Findings of the Appraisal Standards Review
This chapter of the report addresses findings, commendations and recommendations from the appraisal standards review of the Jackson CAD in three sections:
There are three general appraisal methods or approaches-cost, income and market-that a chief appraiser must consider in determining the market value of property. The appraiser must use the method most appropriate to appraise a particular property.
Appraisal textbooks and IAAO Standards provide additional information about the approaches to determine or appraise value. Appraisers usually determine the value of producing mineral deposits, including oil, gas and coal, and the value of utility and commercial properties by using the income approach to value. Most appraisal districts contract with consultants to appraise mineral and utility properties. The chief appraiser can provide information that helps the contractor decide the proper method to use to appraise mineral and utility properties.
Jackson CAD lacks some of the mass appraisal core components needed to appraise all property types adequately.
The 2004 final PVS and 2005 preliminary PVS results for Jackson CAD reflect the countywide appraisal deficiencies due to this omission. Industrial ISD, with 51 percent of Jackson CAD's value, failed to achieve acceptable values in the 2004 PVS because of an invalid ratio for Category D properties.
For purposes of Industrial ISD's eligibility, the problem initially appeared to have been solved since the weighted mean ratio rose to slightly above the desired minimum, and a valid finding was assigned in the 2005 PVS.
The 2005 PVS also found the Edna school district to have invalid findings and designated as eligible for a first year of grace. The PVS results indicate systemic issues with general CAD in-house appraisal operations, as shown by the many tested categories appraised in-house that did not reach the desired minimum ratio.
Edna ISD has 35 percent of the CAD's value. The 2005 PVS tested properties with weighted mean ratios outside accepted levels including single family residential, agricultural, commercial and commercial personal categories (Exhibit 6). Jackson CAD and Edna ISD together appealed categories A, residential; D2/E, land and farm improvements; F1, commercial; and J, utilities. While some category ratios improved because of the appeal, the CAD and Edna ISD were unable to achieve local value in the final 2005 PVS.
Edna ISD Ratios for PVS-Tested Categories 2003 through 2005
|Category||Weighted Mean Ratios 2003 PVS||Weighted Mean Ratios 2004 PVS||Weighted Mean Ratios 2005 PVS|
|Category L1||Not tested||1.0711||0.9116|
Source: 2003 and 2004 final and 2005 preliminary PVS.
Jackson CAD and Ganado ISD successfully appealed the preliminary 2005 PVS. While the final PVS gave the school district valid values, several tested categories had weighted mean ratios that did not reach the desired 0.95 ratio (Exhibit 7).
Ganado ISD: Ratios for PVS-Tested Categories
|Category||Weighted Mean Ratios 2003 PVS||Weighted Mean Ratios 2004 PVS||Weighted Mean Ratios Preliminary 2005 PVS||Weighted Mean Ratios Final 2005 PVS|
|Category L1||Not tested||Not tested||1.2168*||1.2168*|
* Below the desired minimum ratio of 0.95 or above the desired maximum ratio of 1.05.
Source: 2003 and 2004 final and 2005 preliminary PVS.
All Jackson CAD Category A weighted mean ratios in the 2005 PVS are below the minimum desired 0.95. Two of the three Jackson CAD school districts have Category D weighted mean ratios below the minimum desired 0.95 in the 2005 PVS.
Although not tested in all school districts, Jackson CAD Categories F1 and L1 also experienced significant weighted mean ratio declines from the 2004 PVS to the 2005 preliminary PVS with all ratios below the desired minimum of 0.95. The only exception is in Ganado ISD, where the CAD tested Category L1 in the 2005 PVS, with a weighted mean ratio of 1.20, considerably more than the desired maximum of 1.05.
Because of the countywide appraisal deficiencies, Jackson CAD school districts received invalid findings in the 2004 and 2005 PVS, putting the school districts at risk of losing future state funding in addition to the local funding losses incurred from the inaccurate appraisal base used for property tax collection purposes.
In an effort to improve appraisal staff knowledge and appraisal accuracy, the chief appraiser and three CAD staff attended an Excel spreadsheet class in January 2006 on how to use and construct appraisal schedules for various types of property. After attending the three-day class offered by Texas Mass Appraisal Software Solutions (TXMASS), the chief appraiser realized that the CAD could greatly benefit from additional mass appraisal expertise and invited TXMASS to review the CAD's appraisal roll and computerized appraisal system and make recommendations for improvement.
The board approved a contract with TXMASS for a one-year term with the option to renew for an additional two years. The agreed terms for performing these professional appraisal services were $1,000 per month for a minimum of 20 hours of work completed monthly, plus $50 for each day trip to Jackson CAD. The company bills monthly and includes a detailed work log with daily task and time detail. For example, the company performed 76 hours, 6 minutes of work for Jackson CAD between February 15 and March 15, 2006, with one day-trip to the CAD. From March 16 through April 15, the company logged 85 hours, 19 minutes and one day-trip to the CAD.
After an extensive review in early February, the company identified key needs in its proposal to the chief appraiser (Exhibit 8).
Summary of Key Needed Mass Appraisal Core Components
|Key Need||Explanation||Status/Target Completion Date|
|Build a market group system.||No neighborhoods exist-create and define neighborhoods.||Completed in April 2006|
|Improve the existing land table system.||Add three items: table interpolation, economy of scale recognition and a maintenance system.||Planned completion for 2007 tax year|
|Develop depreciation tables.||Design a system to update automatically the percentage of all real property that requires tying the depreciation table to the effective year built. CAD field appraisers can gather, review and confirm this information while performing site visits.||
for 2007 tax year
|Review and revamp the unit price tables.||The existing basic design is good. Build unit price tables and keep in a spreadsheet for easy update and maintenance. Review market data and update the tables every two to three years to reflect the current market. Once updated, apply neighborhood factors generated by the market group system for a final adjustment to the tables.||
for 2007 tax year
|Upgrade the manufactured home valuation design||Tie the home classification to the National Automobile Dealers Association (NADA) standard, issued quarterly. Software used in defending values in appeal/protest season costs about $100.||
for 2007 tax year
|Develop use areas for land valuation||Presently land is valued according to its use, which is not necessarily its highest and best use. Land should be valued as if vacant, with value added for any improvements (such as grading, utilities or clearing). Spreadsheet and new mapping technology will allow Jackson CAD to differentiate between land values for commercial, residential and rural properties, as well as transitional properties moving between these classes.||
for 2007 tax year
|Adapt and install system to defend Jackson CAD property value in protest season, excluding personal property.||The system will find comparable sales for a property under protest and adjust them to calculate a final value for the protested property. Williamson CAD, which typically handles 18,000 to 22,000 protests annually with 250 to 350 daily informal protests, developed and tested the system. TXMASS will redesign and adapt the system for Jackson CAD, which has a much smaller volume of protests.||
for 2006 tax year
|Maintain needed mass appraisal core components||Keep the core components and systems up-to-date and working. Jackson CAD staff should receive training on these duties and assume them over time, phasing out consultant services completely.||
(estimated completion sometime between 2008 and 2010)
Source: Service Proposal to Jackson CAD from TXMASS and telephone interviews with TXMASS, April-May 2006.
