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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 Cooke County Appraisal District in five sections:

2.1Board of Directors
2.2Appraisal District Policies, Procedures and Operations
2.3Information Processing Systems
2.4Staffing, Personnel Qualifications and Positions
2.5Generally 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
Michael McHorse, Chair Gainesville City 2000
Lisa Bellows Gainesville ISD 2004
David Clifton Valley View ISD 2002
Robert Knauf Cooke County 2004
Jim Myrick Cooke County 2004
Source: Cooke CAD, 2005.

Lisa Bellows is a Gainesville ISD board of trustee and an elected official.

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 to act as the chief operating officer of the district;
  • 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 received a written survey about board activities. Four 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 generally gave itself, the chief appraiser and staff high marks for running the district. On the majority of questions, the board agreed or strongly agreed that the district was operating effectively. Three board members agreed with the statement "the board maintains a comprehensive set of policies and procedures to guide the operation of the appraisal district; and two members agreed with the statement that "all board policies in my district are reviewed and updated at least every two years." None of the board members knew if the board policy regarding the designation of an auditor follows section 6.063, Tax Code. The board members felt they did evaluate the chief appraiser annually, and felt they did have a written job description and a performance plan for the chief appraiser. One board member agreed with the statement that "the external audit contract is periodically bid and the auditors are rotated periodically," while 2 members did not know and one did not answer.

FINDING
The district's budget lacks the detail necessary to comply with Section 6.06, Tax Code. The Cooke CAD submitted the approved budget for the years 2001-2004, the adopted budget for the years 2004-2006 with the 2005 cost allocation based upon the 2004 levy and the estimated 2005 appraisal budget and collection budget allocation.

Section 6.06, Tax Code requires the chief appraiser to prepare a proposed budget for the following tax year, submit copies to each taxing unit participating in the district and to the board by June 15. The budget shall include a list showing each proposed position, the proposed salary for the position with the related benefits, the proposed capital expenditures and an estimate of the amount allocated to each taxing unit.

Exhibit 5 is the appraisal district's budgets for the years 2001-2004.

