains the statutory responsibilities set forth in Section 6.05 of the Property Tax Code, as well as specific goals and expectations required from the board. The job description clearly defines the role of the chief appraiser and lays the groundwork for an objective evaluation. The chief appraiser receives an annual performance evaluation on the anniversary date of his/her hire. The board uses an instrument that allows for input from all board members, and affords the chief appraiser an opportunity to address his/her own goals and objectives during the evaluation period. In addition, the evaluation sets up goals and objectives for the next 12 months.
RECOMMENDATION 4
Develop a job description and an objective set of evaluation measures for the chief appraiser position and establish an annual evaluation process based on objective measures.

2.5
Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards

In appraisal circles there are generally three approaches to value - cost, income, and market - that a Chief Appraiser must consider in determining the market value of property. The Chief Appraiser must consider all three and use the method most appropriate in appraising a particular property.

Minerals are appraised using the income approach, which involves estimating the future income likely to be generated and discounting that income back to current value. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the market value of the entire utility and apportion the value to each taxing unit within the appraisal district.

The district has developed its own appraisal manual entitled Guidelines for Mass Appraisal. The manual was updated in 2004. The purpose of the manual is to provide uniform methods of appraisal and establish equitable market values. The appraisal manual includes information on general field procedures, measuring procedures, valuation procedures, depreciation, and property codes. The manual also includes class descriptions for residential, commercial, mobile homes as well as agricultural and land valuation guidelines. The cost schedules were developed locally for use in Collingsworth County Appraisal District.

FINDING
The Collingsworth CAD's computerized appraisal system allows the appraisal district to analyze its appraisals through ratio studies within and among property classifications. According to IAAO's Property Appraisal and Assessment Administration, a ratio study is a study of the relationship between appraised or assessed values and market values. Indicators of market values may be either sales or independent "expert" appraisals. Of common interest in ratio studies are the level and uniformity of the appraisals or assessments.

The chief appraiser runs ratio studies within property classes and by neighborhoods. Ratio studies are conducted continuously and results are used to evaluate cost schedules. Sales used in the ratio studies are verified by local realtors, abstract companies and appraisers. Outlier ratios are flagged and researched through physical inspections and, if needed, owners contacted. Categories of properties included in the ratio studies depend on the availability of sales. Collingsworth County is a rural county and has limited commercial properties resulting in the ratio studies primarily evaluating Categories A, C and D. Statistical measures included in the ratio study process include range, mean, median, absolute deviation, and coefficient of dispersion.

A ratio study can be run at anytime during the year as sales are gathered all year long and entered in the computer. However, the appraiser normally will start running ratio studies in January and evaluate the sales that were gathered the previous year. He waits until January to have a sufficient number of sales with which to work.

Ratio studies are run again in early April to evaluate sales from the first three months of the current year and see if any new trends have emerged. The ratio studies are used to evaluate schedules and make changes if necessary.

Outlier ratios are flagged and the chief appraiser and the contract appraiser will meet to discuss the flagged sales. A physical inspection is conducted if necessary.

Appraisal districts use ratio studies to plan appraisal maintenance programs. The ratio study results indicate those market areas in the appraisal district whose values no longer reflect the market. Frequent ratio studies and the appraisal maintenance that follows enable an appraisal district to keep its values at or near the market.
COMMENDATION
Collingsworth CAD has a comprehensive ratio study system that allows proper reappraisal and maintenance planning.

FINDING
Collingsworth County Appraisal District lacks a detailed reappraisal plan to ensure the execution of timely and accurate reappraisals.

A general reappraisal plan is contained in the 2003 Through 2005 Contract for Appraisal Services between Pritchard & Abbott, Inc and Collingsworth County Appraisal District. Collingsworth CAD's reappraisal plan is presented in general terms and indicates reappraisals are to be performed in one-third increments for each of the three years of the contract. The appraisal of new construction, rezoned property and remodeled structures is also generally addressed in the plan.

The contracted appraiser indicated that a slightly different reappraisal plan was actually followed in the field, which divided appraisal work by category type. Specifically, rural properties were reappraised in 2004, commercial properties will be reappraised in 2005 and residential properties in 2006.

The reappraisal plan does not give any detail as to the steps to be performed, staffing levels, workflow or the costs associated with plans and goals. The plan does not list specific procedures for determining how the sales are to be used in reappraising property in each market area, or how the district's internal ratio study is used to determine the need for reappraisal in each market area. The plan does not discuss how market areas might be grouped to provide sufficient sales for appraisal model analysis and development.

The reappraisal plan does not link the appraisal district's budget, training, contracting, market analysis, field inspections and data processing in one document. The appraisal district's policy includes statements about some of these elements but the appraisal district Board of Directors has not adopted a plan that includes documentation of how the appraisal district staff will implement the reappraisal plan.

Lack of a detailed reappraisal plan could cause the execution of the plan to go awry, and result in property values that deviate from market value. This market value deviation could cause any of Collingsworth County's school districts to receive an invalid finding in the state's property value study.