The work product also includes that the company deliver supporting documentation and procedures for the mass appraisal system components.
The company representative indicated the two most critical mass appraisal components missing at Jackson CAD are the lack of data on neighborhoods and lack of interpolation of tables. All three of Jackson CAD's school districts received invalid findings in the 2004 final PVS or 2005 preliminary or final PVS, attributed to inaccurate residential, rural real land, agricultural land, and commercial real and commercial personal property appraisals. Jackson CAD could have avoided invalid findings by establishing neighborhoods and using them to develop accurate local modifiers and by using land table interpolations before applying factors.
The chief appraiser believes that this finding and some status and target completion dates in Exhibit 8 do not represent a true picture of how the CAD is appraising property in 2006. He believes that "With the help of the software company all components of mass appraisal will be in place... with the majority for the 2006 tax year." The chief appraiser provided no documentation to support his contention.
According to chapters 14 and 15 of IAAO's Property Appraisal and Assessment Administration, a mass appraisal system has the following four interdependent subsystems, whether manual or computerized:
a data management system:
- data collection;
- data entry and editing;
- data conversion; and
- data storage and security.
a sales analysis system:
- sales data collection;
- sales screening and processing;
- ratio studies; and
- sales reports.
a valuation system:
- sales comparison approach;
- cost approach;
- income approach; and
- valuation review and reconciliation.
an administrative system:
- budgeting, scheduling, planning;
- inquiry, analysis, reporting;
- assessment roll, notices;
- forms, word processing, record cards; and
As of April 2006, Jackson CAD created neighborhoods and the land table interpolation was underway. Because of the company's work completed by April, the chief appraiser was able to file and win an appeal for Ganado ISD that resulted in changing the invalid preliminary finding to a valid amended preliminary finding in the 2005 PVS. The company also worked with Jackson CAD to prepare the Edna ISD 2005 PVS appeal, which resulted in some improved category weighted mean ratios, but not enough improvement to remove its invalid finding in the final 2005 PVS.
Jackson CAD's attorney is preparing the TXMASS-Jackson CAD written one-year agreement. This includes complete and up-to-date appraisal manuals for all types of property appraisals, which were lacking in 2004 and 2005, and training for staff as system updates and changes occur. TXMASS is serving as a human resource and consultant for appraisal staff while the planned work is in progress so the CAD gets full and immediate improvement in its appraisal quality and practices. Another service the company provides is ARB training. The company participated in the May 2006 ARB training to explain the CAD's new defense process of property value and system changes.
By obtaining and maintaining all key mass appraisal system components, ensuring that resources are in place to produce accurate property appraisals, the CAD may effectively appraise accurately in the future.
Acquire needed mass appraisal core components to assist in appraising all property types.
Jackson CAD does not routinely inspect tangible personal property but instead uses values rendered by the property owner to value tangible personal property.
The chief appraiser disagrees with the finding. He indicated that because Jackson is a small county appraisal district, the CAD visits or passes by most businesses regularly. He noted that the CAD inspects businesses if they are new, that appraisers know of changes, and that the CAD inspects all properties at least every three years.
The deputy chief appraiser stated the CAD discovers business personal property through:
- Victoria Business Magazine;
- local newspapers-business card and other advertisements;
- Jackson County Chamber of Commerce membership list;
- construction or opening of new businesses around the county;
- billboard and sign advertisements around the county;
- new permits lists from the Cities of Edna and Ganado, received weekly;
- new service lists from the two electric companies serving the county;
- deed changes and mechanics liens from the courthouse, received weekly; and
- mailing rendition forms to existing business accounts and hand-delivering them to new busi-ness owners each year while the appraiser performs an on-site inspection.
Two deed clerks review all information updates when received and then give them to the deputy chief appraiser for entry in the computerized appraisal system database.
In 2004 and 2005, Jackson CAD staff appraisers handled the tangible personal property in their respective assigned areas. When a new full-time appraiser joined the staff in April 2006, the CAD planned to redistribute parcel assignments among the three appraisers. According to the chief appraiser he plans to rearrange some assignments and the newly hired appraiser may be handling all of the business personal property parcels in the future; however, this had not occurred at the time of the review. Only new businesses receive an on-site inspection. The CAD inspects other business properties if time permits, but does not routinely schedule any.
The Field Appraiser's Guide is three years out of date, is no longer in publication and was never intended for use by CADs as a standalone manual but only as a tool for use in establishing local procedures. PTD does not direct appraisal districts on how to appraise property, what schedules to use and how much depreciation to apply; therefore, CADs should not rely on the outdated Field Appraiser's Guide, but should develop local tables.
The CAD initially provided one Commercial Personal Property Percent Good Table to use with manual calculations. The "year acquired" column has dates from 1974 to 2004, so this table does not account for commercial personal property acquired after 2004. In June 2006, the chief appraiser provided a commercial property percent good table for 2006. Appraisers do all calculations and estimations manually. Appraisers only enter the total/final value into the computerized appraisal system. There is no quality assurance process in place to verify the manual calculations.
Jackson CAD provided no documentation showing the CAD visits most businesses regularly or inspects all every three years.