Exhibit 5
Cooke CAD Approved Appraisal Budgets
Category Approved 2001 Approved 2002 Approved 2003 Approved 2004
Chief Appraiser $47,500 $45,000 $45,750 $47,200
Business Manager $19,500 $13,000 $13,000 $13,400
Personal Property Appraiser $22,000 $22,000 $24,000 $24,700
Appraiser $31,200 $32,500 $22,500 $23,200
Appraiser $31,200 $23,000 $26,000 $26,800
Appraiser $31,200 $32,500 $33,250 $34,500
Appraiser $26,500 $28,000 $32,000 $34,500
Appraise   $25,000 $24,000 $26,000
Appraiser $19,250 $23,000 $26,000 $26,800
Computer Sr. Clerk $20,100 $20,900 $21,650 $22,500
Computer Coordinator $24,500 $28,000 $30,750 $31,600
Data Entry $16,600 $17,000 $19,000 $19,500
Cartographer $28,300 $29,000 $29,750 $30,800
Mapping Clerk $20,300 $21,000 $21,750 $23,200
Clerk/Receptionist       $0
Part-time Help $10,000 $10,000 $12,000 $12,300
Total Salaries $348,150 $369,900 $381,400 $397,000
FICA & Medicare Tax Expense $6,000 $6,000 $6,000 $5,500
TWC Unemployment Tax $2,000 $3,700 $3,700 $4,000
Group Health Insurance $40,000 $72,500 $87,000 $91,200
Retirement $33,000 $35,000 $35,000 $35,000
Workers Compensation Insurance $1,500 $1,500 $1,500 $2,100
Appraisal Review Board $6,000 $6,000 $6,000 $6,000
Board of Director Expense $2,000 $2,000 $2,000 $1,000
Contingencies $4,000 $4,000 $4,000 $4,000
TECH Hardware Upgrade $5,000 $5,000 $5,000 $5,000
Auditing $3,700 $3,700 $3,700 $4,000
Attorney $1,800 $1,800 $1,800 $1,800
Mineral & Utility Appraisal $40,000 $40,000 $40,000 $40,000
Mapping Information System $500 $500 $500 $5,000
Deed Copies/Microfilm $750 $750 $750 $1,500
Mapping Supplies $1,000 $1,000 $1,000 $1,000
Car Allowance - Chief Appraiser $4,800 $4,800 $4,800 $4,800
Vehicle Fuel & Maintenance $4,500 $4,500 $4,500 $4,500
Vehicle Mileage & Allowance $1,000 $2,000 $2,000 $2,000
Trade Vehicle $0 $13,000 $0 $0
Property Maintenance $2,000 $2,000 $2,000 $1,700
Custodial Services $3,800 $3,800 $3,800 $3,800
Dues & Memberships $2,500 $2,500 $2,500 $2,500
Equipment Lease/Postage $1,200 $1,200 $1,200 $4,000
Postage Equipment Maintenance $1,500 $1,500 $1,500 $1,700
Equipment Maintenance $1,000 $2,000 $2,000 $2,000
Mapping Software Maintenance $1,250 $1,250 $1,250 $1,700
Insurance Liability $1,200 $1,200 $1,200 $1,600
Insurance - Property $300 $300 $300 $1,400
Insurance - Dishonesty Bond $850 $850 $850 $350
Insurance - Vehicle $500 $500 $500 $700
Legal Notice $1,000 $1,000 $1,000 $1,000
Building Payment $32,500 $26,000 $26,000 $26,000
Office Supplies $8,000 $8,000 $8,000 $10,000
Record Retention $1,000 $1,000 $1,000 $1,000
Postage & Freight $7,800 $7,800 $7,800 $9,000
Printing/Notices/Rolls $3,000 $3,000 $3,000 $3,000
Schools & Seminars $6,000 $6,000 $6,500 $7,300
Telephone $4,700 $4,700 $4,700 $6,400
Utilities/Electric $7,200 $7,200 $7,200 $7,500
Utilities/Water $1,200 $1,200 $1,200 $1,200
F&F and M&E $1,000 $1,000 $1,000 $1,000
Computer Purchase Note GNB $18,000 $18,000 $18,000 $6,100
Computer Hardware Maintenance $2,000 $2,000 $2,000 $2,000
Software Maintenance $27,000 $27,000 $27,000 $31,000
Software Upgrade $0 $3,000 $3,000 $3,000
Total Operations $294,050 $341,750 $343,750 $355,350
TOTAL SALARIES & OPERATIONS $642,200 $711,650 $725,150 $752,350
Source: Cooke CAD.
Note: totals show the correct total amounts. Budget documents contained calculation errors.

Exhibit 6 is the approved collection budgets for the years 2001-2004.

Exhibit 6
Cooke CAD Approved Collection Budgets
  Approved 2001 Approved 2002 Approved 2003 Approved 2004
Chief Appraiser $2,500 $7,500 $7,750 $7,982
Business Manager $5,500 $13,000 $17,000 $17,510
Collections Supervisor $28,000 $24,750 $24,750 $25,500
Collections Clerk   $17,000 $18,500 $19,100
Collections Clerk $16,600 $17,000 $17,500 $18,025
Part-time Help $10,000 $2,000 $2,500 $2,500
Total Salaries $62,600 $81,250 $88,000 $90,617
FICA & Medicare Tax Expense $2,000 $1,200 $1,200 $2,400
TEC Unemployment Tax $600 $800 $800 $1,000
Group Health Insurance $7,000 $19,000 $22,800 $21,000
Retirement $6,500 $7,500 $7,500 $7,000
Workers Compensation Insurance $600 $1,000 $1,000 $900
Contingencies $2,000 $1,000 $1,000 $1,000
TECH Hardware Upgrade $3,000 $3,000 $3,000 $1,000
Auditing $5,800 $5,800 $5,800 $6,000
Vehicle Mileage & Allowance $800 $1,200 $1,200 $1,000
Property Maintenance $1,000 $1,000 $1,000 $700
Custodial Services $1,700 $1,700 $1,700 $1,700
Dues & Memberships $500 $500 $500 $1,000
Equipment Lease/Postage $1,000 $1,000 $1,000 $1,700
Postage Equipment Maintenance $1,500 $1,500 $1,500 $1,500
Equipment Maintenance $800 $1,000 $1,000 $800
Insurance Liability $400 $400 $400 $700
Insurance - Property $200 $200 $200 $600
Insurance - Dishonesty Bond $400 $400 $400 $150
Insurance - Vehicle $200 $200 $200 $300
Legal Notice $200 $200 $200 $200
Building Payment $14,000 $11,100 $11,100 $12,000
Office Supplies $3,000 $3,000 $3,000 $6,000
Tax Statements/Envelopes $3,000 $2,000 $2,000 $3,000
Record Retention $1,000 $900 $900 $1,000
Postage & Freight $8,000 $7,000 $7,000 $8,000
Printing/Notices/Rolls $200 $200 $200 $1,800
Schools & Seminars $1,000 $3,000 $3,000 $3,000
Telephone $2,500 $2,000 $2,000 $2,800
Utilities/Electric $3,400 $3,200 $3,200 $3,400
Utilities/Water $600 $600 $600 $450
F&F and M&E $500 $500 $500 $500
Computer Purchase Note GNB $7,800 $7,800 $7,800 $2,700
Computer Hardware Maintenance $3,000 $3,000 $3,000 $3,000
Software Maintenance $11,400 $11,400 $11,400 $14,000
Software Upgrade $0 $650 $650 $650
Total Operations $95,600 $104,950 $108,750 $112,950
TOTAL SALARIES & OPERATIONS $158,200 $186,200 $196,750 $203,567
Source: Cooke CAD. Note: totals reflect column totals rather than district printout.