Section 25.18, Property Tax Code, requires appraisal districts to implement a plan for reappraisal. The plan for reappraisal shall provide for reappraisal of all real property in the district at least once every three years. A reappraisal plan is a roadmap for performing the work. It is also a communication tool that shows the appraisal district board of directors how the appraisal district staff plans to accomplish its appraisals, and if the board chooses to require the chief appraiser to submit the plan for approval, the board can direct the appraisal activities by amending the plan.

According to USPAP Standard 6, a functional reappraisal plan includes the following activities:

identifying properties to be appraised;
identifying and updating in the appraisal records the relevant characteristics of each property to be appraised;
defining market areas;
identifying property characteristics that affect property value in each market area;
developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area;
calibrating the model to determine the contribution of the individual property characteristics affecting value;
applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
reviewing the appraisal results.

A reappraisal plan also provides for a physical inspection of the properties being appraised. Alternatively, the plan can include reliance on reliable sources of property information instead of physical inspections. Such sources include, but are not limited to, deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps and property sketches. A complete plan would indicate instances or types of properties that will be appraised using sources of information other than physical inspection.
RECOMMENDATION 5
Adopt a detailed reappraisal plan that, at a minimum, includes the vital steps in the process, explains exactly how and when the steps will be executed, and explains how sufficient resources will be allocated to follow the plan.

FINDING
Collingsworth CAD does not have written procedures for gathering and analyzing sales, nor does the district have other appraisal manuals for appraising property. Collingsworth County does not have a multiple listing service (MLS) for real estate professionals. To obtain market data from sales, the appraisal district researches deed recordings to identify property transactions. The district sends sales confirmation letters to buyers and/or sellers as recorded in the deed to confirm and verify the transaction and the amount of the transaction. The chief appraiser also verifies sales through local banks, realtors, and abstract companies. Sales are maintained in the computer and recorded with sales data codes.

The district does not have written appraisal manuals for appraising differing property categories. While the district contracts out the appraisal of many of the property categories, appraisal manuals are necessary to ensure that the contractor is following district guidelines and procedures for appraising property according to district needs and guidelines.

The district's confirmation and verification procedure is one that appraisal districts use, especially those appraisal districts that do not have access to a multiple listing service. However, the appraisal district's procedure for gathering and analyzing sales and market data is not written or contained in a procedures manual.

Written procedures ensure the market analyses are done consistently, regardless of changes in personnel. Knowing what analysis needs to be done, when to perform the analysis, and how to actually perform it is key to maintaining continuity and a high level of appraisal performance.
RECOMMENDATION 6
Establish written procedures for gathering and analyzing sales and develop appraisal manuals for all property categories.

The chief appraiser needs to include the sales analysis procedures in the appraisal procedures manual. Compiling these procedures in a written manual will increase overall effectiveness of the appraisal program and ensure continuity in the appraisal district's performance.

FINDING
The appraisal district does not physically inspect all business personal property annually. The district also fails to develop an independent valuation of inventories, fixtures and equipment.

The chief appraiser is responsible for appraising the majority of business personal property accounts in the county. Pritchard & Abbott appraises business personal property accounts associated with mineral production. According to the recapitulation data provided by P&A, the district currently has 127 business personal property accounts.

The chief appraiser said that the valuation of business personal property is often difficult in rural areas, as information is hard to obtain from the business owners and the furniture, fixtures and equipment is frequently old and of little value. The district relies mainly on rendition forms in valuing business personal property. Rendition forms are mailed to business owners each year. Some of the rendition forms will be reviewed for reasonableness and physical inspection conducted if needed. The district trends and depreciates computer equipment when sufficient information exits.

New business personal property accounts are inspected each year. The most effective measure used to discover the new accounts is driving the county as most of the business accounts are limited to a few locations. A brief list of personal property appraisal procedures are contained in the district's appraisal manual entitled Guidelines for Mass Appraisal. The district also uses the Field Appraiser's Guide published by the Comptroller of Public Accounts.

Section 23.01 of the Property Tax Code requires all property to be appraised at market value, taking into consideration the individual characteristics of each property. Annual inspections are necessary to identify changes in the character of the accounts, as well as changes in ownership and location of property. Independent verification, inspection and valuation of inventories, fixtures and equipment ensure that accounts reflect market value.
RECOMMENDATION 7
Physically inspect all business personal property accounts each year and develop an independent verification and valuation of the business personal property.

Procedures need to be developed to meet these recommendations and those procedures should be documented and incorporated into the district's appraisal manual.

2.1	Board of Directors
2.2	Appraisal District Policies, Procedures and Operations
2.3	Information Processing Systems
2.4	Staffing, Personnel Qualifications and Positions
2.5	Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards

Board Member	Represents	Starting Date
Eddie Orr, Chair	Collingsworth County	1/1/2004
Jacque Garner	City of Wellington	1/1/2004
Kathy Littrell	City of Dodson	1/1/2004
David Conner	Samnorwood ISD	1/1/2005
Michael Souder	Wellington ISD	1/1/2002
Source: Collingsworth CAD.

Name	Position	BTPE Certification	Years with Collingsworth CAD	Salary
Ann Wauer	Chief Appraiser	RPA and CTA	23 Years	$22,200
Source: Collingsworth CAD, April 2005.