While the computerized appraisal system has a personal property module, the database that supports the module is not complete. CAD staff indicated no one uses the personal property module and that it is not a priority to get the database completed.
A lack of regular inspections of existing business personal property accounts, the lack of a quality assurance process for verifying manual calculations and the lack of an independent valuation method have contributed to inaccurate Category L1 appraisals, as measured by the PVS. The Comptroller's office tested Category L1, business personal property, in the 2004 and 2005 PVS for Edna ISD. While other Edna ISD 2005 PVS tested categories received lower ratios, this category's weighed mean ratio of 0.9116, down from 1.0711 in the 2004 PVS, contributed to Edna ISD's invalid finding in the 2005 preliminary PVS. Neither Jackson CAD nor Edna ISD submitted a 2005 PVS appeal for Category L1.
Effective appraisal districts meet or exceed recommended industry practices for tangible personal property appraisal, ensuring accurate valuations as a basis for taxpayer assessments and the public. The following are standards and laws that apply to personal property appraisal.
IAAO's Standard on Valuation of Personal Property requires that an assessor establish an audit program to verify that a CAD reports all personal property items and that the information given is accurate.
Section 23.01, Tax Code, requires a CAD to appraise all property at market value, taking into consideration the individual characteristics of each property. Annual inspections help 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.
Section 22.07(a) gives the chief appraiser or a designated authorized representative permission to enter the premises of a business, trade or profession to inspect the property to determine the existence and market value of tangible personal property used for the production of income and having a taxable situs in the CAD. Section 22.07(c) gives the chief appraiser the authority to request supporting rendition information.
Johnson CAD has an effective system of property discovery and recording for business personal property that incorporates an automated information system. Johnson CAD gathers business personal property information from doing business as (DBA) recordings with the county clerk in addition to newspaper and other advertisements. By using this process, the CAD almost doubled the number of renditions received from 2003 to 2004, from 33 percent to 64 percent, respectively.
Develop a plan to inspect all tangible personal property accounts on a scheduled basis and develop quality assurance and independent valuation processes.
Computers have become a necessity for all appraisal districts.
Technology infrastructure is the underlying system of cabling, phone lines, hubs, switches, routers and other devices that connect the various parts of an organization through a wide area network (WAN) and through a series of local area networks (LANs). Maintaining a strong infrastructure and integrating the various systems used by the appraisal district is critical to increased staff productivity, fewer costly data errors and better customer service to the users, community members and the taxing units dependent on the appraisal district for critical information.
Technology is a critical part of managing large amounts of data effectively, and appraisal districts use appraisal systems and mapping or geographic information systems to improve appraisal accuracy and uniformity.
After a January 2004 fire destroyed the CAD's office and equipment, Jackson CAD established a timely action plan and decision-making process that resulted in improved facilities, computers, equipment and an upgraded computerized appraisal system.
Instead of immediately replacing the lost items with the same items, the board and chief appraiser charted an action plan that included setting up a temporary location with minimal equipment and supplies while appointing committees to analyze present and future CAD needs before securing permanent facilities, computers, equipment and supplies.
The CAD established committees to define short- and long-term facility needs and locating options, appraisal system and mapping needs and communication needs. The committees then researched options to find and present the most appropriate sources to the board for decision. Some tasks required extra coordination since Jackson CAD has an interlocal agreement with Jackson County for shared computer hardware and software for tax assessment and collection purposes.
Jackson CAD leadership made a concerted effort to research and purchase better hardware, software and other technology to improve appraisal office processes and operations, meeting or exceeding the recommended criteria in the IAAO Standard on Facilities, Computers, Equipment and Supplies.
Jackson CAD's leadership established and successfully implemented a process that changed the CAD's fire losses into improved resources for more effective and efficient appraisal office operations.
After identifying mapping needs, Jackson CAD developed plans to integrate its countywide computerized mapping project with its appraisal system database.
In 2003, the chief appraiser identified the CAD's need to upgrade the paper map system that would:
- improve appraisal performance;
- improve customer service with timely, up-to-date real time maps; and
- meet or exceed industry standards for computerized mapping and maintenance.
At the chief appraiser's request, Oehler Maps and Data (OMD) presented a computerized mapping program to the board in March 2003. In September 2003, Jackson CAD's board approved Option 4 in the OMD proposal (Exhibit 9).
Oehler Maps and Data Mapping Proposal for Jackson CAD
|1||Provide basemap and GIS consulting for a GIS system including all available topographic maps, aerials, abstracts, roads, etc. Also includes hardware and software consulting. A list of computer, plotter and software specifications will be provided. These items will be purchased by the appraisal district directly from providers as needed||$3,500|
|2||Scan current ownership plats (approx. 555) and provide in TIFF digital format on CD-ROM (not georeferenced.)||$12 each for an estimated total of $6,660|
|3||Train staff to georeference scanned images and create parcel maps. Also train staff on TSG (appraisal system) connectivity.||$600/day (two days minimum expected)|
|4||Turn key appraisal district parcel layer. The parcel layer will have all parcels that are available from the current paper maps, in ESRI digital format. This layer will also include account information if it is located on paper maps. This option must also include Options 1 and 2. Training is provided with this option. In lieu of a appraisal district wide parcel layer, I will also be happy to provide a parcel map for sections of the county loosely based on approximately $2.50-$3.00 per parcel (example: the City of Edna, rural subdivisions, etc.)||$50,000 plus Options 1 and 2|
|Other||As we have discussed, your office needs to purchase various hardware and software to get a geographic information system on-line. I recommend that you purchase ESRI's ArcView software, additional georeferencing software and an H500 series inkjet plotter. I will provide specifications for these products; locate and install them as well.||$6,500 estimated cost for all items|
Source: Jackson CAD, April 2006.
As of May 2006, the computerized mapping program and database were complete. The chief appraiser purchased the software that links the appraisal database to the computerized mapping program and is ready for installation.
In order to complete the project, the linking software will be installed and the system interface will be tested and CAD staff trained on the system.
Jackson CAD developed and put in motion a plan to integrate its countywide computerized real-time maps with its appraisal system database to improve appraisal performance, improve customer service, and meet or exceed industry standards for computerized mapping and maintenance.