The Section 6.06, Tax Code requires that the budget reflect each position and the benefits related to that position. Cooke CAD's budget does reflect each position; however, the benefits are not broken down by position.

RECOMMENDATION 1
Develop and expand the budget document that is distributed to taxing units to include the salary and benefits for each position.

FINDING
The Cooke CAD was audited by the accounting firm, Mathis, West, Huffines & Co., P.C. in 2002 and 2003. They state, "we conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion."

In the 2002 Annual Financial Report, there are three of ten notes to the financial statement worth mentioning: a deficit fund balance, expenditures in excess of budgeted amounts and an employee theft.

Note Eight ― DEFICIT FUND BALANCE ― A deficit fund balance of $4,647 exists in the general fund at December 31, 2002. The deficit results from the district's expenditures exceeding the budgeted amount. It is expected that this deficit will be recovered in 2003.

Note Nine ― EXPENDITURES IN EXCESS OF BUDGETED AMOUNTS― Expenditures exceeded budgeted amounts in several categories in both the appraisal and collection budgets. Most notably, the budgeted amounts for "special services" and "office and miscellaneous" in the appraisal budget and "office and miscellaneous" in the collection budget.

Note Ten ― THEFT― During the year ending December 31, 2002, the district discovered theft by an employee totaling $31,045. The district contacted the local district attorney about the theft and an investigation followed and resulted in the indictment of the former employee. As of the date of the audit report, the case has not yet gone to trial. The district anticipates recovering part of the loss through insurance.

There were no management letter findings to address the above issues in the 2002 Annual Financial report nor were there any remedies to correct these occurrences again. Financial audits typically identify weaknesses in internal controls in a management letter, alerting boards to potential problems in operations. The board then takes steps, or directs the chief appraiser to take steps, to address the identified problems.

In the 2003 Annual Financial Report, there was a note about the judgment from the employee theft the preceding year. A judgment involving theft by a former employee was ruled in the district's favor on October 23, 2003. Restitution in the amount of $28,386 was ordered to be paid to the district over a ten-year span. The district anticipates collecting $236 per month. However, the ability to collect the full restitution is uncertain. A receivable has not been recorded as of the date of the audit report (May 13, 2004).

There was no documentation presented to show that any action by the CAD or the board had been taken on these findings. However, the CAD provided five pages of information on various accounting entries. There is mention of getting checks signed by two people and those authorized to sign checks are the Chief Appraiser, Collections Supervisor and the Computer Supervisor. There was nothing to indicate that the check signing authority had been approved by the board.

Even though there was no note about the 2003 budget being over budget by $61, 679, it is worth noting in this report as the CAD had been under budgeted the previous year. There was no information in the budget information reviewed that addressed how the excess budget funds were to be credited back to the taxing units as required by Section 6.06(j), Tax Code.

