EXECUTIVE SUMMARY
In July 2004, the Spearman Independent School District (Spearman ISD), located in Hansford County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that served them. In March 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Hansford County Appraisal District (Hansford CAD).
Appraisal Standards Reviews
The 78th Legislature, Regular Session, directed the Comptroller's office to conduct appraisal standards reviews of county appraisal districts if the Comptroller finds in its annual Property Value Study (PVS) that the appraisal district has one or more "eligible" school districts. Eligible school districts are those that meet all of the following conditions:
- the district's values are invalid in the most recent property value study;
- the district's values were valid in the two studies preceding the most recent study; and
- the district's local value is above 90 percent of the lower threshold of the margin of error.
In Texas, public education is paid for by a combination of state and local funds. Local funding comes from local property taxes. The chief appraiser of each county appraisal district (CAD) determines local property values, and school districts set tax rates that determine the amount of local tax revenue. Appraisal districts, under most circumstances, are required by law to appraise property at or near market value. Market value, in simple terms, is the price for which a property would sell under normal conditions. State funding is based on the total taxable property value within each school district as determined by the PVS.
The PVS independently estimates the taxable property value in each school district to ensure that state values reflect market value, which in turn ensures that school districts have approximately the same number of dollars to spend per student, regardless of the school district's property wealth or lack of property wealth. School districts with less taxable property value per student receive more state dollars for each pupil than districts with more value per student. The state's fair distribution of school funding depends largely on the Comptroller's taxable value findings.
By conducting appraisal standards reviews, the Comptroller's office helps school districts to understand the reason for the invalid finding so they can effectively work with the appraisal district to correct the problems and achieve market values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy.
An ASR examines and evaluates a CAD's appraisal practices including appraisal planning, appraisal procedures and methodology, and application and adherence to appraisal standards. The Tax Code and Comptroller rules are the major criteria used to measure the appraisal district's performance. The evaluation of the appraisal district's appraisal methods are based on a comparison of local methods and procedures to those generally accepted by the mass appraisal industry in Texas. The Tax Code dictates certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practices (USPAP,) specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the International Association of Assessing Officers (IAAO) Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of the review are to determine why a school district served by the CAD was deemed eligible and to make recommendations to improve appraisal practices so the school district's values can be determined valid in future studies. The review evaluates five broad functional areas of CAD operations, including information processing systems, district staffing, property mapping and discovery, appraisals and appraisal standards.
The review methodology includes a self-assessment completed by the CAD, staff interviews, reviews of written policies, procedures, plans, financial and management audits, and assessments of manual and automated records systems.
As the result of the review process, the Comptroller is issuing this report of her findings that includes recommendations for change and commendations for exemplary district appraisal practices. The appraisal district is required by law to comply with the recommendations within one year of the release of this report. If the Comptroller determines that the appraisal district board of directors failed to take remedial action within one year after the issuance of the review, the Comptroller shall notify the district judges serving in the county, who shall appoint a five-member board of conservators to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the appraisal district until the Comptroller determines pursuant to the annual Property Value Study, Section 403.302, Government Code, that in the same year the taxable value of each school district for which the appraisal district appraises property is the local value for the school district. The appraisal district shall bear the costs related to the supervision and control of the district by the board of conservators.
While the review team found several commendable practices implemented by dedicated and hardworking district employees, Hansford CAD is facing a number of challenges in achieving and maintaining consistent valid findings, including:
- documenting and following procedures, and
- completing reappraisal plans and appraisal manuals.
Key Findings and Recommendations
Document and Follow Procedures
Implement and document required appraisal board policies and practices. The Hansford CAD board of directors has not officially adopted the policies and procedures they use to manage the district. Missing board policies or actions include board policies addressing public access and interaction and a policy and conflict of interest statements from board, staff and appraisal review board members. Boards complying with these requirements ensure that no conflicts exist with staff, board or appraisal review board members and that the public is informed about what appraisal district boards do and how to interact with the board when desired.
Expand the budget format to comply with the Tax Code. Hansford CAD's adopted appraisal and collection budgets for 2004-05 and 2003-04 do not detail the benefits proposed for each position as required by the Tax Code. Instead, the benefits are listed as a lump sum for all employees. Complying with budget requirements ensures the public and participating taxing units receive enough information to be assured adequate staffing exists and staff are being compensated fairly.
Develop a complete, written administrative procedures manual. Hansford CAD does not have complete written administrative procedures manuals. Instead, the only written documentation for administrative functions is job descriptions tied to specific staff members. Communicating appraisal and administrative procedures only by word of mouth puts the district at risk. If seasoned staff depart suddenly, or before training new staff, the knowledge base is lost. Written policies and procedures remove dependence from individual staff members, ensuring that key information for district processes is available at all times to all staff.
Complete Reappraisal Plans and Appraisal Manuals
Expand the reappraisal plan. Hansford CAD's reappraisal plan lacks detail for both in-house and contracted appraisals and does not meet accepted industry appraisal standards. The one-page policy statement has four parts and no mention of contracted appraisals. Lack of a detailed reappraisal plan could cause plan execution to go awry, resulting in property values that deviate from market value. A comprehensive reappraisal plan is critical to the success of the district in many ways including: budgeting, market analysis, continuity of district performance during staff changes, as well as a directive for current staff.
Expand the existing property classification manual. Hansford CAD lacks property classification manuals that describe and define the characteristics of each class of property. No manual exists for the outsourced mineral, utility, commercial and industrial property appraisals. Rather than employing a procedures manual for appraisers to reference, the appraisal district relies on personal training provided by the chief appraiser and assistant chief appraiser. Hansford CAD's sole reliance on staff experience does not ensure required generally accepted appraisal methods and techniques are consistently applied to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value.
Commendable Practices
The review team identified some commendable practices in Hansford CAD that other county appraisal districts may do well to review and implement where appropriate.
Hansford CAD's process for managing and monitoring contracted services provides continual oversight in compliance with IAAO standards. Hansford CAD successfully prepares, manages and monitors its contracts while meeting IAAO contracting standards. The deputy chief appraiser and chief appraiser act as contract monitors for all contracts except the chief appraiser's, which is managed directly by the board. CAD management routinely reviews vendor performance and contract terms, requesting bids for services when needed to ensure receiving the best value at a reasonable cost. For example, in spring 2004, the board initiated requesting bids for the district's outsourced professional appraisal services, to ensure continuing to pay market rates while receiving a quality product. The district's adopted process ensures timely receipt of quality deliverables and timely payment according to contract terms.
Hansford CAD has approved employee job descriptions and an excellent non-contract employee evaluation process. The board has approved all employee job descriptions. Each job description consists of a general statement that the CAD is an equal opportunity employer and does not consider race, color, creed, age, or sex in matters of employment. A general position summary statement defines the position. The knowledge, skills, and abilities portion of the job description defines what credentials are required before being hired or what credentials or skills must be attained in a timely manner after being hired. Complete job descriptions ensure both employee and employer are both informed about expected duties and the basis for performance. Hansford CAD also has an established practice of annually evaluating all non-contract staff and a separate performance evaluation process for first year employees. The process ensures open communication by requiring both staff and manager to complete the evaluation documents and to meet to discuss both sets of ratings prior to finalizing the performance evaluation.