During the course of the review process, the review team identified certain management and operational issues not directly related to the appraisal process, but that can have an indirect impact on the ability of the CAD to carry out its mission of property appraisal accurately and consistently. The CAD is not obligated to implement these recommendations, but they may wish to consider them as additional ways to enhance operational effectiveness and efficiency.
Jackson CAD's 2004, 2005 and 2006 proposed budgets did not meet the requirements of Property Tax Code, Section 6.06 (a) because they did not include an estimate of the amount of budget allocated to each taxing unit.
Section 6.06, Property Tax Code, requires that an appraisal district list in its budget:
- each proposed position with associated salary and benefits;
- each proposed capital expenditure; and
- an estimate of the amount of the budget allocated to each taxing unit.
The chief appraiser pointed out that the CAD carries out the following practices as they relate to the budget approval cycle:
- the board reviews all budget items;
- the budget worksheet explains any increases from the previous year; and
- taxing units can question the budget by contacting the board or chief appraiser or attending public budget workshops.
The CAD's 2004, 2005 and 2006 proposed budgets (Exhibit 10) each contained a budget worksheet listing each proposed position with its salary and assigned benefits. The CAD meets the requirements of Property Tax Code Section 6.06(b) for notifying the public and the taxing entities about adopting the budget.
Jackson CAD Adopted Budgets
2004 through 2006
|Line Item||2004 Budget||Percent||2005||Percent||2006||Percent1||Percentage Increase (Decrease)|
|6010 - Salaries||$217,375||44.0%||$222,305||42.8%||$268,355||45.1%||23.5%|
|6019 - Longevity||6,090||1.2%||6,170||1.2%||4,825||0.8%||-20.8%|
|6020 - Retirement (5%)||11,225||2.3%||11,475||2.2%||13,710||2.3%||22.1%|
|6021 - Hospitalization||37,680||7.6%||37,680||7.2%||45,145||7.6%||19.8%|
|6022 - Employer FICA (6.2%)||13,855||2.8%||14,165||2.7%||16,940||2.8%||22.3%|
|6023 - Employer Medicare (1.45%)||3,240||0.7%||3,310||0.6%||3,960||0.7%||22.2%|
|6024 - State Unemployment||1,500||0.3%||4,500||0.9%||1,000||0.2%||-33.3%|
|6025 - Worker's Compensation||1,000||0.2%||1,000||0.2%||1,000||0.2%||0.0%|
|6030 - Board of Directors||1,500||0.3%||1,500||0.3%||1,500||0.3%||0.0%|
|6031 - ARB Pay and Expenses||3,000||0.6%||5,000||1.0%||3,000||0.5%||0.0%|
|6037- Professional Services||73,800||15.0%||73,800||14.2%||75,280||12.7%||2.0%|
|6040 - Office Equipment||6,000||1.2%||6,000||1.2%||6,000||1.0%||0.0%|
|6041 - Maps and Supplies||500||0.1%||500||0.1%||500||0.1%||0.0%|
|6042 - Office Supplies||2,500||0.5%||2,500||0.5%||2,500||0.4%||0.0%|
|6043 - Postage||8,000||1.6%||16,000||3.1%||8,000||1.3%||0.0%|
|6044 - Xerox Maintenance||500||0.1%||1,290||0.2%||1,290||0.2%||158.0%|
|6046 - Telephone||5,300||1.1%||5,300||1.0%||5,760||1.0%||8.7%|
|6048 - Lease Office Space||13,500||2.7%||24,000||4.6%||45,000||7.6%||233.3%|
|6049 - Publications and Legal Notices||700||0.1%||700||0.1%||700||0.1%||0.0%|
|6050 - Miscellaneous||500||0.1%||500||0.1%||500||0.1%||0.0%|
|6051 - Appraisers Auto Allowance||18,000||3.6%||18,000||3.5%||24,000||4.0%||33.3%|
|6052 - Tuition and Registration||3,500||0.7%||3,500||0.7%||3,500||0.6%||0.0%|
|6053 - Meals, Mileage and Rooms||7,000||1.4%||7,000||1.3%||7,000||1.2%||0.0%|
|6054 - Fees and Dues||2,000||0.4%||2,000||0.4%||2,000||0.3%||0.0%|
|6055 - Books and Subscriptions||1,000||0.2%||1,200||0.2%||1,500||0.3%||50.0%|
|6056 - Bond and Insurance||2,000||0.4%||2,000||0.4%||2,000||0.3%||0.0%|
|6057 - Audit||2,800||0.6%||2,800||0.5%||2,800||0.5%||0.0%|
|6058 - Computer Supplies||5,000||1.0%||5,000||1.0%||5,000||0.8%||0.0%|
|6062 - Records Management||1,000||0.2%||1,000||0.2%||1,000||0.2%||0.0%|
|6144 - Xerox Supplies||750||0.2%||750||0.1%||750||0.1%||0.0%|
|6151 - Computer Maintenance||27,700||5.6%||23,890||4.6%||24,970||4.2%||-9.9%|
|6170 - Legal Fees||10,000||2.0%||10,000||1.9%||10,000||1.7%||0.0%|
|6300 - Reserve||5,000||1.0%||5,000||1.0%||5,000||0.8%||0.0%|
Source: Jackson CAD, 2004, 2005 and 2006 budgets.
Budget worksheets reference each budget line item but these items have no explanation, just a dollar amount.
Without sufficient information regarding the amount of the budget allocated to each taxing unit, taxing units and the public do not know how much each taxing unit may be obligated to pay in support of Jackson CAD or have enough information about what they are paying for.
The 2006 budget increases are attributable to an additional appraiser position and to a larger, permanent office space occupied in December 2005, after the January 2004 fire.
By preparing budgets that clearly indicate how it allocates, obligates and intends to spend funds, Jackson CAD can ensure Tax Code compliance while providing a complete public inspection for taxpayers, taxing units and interested parties.
Glasscock CAD, for example, developed a complete budget that complies with Section 6.06 (a) of the Property Tax Code, and uses its budget to inform taxing units and citizens of how it spends money and how much each taxing unit must contribute to the budget.
Expand the budget information to comply with Property Tax Code, Section 6.06 (a).