The CAD submitted the engagement letter with Mathis, West, Huffines & Co., P.C., for the 2004 audit, which outlines the audit engagement and the fees. The fees as outlined in the letter were 45 percent higher than what the CAD had budgeted for the same service in 2003 (paid for in 2004) without any explanation for the increase.

In Nueces County, for example, the management letter in the financial audit alerted the board to a situation where the chief appraiser was approving his own travel (the chief appraiser was responsible for approving all travel). Even though there was no evidence of misuse of travel funds, this was identified as an internal control weakness. The board reacted swiftly to the finding, changing both the travel procedures and the travel approval form to require a board member to approve all travel related activities by the chief appraiser.

RECOMMENDATION 2
Develop procedures for responding to notes on the financial statement and management letter findings.

FINDING
The district's professional appraisal contract with Pritchard & Abbott, Inc. (P&A) lacks standard contract clauses that protect the district. The contract does not include the dates when services will be delivered to the appraisal district nor does it contain any monitoring provisions. The contract also does not include a venue clause. Venue clauses are common in government contracts, establishing the location of courts that would be used in the event of a contract dispute. There is also no funding out clause or similar types of government contract clauses. The appraisal contract with P&A for professional appraisal services does not include the dates when services will be delivered. The 2003 Contract for Appraisal Services was signed September 17, 2002 by the chief appraiser and P&A for $40,000 paid in equal quarterly payments. An automatic option for contract extension is in effect for 2004 and 2005 unless the CAD gives written notice of its intent not to exercise the option.

According to the contract, P&A is to appraise all interests in properties producing oil, gas, and other fuel minerals, (non-fuel minerals are not covered by this contract) including working interest, oil payments, overriding royalties and royalty interests; and shall also include all personal property related to oil and gas production such as oilfield supply stores, oilfield service companies, pipe yards, oil company production yards, drilling equipment, dirt contractors, and etc. Also included within the terms of the contract is property owned by regulated utility companies such as pipelines, pump stations, compressor stations, railroad, telephone companies, and gas distribution companies. Personal property associated with heavy industries and major manufacturing plants are included.

The CAD has a Municipal Lease Purchase for the refinance of the existing appraisal building. A copy of the proposal letter dated May 13, 2004 from the Government Capital Corporation was provided, but not a copy of the executed lease purchase plan or any board minutes approving the plan or authorizing the chief appraiser to enter into the plan. A copy of Exhibit B of Municipal Lease-Purchase Agreement No. 3503 dated May 13, 2004 and signed by the chief appraiser was submitted. Also, no information was provided to show that the requirements of Section 6.051, Tax Code, or Section 6.11 Tax Code, had been met for the agreement.

Additionally, the CAD submitted information regarding lease agreements with True Automation and Pitney Bowes, although no actual lease agreements were provided.

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 3
Establish written procedures for monitoring professional services contracts and revise current contracts as they expire to include venue clause, deliverables and deliverable dates.

FINDING
The CAD's board has approved an employee handbook and personnel policy, but the board has no comprehensive written board policies. During an interview, the board president stated that the current board was a good, working board. He stated that he felt that the Cooke CAD is working better than it had in the past. He has served on the board for six years and stated there are no written board policies. The board president said the board approves contracts the district enters into and that he felt the chief appraiser had improved the district. The board president said that the board meets every two to three months.

The Comptroller's office publishes an Appraisal District Director's Manual that outlines board of directors' responsibilities. Boards develop local policies to guide the chief appraiser and district staff in effectively managing district operations.

RECOMMENDATION 4
Develop written board policies to guide the CAD to effectively manage the district operation.

The chief appraiser should work with the board to develop policies that the board can approve and adopt. In order to make these changes and work on policies, the board may need to meet monthly.

FINDING
The board does not have a written process for evaluating a chief appraiser. There is no evidence of any formal or informal review process for assessing chief appraiser performance. A three page job description for the chief appraiser that was approved in 1996, along with a seven page evaluation tool for the chief appraiser position, was provided by the district. The evaluation tool is divided into seven major categories with eleven statements that reflect the major responsibilities of the chief appraiser in managing the district.

The chief appraiser has worked at Cooke CAD since 1989 and was appointed chief appraiser in 1998. Although the chief appraiser has submitted the evaluation tool to the board for evaluation annually, the board has not completed an evaluation since 1999.

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 following an objective system 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.

RECOMMENDATION 5
Use the evaluation tool and establish an annual written evaluation process for the chief appraiser.

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
Cooke CAD does not have policies and procedures to guide the day-to-day operations of the district in areas such as payroll processing, accounting, purchasing and the like.

What was submitted is a four page outline of the Cooke County Appraisal District's Appraisal Department. It is unclear how certain policies are translated into practice in the district, nor is it clear that the chief appraiser or any other employee is responsible for monitoring day-to-day operations to insure that policy decisions of the board are carried out. Also, the CAD provided five pages of information on various accounting procedures from doing payroll to entering and paying bills. Again, it is unclear how these procedures are used in the district.

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

Well-written and organized procedures:

  • implement and assure compliance with board policies as well as documenting 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.

To be effective, policy and procedure manuals should be 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.

RECOMMENDATION 6
Develop a comprehensive written policy and procedures manual for district administrative 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
Cooke CAD uses appraisal system technology to complete appraisals. The Cooke CAD uses computers and software that are updated with current appraisal technology software. The chief appraiser has a desktop personal computer and a laptop, and the other employees have desktops. There is a computer terminal and a microfiche reader in the front office for the public. There is also a microfilm reader for the information received from Cooke County. The District has been using True Automation Software for several years. True Automation is updated regularly and the employees receive training on the software. The computer coordinator is responsible for the computer system. Cooke CAD has internal controls that dictate who can use the system. Only the computer coordinator and the chief appraiser can make certain changes to the data. Once the tax roll is certified by the chief appraiser, no changes can be made to the data unless it is approved by the chief appraiser. ESRI mapping software version ARCGIS is used by Cooke CAD. All the maps are digitized and are integrated with True Automation.

Cooke CAD regularly receives sales data from Multiple Listing Service (MLS), word of mouth, sales letters and deed transfers from Cooke County. Sales data and other information about property, residential, commercial or real, is obtained from the newspaper, other organizations like the Chamber of Commerce and the community. The Cooke CAD has experienced a 50 percent response rate from its sales letters. The senior mapping clerk processes the deeds and creates a record in True Automation that will automatically generate a sales letter that is sent to the taxpayer. Every two weeks Cooke CAD receives a microfilm from Cooke County that reflects the recorded deeds and subdivision plats. A document is created from the microfilm that is scanned and entered into the system.

The Cooke CAD uses the GEO system for coding. The Cooke CAD has neighborhood codes. The County is divided into areas, NE, SE, SW and NW. I-35 divides the County north by south and HWY 82 divides it east by west. The appraisal staff is assigned different areas of the CAD.

The sales data is verified with the MLS data, the sales letters and reviews by each appraiser. It appears from reviewing the system, the Cooke CAD follows the Comptroller rules.

COMMENDATION
The district has integrated its appraisal software and geographic information systems providing staff and taxpayers better access to data.

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 Cooke CAD staff is organized as outlined in Exhibit 7.

Exhibit 7
Cooke County Appraisal District Staff, Positions, Certifications, Years with Cooke CAD and Salaries
Position BTPE Certification Years with Cooke CAD Salary**
Chief Appraiser RPA & RTA 16 $57,941
Senior Appraiser RPA 16 $36,225
Senior Appraiser RPA 14 $36,225
Appraiser Class III 4 $27,000
Appraiser Class III 1 $30,000
Appraiser Class III 4 $27,350
Appraiser Class III 5 $28,140
Appraiser Class III 2 $25,935
Collections Supervisor RTC 4 $28,500
Business Manager N/A 3 $28,875
Computer Coordinator N/A 17 $33,180
Computer Supervisor N/A 9 $23,625
Cartographer N/A 17 $32,340
Sr. Mapping Clerk N/A 16 $24,500
Collections Clerk N/A 3 $20,055
Collections Clerk N/A 2 $18,926
Data Entry* N/A 14 $10.5/hr.
Source: Cooke CAD, 2005
* Part-Time.
** Includes contributions from appraisal and collection budgets.