Jackson CAD retained 2003 and 2004 surplus funds without crediting or refunding unobligated and unexpended funds to taxing entities as required by Property Tax Code, Section 6.06 (j).
The chief appraiser disagreed that there is a problem with the existing practice of retaining funds, saying the CAD has:
- not received any disapproval from taxing entities for retaining fund balances;
- sent out a request to retain fund balances to each of the taxing entities with an explanation of what monies will be used for; and
- followed directions from the CAD's external auditor on retaining fund balances.
Even though Jackson CAD followed directives of financial advisors, Property Tax Code, Section 6.06 (j) requires CADs to refund or obligate funds in the budget. Notes by the external auditor in the 2003 and 2004 annual audits indicated a surplus, along with the following statement:
The Statement of Revenues, Expenditures and Changes in Fund Balance reflects a surplus of revenues over expenditures and other financial uses of (dollar amount) for 2003/2004. The CAD has elected to retain the (dollar amount) for 2003/2004, subject to the approval of the taxing jurisdictions.
For 2003, the surplus amount was $19,126. The July 2004 board minutes outline a discussion of the unexpended funds from 2003, stating, "The board opted to ask the entities if we could keep excess funds to help pay for the items lost in the January 6th  fire not covered by insurance, and advances in technology being mandated by recent legislation." The CAD assigned surplus funds mostly to the reserved equity fund, as detailed in the following audit notes:
In the past, the CAD has elected to reserve a portion of the surplus of revenues over expenditures, subject to the approval of the taxing jurisdictions, for capital expenditures. The reserved equity balance at December 31, 2002 was $25,000. During 2003, the CAD board voted to use $10,100 of the reserve equity for items 1 and 2 of the GIS mapping contract with Oehler Maps and Data (See Note 6) and elected to add $15,100 of the $19,126.22 surplus of revenues over expenditures to the reserve equity fund, making the balance $30,000 at December 31, 2003. The board has voted for a net increase of $5,000 in the reserved equity fund, making the balance $35,000 at December 31, 2004.
The CAD did not reserve the remaining 2003 surplus, $4,026, for a specific purpose, so it became part of the unreserved fund balance. The Oehler Maps and Data mapping contract and related funds are not in any of the budgets or line items for 2003-06. The only mention of the contract is in board minutes and annual audit reports in the balance sheet and audit notes only.
For 2004, the surplus amount was $24,674. The June 2005 board minutes outline a discussion of the unexpended funds from 2004, stating, "The board opted to ask the entities if we could keep excess funds to help pay for advances in technology being mandated by Legislation." The CAD partially assigned surplus funds to the reserved equity fund, as detailed in the following audit notes:
The CAD did not reserve the remaining surplus, $21,674 for a specific purpose, so it became part of the unreserved fund balance. As of December 31, 2004, Jackson CAD's unreserved fund balance was $136,552.
The existing process for retaining the surplus does not clearly obligate funds or provide for clear disclosure to the public or taxing units of how the CAD intends to hold or spend funds, which obscures oversight opportunities.
Section 6.06 (j), Property Tax Code, requires that if taxing units' total payments to an appraisal district exceed the amount the appraisal district spent or was obligated to spend during a fiscal year, the chief appraiser shall credit the excess amount against each taxing unit's allocated payment for the following year. In the alternative, the CAD should refund the excess amount to the taxing unit within 150 days after the end of the fiscal year for which it made the payments.
Effective appraisal districts maintain their fiduciary duty and preserve budget transparency for taxpayers and the public by handling unexpended budget funds as required by law.
Comply with Section 6.06 (j) of the Property Tax Code concerning budget and financing and account for the transfer or obligation of fund balances.
If the CAD wishes to have a surplus fund, it must credit the surplus to its taxing units, then include the surplus as a line item in its budget, and allocate to each taxing unit its portion of the budget, which will include the surplus. In this manner, the CAD complies with the law and maintains a surplus fund.
Jackson CAD's board does not conduct formal chief appraiser performance evaluations on a regular basis.
The chief appraiser disagreed that there is a problem with the existing practice, saying the board evaluates his performance adequately through written evaluations and frequent office visits from board members. The Jackson CAD board policy manual and the chief appraiser's contract spell out the chief appraiser's responsibilities. The chief appraiser noted that the board evaluated him on February 15, 2006.
The chief appraiser, who has 10 years with the CAD, indicated that informal communications allowed board members to voice any requests or criticisms of the chief appraiser at any time. The CAD provided the review team a copy of a written evaluation of the chief appraiser by the board. Both the chief appraiser and board chairman signed the document on February 15, 2006. When asked, the chief appraiser indicated it was the only written evaluation he received during his 10-year tenure. While the job description and employment contract mention a few of the written evaluation criteria, none of the documents mention specific criteria. The documents that the board adopted were on different dates: board policy manual-revised January 2006; written performance evaluation-dated February 2006 and employment contract-entered into July 2005.
Section III (A) of the board's policy manual includes the chief appraiser's job description that consists of 14 specific duties and responsibilities (Exhibit 11).
Chief Appraiser Duties and Responsibilities From Board Policy Manual
|Duties and Responsibilities|
|1. Establish a comprehensive program for conduct of all appraisal activities.|
|2. Keep the board informed on the progress of appraisal activities.|
|3. Develop and implement sound administrative procedures for conduct of all district functions.|
|4. Develop and implement an effective financial management system.|
|5. Provide the board reports to allow evaluation of the district's fiscal affairs.|
|6. Develop and implement an effective internal budget development system.|
|7. Prepare a proposed budget by June 15 of each year.|
|8. Serve as the district's spokesperson in providing information to news media, taxing units and the public.|
|9. Prepare the agenda for each board meeting, attend all meetings and provide staff recommendations for all appropriate board actions.|
|10. In conjunction with district counsel, provide recommendations for board action on litigation.|
|11. Develop and implement a personnel management system for job assignments, evaluations, hiring, staff policy and personnel related matters.|
|12. Employ and compensate professional, clerical and other personnel as provided by the budget.|
|13. Report to the board before April 1 of each year the accuracy of district appraisals and contractor performance.|
|14. Discharge other duties as provided by the board and/or by law.|
Source: Jackson CAD Board Policy Manual, version revised in January 2006.
The only written performance evaluation for the chief appraiser listed key job responsibilities and goal statements (Exhibit 12).
Chief Appraiser Written Performance Evaluation Excerpts
Key Job Responsibilities
|"Responsible to the Board of Directors for everything the District does or fails to do. Performs work considerable difficulty in appraising real estate for ad valorem tax purposes. Possesses extensive knowledge of the principles and practices of real estate appraisal; of laws and ordinances pertaining to the assessment of real and personal property; of local, social, and economic factors affecting property values; of mathematical and statistical tools used in appraisal work; and of office management and supervisory principles and practices. Demonstrates aptitude for determining complex property values and expertise in dealing tactfully and courteously with taxpayers. Makes field and office appraisals of all real and personal property in Jackson County to include residential, commercial, industrial, special-purpose and vacant properties; gathers, records, analyzes, and maintains a variety of data such as asking and selling prices, income from properties, income and expenses for agricultural land, and building costs to determine appraised value; receives and investigates complaints about property values, carries out cyclic reappraisals and submits recommendations for consideration at hearings; assists in training of subordinates; prepares and supports technical cases to defend contested assessments in court proceedings, Appraisal Review Board hearings, or Property Value Study protests; updates and corrects property records. Complies with and enforces provisions of the Property Tax Code while meeting all reporting and compliance requirements set forth by the Comptroller of Public Accounts Property Tax Division. Supervises trains and evaluates employees. Proficient user of the district appraisal software."|
Key Goal Statements
|Goal Statement Number||Goal Statement|
|Key Goal Statement 1||Attain and sustain Board of Tax Professional Examiners registration and certification as a Registered Professional Appraiser and Registered Texas Assessor/Collector.|
|Key Goal Statement 2||Achieve the requisite levels of appraisal uniformity as determined by the Comptroller's Annual Property Value Study to secure "local value" for Edna ISD, Ganado ISD and Industrial ISD.|
|Key Goal Statement 3||Conduct cyclic reappraisal of scheduled real and personal property in the county. Appraise all new improvements. Minimize ARB protests through fair and equal treatment of all taxpayers.|
|Key Goal Statement 4||Adhere to the phases of the property tax calendar.|
Source: Jackson CAD, Chief Appraiser February 15, 2006 Written Performance Evaluation.
While the law does not require this, without annual performance evaluations based on measurable criteria linked to job descriptions, board members invite difficulties in clearly expressing expectations for the CAD and of the chief appraiser.
By formally evaluating the chief appraiser on an annual basis using measurable criteria that correspond with the job description, Jackson CAD's board can ensure clear communication with the chief appraiser concerning CAD goals.
Lee CAD, for example, adopted an evaluation process that includes biannual chief appraiser evaluations based on measurable criteria linked to the chief appraiser's job description and CAD goals. The board uses this process to assess the chief appraiser's performance and establish clear goals for the following performance period.
Evaluate the chief appraiser annually using a written process that includes measurable criteria corresponding with the job description.
Jackson CAD has no job descriptions and uses a generic annual performance evaluation that has no measurable criteria.
The chief appraiser disagreed that a problem exists with the existing evaluations and believes that he adequately evaluates staff performance because:
- Jackson CAD is a small office and the chief appraiser manages seven employees and interacts with them on an hourly basis;
- employees are cross-trained and know what is expected of their position;
- with seven employees, if two are out due to illness or vacation, it can create havoc, so everyone knows what other departments are doing, and if someone is not doing their job it is noticed quickly;
- lines between job descriptions are very vague due to a small staff;
- all employees registered with BTPE are obtaining an RPA;
- the chief appraiser evaluates employees on a daily basis by knowing exactly what they are doing at all times;
- the CAD started employee evaluations in 2000 and conducts them annually and during the year if merited; and
- Comptroller staff approved the CAD's evaluation forms during its last methods, standards and practices review in 2002.
The chief appraiser supplied a copy of the results of the Comptroller's methods, standards and procedures review conducted in 2002 as proof that the Comptroller's office approved the CAD's evaluation forms. The one-page letter did not mention of approving CAD performance evaluation forms, and a review of the questionnaire, with answers, used in conducting the review revealed that CAD staff performance evaluations were not part of the scope of the review. The chief appraiser did not supply any other documentation to support the actions described above.
When asked, the chief appraiser provided a copy of the Jackson County Appraisal District Employee Evaluation and Critique. Although there is no mention of employee evaluations in the CAD's employee handbook, the chief appraiser and CAD staff indicated that the chief appraiser performs all staff evaluations annually on each employee's employment anniversary date. Staff has no written job descriptions and specific job duties are not included in the evaluation form. Less tenured staff relies on the more experienced chief appraiser and assistant chief appraiser for daily guidance and questions.
The evaluation form lists general categories with the maximum points an employee can earn for each category:
- attitude (15 points);
- general work habits (20 points);
- public relations and professionalism (16 points);
- performance-general (12 points);
- attendance, punctuality, time utilization (17 points);
- professional improvement (5 points); and
- critique, summation and etc. (maximum of 85 points, sum of all categories.)
A list of items with multiple-choice numbered answers, except the "critique, summation and etc." category, follows each of the general categories. Through this category, the form provides a place for employee name, evaluator name, date, employee interview date, employee comments, staff comments and signature and date lines for the employee and evaluator.
All of the multiple-choice answers have point values assigned ranging from 4 to -4. The answer choices are subjective judgments not based on criteria measurable by a performance standard. There is no place on the form reflecting what the standard or expectation is for the employee. The review team observed that the chief appraiser rated some items on individual evaluations with "not applicable" in lieu of scoring when the item was deemed as not directly applicable to an employee's job. For example, the chief appraiser did not rate the item dealing with maintaining current daily records or other assigned work reports for one type of staff position. Choosing not to rate individual items in an employee evaluation is purely subjective when there is no basis, such as a job description or list of duties.
As a result, the evaluation measures employees without them knowing in advance what the standard or expectation is for their performance or how it relates to their daily job duties, since the evaluation form does not define any standard or expectation. The CAD is not effectively measuring job performance in terms of actual tasks performed in daily practice.