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 district provides appraisal services for 20 taxing units including Cooke County, Gainesville Independent School District, Muenster Independent School District, Valley View Independent School District, Callisburg Independent School District, Era Independent School District, Lindsay Independent School District, Walnut Bend Independent School District, Sivells Independent School District, City of Munster, City of Gainesville, City of Oakridge, City of Valley View, City of Callisburg, City of Lindsay, Muenster Water District, North Central Texas College District, Clear Creek Watershed District.

FINDING
The Cooke CAD's locally appraised parcels to staff ratio is under the state average by approximately 1000 and their group average by 600 according Exhibit 3. Looking at the comparable districts in size to Cooke, the number of parcels per staff member for Cooke CAD was 2,318. Wharton CAD was 4,019, Pecos CAD was 4,391, Bandera CAD was 5,082 and Upshur was 3,611.

According to the 2003-04 Appraisal District Operations Report, the chief appraiser does appraisals. While doing appraisals the chief appraiser has less time for managing the district's functions, such as developing or maintaining schedules, creating procedures, training and evaluating staff or developing a reappraisal plan.

Cooke County reported 14 full-time staff and two part-time staff during the 2003 appraisal cycle when parcels were being appraised locally. Exhibit 3 in chapter one estimated the total number of locally appraised parcels at 32,445. This resulted in a ratio of 2,318 local parcels per staff, as compared to a statewide average of 3,404 local parcels per staff member and 2,911 local parcels per staff in the counties included in the district's parcel count peer group. Cooke has three fourths the number of staff of the state average and five more staff than its peer districts that are part of the 25,000 to 34,999 category of locally appraised parcels (Exhibit 3).

According to the Chief Appraiser, True Automation is relatively easy to use appraisal software and if there are problems True Automation has an online system for trouble shooting. ESRI mapping software version ARCInfo is used by CCAD. All the maps are digitized and are integrated with True Automation. Each appraiser enters in her/his own sales data except for one appraiser. There are four full time positions and one half time position that are for the computer, data entry and mapping operations.

RECOMMENDATION 7
Conduct a staff needs analysis and establish staffing allocation guidelines that will insure that the number and type of staffing is appropriate and annually adjusted to meet reappraisal plan goals each year.

Successful appraisal districts monitor staffing and parcel counts and make necessary adjustments to ensure adequate county coverage while maintaining appraisal accuracy.

FINDING
The Cooke CAD personnel policy does not include a systematic approach for employee evaluation nor does it have any job descriptions.

IAAO's Property Appraisal and Assessment Administration in Chapter 16, "Administration," states, "Although employees may improve their skills by their own efforts and the help of peers, managers have organizational responsibility for employee development. They use training, education, counseling, and performance reviews to identify talents and help employees grow."

The employee's performance of assigned duties and other job-related criteria provides the basis for an annual (at a minimum) employee evaluation. Employees need to be informed of the criteria on which they will be evaluated. A detailed job description is essential. Evaluation and performance appraisal ratings are based on the evaluation instrument and cumulative performance data gathered by supervisors throughout the year. The district was unable to provide detailed written job descriptions for each staff position.

Each employee needs to have at least one evaluative conference annually to discuss the written evaluation and may have as many conferences about performance of duties as the supervisor deems necessary. Evaluation records and forms, reports, correspondence and memoranda may be placed in each employee's personnel records to document performance. All records that support appraisal ratings need to be maintained for at least two years. Official appraisal records are then maintained throughout a person's employment with the district and for two years after an employee ceases to be employed with the district. All employees need to receive a copy of their annual written evaluations.

A proper personnel evaluation process is essential to employee development and high morale. The district was unable to provide any recent performance appraisals of staff.

RECOMMENDATION 8
Develop job descriptions and adopt an annual personnel performance evaluation system to use in evaluating all district staff.

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

There are 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.

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

Currently, Cooke County's reappraisal plan is a one-page statement with the 2006 appraisal goals and objectives attached. The reappraisal plan states that "the reappraisal of all real property in Cooke CAD shall be done on an annual basis. And each year appraisers gather sales data, analyze the sales and conduct ratio studies to determine areas or subdivisions where values need to be raised, lowered or left as is. Generally, in areas where ratio studies indicate a ratio in excess of 100 percent values are lowered; also in areas where the indicated ratios are less than 95 percent values are raised. The plan also states that a market sales approach is generally used." Some of the goals and objectives include re-appraising all mobile homes, any partial completions, all commercial property in Lindsey ISD and Muenster ISD and all property in Pilot Point ISD, Walnut Bend ISD and Era ISD. Also, it includes gathering building costs, income information and sales information as well as analyzing and adjusting improvement schedules to reflect market values.

The written reappraisal policy 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 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, the training, contracting, market analysis, field inspections and data processing in one document. The board of directors has not adopted a plan that includes documentation of how the appraisal district staff will implement the reappraisal plan. In addition, the board of directors has not adopted or reviewed the work plan the staff would follow to accomplish the reappraisal policy.

Section 25.18, 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.

The USPAP, Standards Rule 6-2(g), requires appraisers to "identify the characteristics of the properties that are relevant to the purpose and intended use of the mass appraisal, including:

(i) the group with which a property is identified according to similar market influence;
(ii) the appropriate market area and time frame relative to the property being valued; and
(iii) their location and physical, legal, and economic characteristics."

To comply with this standard, appraisal districts typically record property characteristics that include: the Comptroller's property category code, the location and market area of property; the physical attributes of the property such as the size, age, condition, and construction type; the number of various kinds of rooms such as bedrooms, bathrooms, etc; the presence of amenities such as central air conditioning; any legal and economic attributes or restraints; and the presence of easements, covenants, leases, special appraisals, ordinances or other legal restrictions. See the Comptroller's Electronic Data Submission Record Layout and Instructions, Account Category Detail Record Layout for a basic list of property characteristics.

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 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 9
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
Cooke CAD lacks detailed ratio study procedures. No information was given on ratio studies to the consultant. The district was unable to produce any ratio studies from 2003 or from the current year.

Evaluating appraisal performance is one of the most important aspects of an effective tax appraisal program because it indicates when reappraisal activity is necessary. The major aspects of appraisal performance evaluation are the appraisal level and measuring appraisal uniformity. The appraisal level refers to the percentage that local appraised values represent of market value. Appraisal uniformity refers to the degree to which properties are appraised at equal levels. Uniformity is typically represented by a statistic called the coefficient of dispersion (COD). The COD measures the average variation in appraisal levels from property to property or among property types. Tax appraisers can best determine both the appraisal level and uniformity through ratio studies. In the simplest definition, ratio studies compare the market value of individual properties in a representative sample of similar properties to the local appraised value for each property in the sample. The level of appraisal is determined by dividing the local appraised value by the market value. The COD is calculated from a statistical formula that incorporates the ratios for individual properties in a sample of properties.

Section 23.01, Tax Code, requires all property to be appraised at market value. Ratios, which measure the percentage of appraised values to market values, show whether appraised values are consistent with the statutory requirement that property be appraised at market value. The COD shows whether appraisals between properties and among property types are uniform. Strong appraisal uniformity guarantees each property owner pays his fair share of taxes and no more or less than others.

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.

RECOMMENDATION 10
Establish comprehensive written ratio study procedures that allow proper reappraisal and maintenance planning.

FINDING
The Cooke CAD lacks written comprehensive appraisal procedures manuals for the appraisal staff.

According to the chief appraiser, most of the reviews of the properties are conducted by two appraisers. The business appraisals are conducted primarily by one appraiser. The chief appraiser said that the Cooke CAD uses the cost method for commercial and residential properties. He also uses information from the local contractors and builders for this approach. The income and sales approach are also used as appropriate. However, from reviewing the files as noted below, it was difficult to determine what approach was actually used to value a property.

The appraisal files consist of the appraisal card. The information on the card includes a description of the property, sketch of the improvements, pictures of the property, sales history and improvement information. The appraisal card also contains the area, unit price, age, depreciation and the land value. There is no backup data or documentation for the appraisal value. It is very difficult, if not impossible, to reconstruct the appraisal value from reviewing the file. From reviewing the appraisal "files," it is difficult to determine what approach is being used for the appraisal, what data is used and what depreciation method. There is only the per-unit price and depreciation used for each component. Each component is different and it is hard to determine the value.