By providing all employees with meaningful job descriptions, expectations and annual written performance evaluations, Jackson CAD can ensure that employees and management work together toward the mission and goals of the appraisal district and that the CAD commends employees as well as informing them about any performance areas requiring change.
Hansford CAD, for example, has approved employee job descriptions and an excellent employee evaluation process. The board approves all employee job descriptions, and the tools used in the evaluation process offer a foundation upon which the employee and the CAD can monitor work expectations. Beginning with the first year of employment, the CAD evaluates staff members using employee appraisal and performance evaluation documents specifically adopted by Hansford CAD. The employee evaluation process requires that both staff and manager complete the evaluation documents and meet to discuss both sets of ratings before finalizing the performance evaluation. The evaluation instruments, because of the use of a numeric rating system and the comments section, measure change over time in the employees' job performance.
Develop staff job descriptions and evaluate staff using a written evaluation process that includes measurable criteria corresponding with the detailed job descriptions.
Jackson CAD lacks a sufficient reappraisal plan, as required by Section 25.18, Tax Code.
The chief appraiser agreed with this finding. The Jackson CAD board adopted a written reappraisal plan in August 2006 in compliance with Section 6.05, Tax Code. To prepare himself to write a reappraisal plan, the chief appraiser attended the "Developing Your District's Written Reappraisal Plan" workshop sponsored by the Texas Association of Assessing Officers (TAAO) in May 2006.
When asked for the 2004, 2005 and 2006 reappraisal plans, Jackson CAD responded with six pages of information that have no reference to a specific reappraisal plan year. The first two pages are the Jackson County Appraisal District Summary Revaluation Program Report for Real Property. The first page begins with an overview section that states Jackson CAD is to reappraise real property at least once every three years and is followed by the Tax Code's definition of market value and a statement that the CAD appraises properties in fee simple using Standards Rule 6-2(g) of the Uniform Standards of Professional Appraisal Practice 1998 (USPAP). According to IAAO's Property Appraisal and Assessment Administration, fee simple appraisal means a CAD appraises the six basic rights associated with private property ownership, often referred to as the "bundle of rights" concept: to use, sell, rent or lease, enter or leave, give away, or refuse to do any of these.
The next paragraph has a general statement about expertise level and BTPE registration of all Jackson CAD appraisers. Other sections in these two pages are assumptions and limiting conditions, data collection and validation, valuation approach analysis and review and testing. Each section has a brief paragraph with some generic appraisal methodologies, assumptions and processes.
The next three pages are the Jackson County Appraisal District Summary Revaluation Program Report for Business Personal Property. Except for definitions of business personal property and the value of inventory, these pages have the same sections and essentially the same generic descriptions as the real property pages. The last page is a Commercial Personal Property Percent Good Table that covers several different types of personal property acquired from 1974 to 2004.
In the existing reappraisal process, the chief appraiser designates which CAD areas are of greatest concern, and concentrates on those areas. There is no oral or written practice on how the chief appraiser makes this determination. The CAD's IAAO survey response states that reappraisal occurs at least once every three years, and the Comptroller's 2004-05 Operations Report submitted by Jackson CAD indicated the last year of reappraisal was 2002 and the next year of reappraisal is 2005. The CAD provided no documentation that it completed the planned reappraisals.
When PTD asked the CAD about the biennial reappraisal plan that Section 6.05, Tax Code requires the CAD to make available for public review and for the board to adopt by September 15, 2006, for the years 2007 and 2008, the chief appraiser did not provide any documentation. Instead, he indicated he is working with the software company on expanding the existing pages into a comprehensive reappraisal plan that will become a manual, in order to comply with the revised Section 25.18, Tax Code, which requires that appraisal districts implement a plan for reappraisal and specifies the elements required in the plan. Section 25.18 requires each appraisal office to implement a plan for periodic reappraisal which provides for certain reappraisal activities all real and personal property in the district at least once every three years. Among the required activities are:
- identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps, and property sketches;
- identifying and updating relevant characteristics of each property in the appraisal records;
- defining market areas in the district;
- identifying property characteristics that affect property value in each market area, including the location and market area of property; physical attributes of property, such as size, age, and condition; legal and economic attributes; and easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions;
- developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics;
- applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
- reviewing the appraisal results to determine value.
All three of Jackson CAD's school districts received invalid findings in the 2004 or 2005 preliminary PVS, attributed to inaccurate residential, rural real land, agricultural land, and commercial real and personal property appraisals. The absence of an adequate oral or written reappraisal plan to guide staff could have contributed to Jackson CAD school districts receiving invalid findings and Industrial ISD receiving designation as an eligible school district in the 2004 PVS. Over time, invalid findings will result in a decrease in state funding for a school district.
A reappraisal plan is a roadmap for insuring that values are regularly updated to current market values, as well as the communication tool that demonstrates to the appraisal district board the methods used by the staff. The reappraisal plan also sets forth the manner in which the staff will conduct its reappraisals.
By producing an accurate written biennial reappraisal plan in accordance with Section 6.05, Tax Code, Jackson CAD can help ensure consistent and accurate appraisals, since a single written source will guide all staff. This is especially important for the CAD, since a new appraiser was just hired, a tenured appraiser resigned and the CAD produced less than acceptable quality in-house appraisals in 2004 and 2005.
USPAP Standards 6, 7 and 8 provide a good resource for developing a complete plan. When comparing the existing CAD document with USPAP Standard 6, which is partially referenced in the plan, the existing document is missing all of the recommended activities to be included in a functional reappraisal plan including:
- 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 document also is missing the appraisal district's budget, training, contracting, market analysis, field inspections and data processing (as related to the reappraisal plan).
For example, Jefferson CAD has a one-year model reappraisal plan that meets or exceeds the criteria of the law and recommended industry standards, with all of the desired details needed to meet the written biennial appraisal plan requirement in effect for 2006.
Develop, adopt and use a complete reappraisal plan in compliance with Tax Code Sections 25.18 and 6.05 and industry standards.
Jackson CAD does not maintain an adequate records control schedule.