According to the chief appraiser, primarily the sales comparison approach is used to value residential properties. The chief appraiser stated that the sales comparison approach, the cost approach, and the income capitalization approach were all considered when valuing commercial properties, though primarily the income approach was utilized. Additionally, the cost approach was utilized for properties with values exceeding $500,000.

Cooke CAD does not maintain physical work files on each of the properties appraised. When access to appraisal work files was requested, the review team was given the opportunity to print appraisal cards that are a product of the True Automation software used by the appraisal district. The appraisal card depicts valuation of the property under the "Improvement Information" section and the "Land Information" section. Under the former, value is derived by unit pricing components of the improvements then multiplying the unit price by the square footage of each component. Next, a depreciation percentage is applied to determine the "Adjusted Value" of the component. Finally, the adjusted values of the components are added together for the total value of the improvements. The land value is determined by applying a "Unit price" that is multiplied by the dimensions of the land and then adjusted. This is essentially the Cost Approach. Even if other approaches are considered and utilized the "appraisal card" does not reflect that consideration. Without an appraisal work file to substantiate the opinion of value, it is impossible to determine the appraisal process the "appraisal card" shows.

Review and sample appraisals and confirmation by the chief appraiser revealed that special purpose properties were largely appraised using the Cost Approach. Additionally, some special use property (such as industrial or mineral rights) appraisals are contracted to independent fee appraisers with expertise in appraising these types of properties.

Physical reappraisals are performed on a rotating basis every year, and sales adjustment appraisals are conducted annually. Additionally, new properties are appraised in the year they are constructed or subdivided. However, according to the chief appraiser, one rural property was not reappraised for four to five years.

It is difficult to determine if Cooke CAD is compliant with USPAP and IAAO regulations and guidelines due to the lack of appraisal work files for the properties appraised.

According to the chief appraiser, the cost approach was considered for all commercial properties and always utilized for properties with a value in excess of $500,000. Marshall Valuation Service cost analysis and cost information from local contractors is used to determine replacement cost of improvements. Age/life method of determining depreciation of the properties appraised is utilized with additional consideration given to observed condition of the improvements, and any economic or functional depreciation.

Several examples within our survey confirmed the use of only the cost approach even when other approaches might be warranted. The True Automation appraisal card appears to be inadequate to determine the appraisal process used.

The income capitalization approach was considered for appraising commercial properties, and was the primary method used to appraise commercial properties. Additionally, the chief appraiser stated that the Income Capitalization Approach was employed to value some residential properties with rental income. A review of Cooke CAD files confirms that rental income data is collected by Cooke CAD, however, the appraisal cards reviewed do not indicate that the Income Approach was utilized in the valuation of the properties. The chief appraiser stated that more commercial sales and rent data needs to be collected.

The sales system utilized by the CAD appeared to be in compliance with guidelines. According to the chief appraiser, new sales were obtained through the Multiple Listing Service (MLS) and local real estate agents. Additionally, sales were confirmed by survey letters sent to new property owners (with a 50 percent response rate) and telephone survey by district appraisers. Sales collected by a dedicated appraiser who is responsible for the area that the sale occurred in, reviews the sale and enters the sales data into the True Automation software.

According to the chief appraiser, the system for approving agricultural appraisal applications is included in the Cooke CAD appraisal manual. The chief appraiser stated that he does not review the applications except in cases in which the application contains complicated issues. Cooke County does not contain any property with qualifying timber.

Several methods are used to determine the existence of personal property. Businesses that own taxable personal property items are discovered by reporting from citizens, returned renditions, and physical inspection by appraisers of personal property. Sales data for other property is entered into the appraisal modeling software utilized by the District. The software determines an adjusted average price per square foot for a particular area. The automated system is largely utilized for residential appraisals. For commercial appraisals, our review of sample appraisals did not reveal the use of improved sales data, only utilization of the cost approach.

RECOMMENDATION 11
Prepare and issue to each appraiser detailed appraisal procedures manuals that provide local procedures and practices for each type of property the staff appraises.

To increase efficiency and aid appraisal equality, each appraisal staff member needs an appraisal procedures manual. The procedures manual includes local procedures and practices for each type of property the staff appraises. The procedures manual also needs to include directions for gathering and processing property characteristics and for reviewing and evaluating appraised values.