The chief appraiser provided a one-page document from the TSLAC dated 1989, as well as a Records Control Schedule dated April 1994. The administrative assistant to the chief appraiser is the designated records control officer.
There are no written procedures for retaining or managing records. In practice, the CAD keeps two complete years of data in the office, and once a year, after ARB hearings, the chief appraiser tells staff to box up the oldest year and move it to the storage building, which is located behind the CAD office building that burned. The storage building was unaffected by the fire. The chief appraiser tells staff when to destroy documents; for example, he tells staff when to delete renditions from the prior year.
The deputy chief appraiser indicated that the CAD has many documents dating back to 1981. As long as the CAD retains old records, it must manage those records, which are subject to public information requests.
Local Government Code, Sec 203.041 (a) requires that each local government must develop a records control schedule and file the schedule with the TSLAC director and librarians. Section 6.13 of the Property Tax Code states that preserving, microfilming, destroying or other disposition of appraisal district records is subject to Local Government Code requirements.
According to TSLAC, the benefits of records management are:
- complying with legal requirements;
- destroying records that no longer have value to the government;
- providing legal protection to the government when destroying records;
- retaining records of permanent value;
- improving protection of vital records;
- providing security for records with confidential or sensitive information;
- efficiently using office space for active records;
- moving inactive records into less expensive storage areas, if possible;
- releasing equipment and reusable media for other productive uses; and
- maintaining records in the formats offering optimum cost-effectiveness.
As an example, Matagorda CAD maintains a current records control schedule on file with the Texas State Library and comprehensive written procedures for document storage, retention and destruction.
Follow an up-to-date records control schedule and file the schedule with the Texas State Library as required by law.
Jackson CAD does not possess a comprehensive disaster recovery plan.
A fire dramatically revealed the need for such a plan in January 2004, irreparably damaging the CAD's office.
The fire completely shut down operations for at least a week, until the CAD secured temporary office space. The CAD relocated to a larger temporary office space from February 2004 until December 2005, when it moved to a permanent location in the same building.
While Jackson CAD has no written disaster recovery plan, the chief appraiser maintains contact information for each employee, and when the fire occurred, he was able to reach everyone almost immediately and inform him or her of the situation.
Exhibit 13 shows elements of a disaster plan.
Key Elements of a Disaster Recovery Plan
|Build a disaster recovery team||Identify a disaster recovery team that includes key policy makers, building management, end-users, key outside contractors and technical staff.|
|Obtain and/or approximate key information||Develop an exhaustive list of critical activities performed within the appraisal district.|
|Develop an estimate of the minimum space and equipment necessary to restore essential operations.|
|Develop a time frame for starting initial operations after a security incident.|
|Develop a list of key personnel and their responsibilities.|
|Perform and/or delegate key duties||Develop an inventory of all computer technology assets, including data, software, hardware, documentation and supplies.|
|Set up a reciprocal agreement with comparable organizations to share each other's equipment or lease backup equipment to allow the appraisal district to perform critical duties in the event of a disaster.|
|Make plans to procure hardware, software and other equipment as necessary to ensure the appraisal district can resume critical operations to soon as possible.|
|Establish procedures for obtaining off-site backup records.|
|Locate support resources the appraisal district needs, such as equipment repair, trucking and cleaning companies.|
|Arrange with vendor to provide priority delivery for emergency orders.|
|Identify data recovery specialists and establish emergency agreements.|
|Specify details within the plan||Identify individual roles and responsibilities by name and job title so that everyone knows exactly what they need to do.|
|Define actions to take in advance of an occurrence or undesirable event.|
|Define necessary actions at the onset of an undesirable event to limit damage, loss and compromised data integrity.|
|Identify actions to take to re-establish normal operations.|
|Test the plan||Test the plan frequently and completely.|
|Analyze the results to improve the plan and identify further needs.|
|Deal with damage appropriately||If a disaster actually occurs, document all costs and videotape the damage.|
|Be prepared to overcome downtime on your own; insurance settlements can take time to resolve.|
|Consider other significant issues||Do not make a plan unnecessarily complicated.|
|Make one individual responsible for maintaining the plan, but have it structured so that others have the authority and ability to it implement when needed.|
|Make updates to the plan on a regular basis and make revisions whenever a system change occurs.|
Source: Adapted from the National Center for Education Statistics, "Safeguarding Your Technology," September 1998.
The chief appraiser disagreed with this finding. He noted that the CAD had a disaster recovery plan in place during the 2004 fire that was tested and passed with flying colors. The chief appraiser requested an example of a written disaster recovery plan from an appraisal district comparable in size to Jackson CAD and along the Gulf of Mexico. The Comptroller's office is not aware of a disaster recovery plan meeting the exact specifications requested by the Jackson CAD and is, therefore, unable to provide this specific example.
An effective disaster recovery plan, nevertheless, includes key elements that address:
- immediate response;
- incident control/evaluation;
- environmental restoration; and
- resumption of critical business functions.
In addition to shutting down CAD operations, the fire permanently destroyed office records because only the appraisal data was backed-up offsite. Insurance reimbursement funds did not cover all replacement costs so the CAD spent an estimated $80,000 in out-of-pocket expense, based on board minutes and financial statements. Some of that expense may be due to upgrades rather than replacement costs.
Not having a disaster recovery plan means key details, such as the critical staff necessary to carry out recovery operations, are unknown. State and local governments, taxpayers, vendors and the general public need to know how to contact Jackson CAD when a forced relocation happens. In the case of loss of appraisal district facilities, appraisal district staff members need a written plan directing them where and when to report to work if facilities are uninhabitable and how to perform offsite work.
The Texas State Library and Archives Commission (TSLAC) makes available to local governments a sample of an acceptable disaster recovery plan on its Web site at http://www.tsl.state.tx.us/slrm/recordspubs/dp.html.
Prudent appraisal districts have a plan to recover all data and continue appraisal district operations with minimal interruptions in disaster situations. Key items in the plan include instructions for alternate office locations and communications and recreating appraisal, mapping and all other file systems. With an effective disaster recovery plan, the CAD will ensure business continuity for the CAD, taxpayers and the taxing units.
Develop a comprehensive, written disaster recovery plan.