Appraisal Standards Review
Rains County Appraisal District Follow-Up Report
April 2007
Summary
In July 2004, the Texas Comptroller of Public Accounts identified Rains Independent School District (Rains ISD), located in Rains County, Texas, as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of its county appraisal district. In August 2005, the Comptroller’s Property Tax Division (PTD) released the results of the ASR of Rains County Appraisal District (Rains CAD).
The report made 11 recommendations to improve Rains CAD’s appraisal practices and operations. The intent of ASRs is to determine why the local value is invalid and to recommend changes in operations and management that would improve appraisal practices. The Rains CAD review evaluated five functional areas: board of directors; appraisal district policies, procedures and operations; information processing systems; staffing, personnel qualifications and positions; and generally accepted appraisal practices, equality and uniformity of appraisal standards.
At the time of the review, the challenges facing Rains CAD included performing ratio studies regularly, documenting procedures and appraisal manuals and planning reappraisals.
Texas Property Tax Code Section 5.102(d) requires that, if the appraisal district fails to comply with the recommendations in the report and the Comptroller finds the board of directors of the appraisal district failed to take remedial action before the first anniversary of the date the report was issued, the Comptroller shall notify the judge of each district court in the county for which the appraisal district is established, who shall appoint a board of conservators consisting of five members to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the appraisal district until the Comptroller determines under 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.
For the one-year follow-up report, an appraisal district is in compliance with the statute if they take remedial action to implement the recommendations in the ASR. Remedial action means the CAD has or intends to correct, remedy or improve the deficiencies identified in the ASR. Remedial action is demonstrated by having implemented or nearly completed the preponderance of the recommendations by the first-year anniversary of the release of the report. In some instances, recommendations require a strong commitment by the board to complete. The Comptroller recognizes some recommendations included in ASRs require more than a year to implement. Some ASRs include more recommendations than a CAD can implement all within a year in CADs with limited resources. So long as the CAD is working at remediation of the findings, the Comptroller will continue to work with the CAD to achieve full compliance and will continue to monitor the performance of a CAD until all recommendations are implemented. CADs that have completed all recommendations by the one year anniversary have met their statutory obligations and will not require additional monitoring.
PTD sent a consultant to Rains CAD in August 2006 to assess its progress in implementing the report recommendations. While the consultant found evidence that Rains CAD is making progress toward implementing many of the recommendations, much work remains to complete the recommendations in a timely manner. The CAD has completed four of the 11 recommendations, five are in progress and the CAD has not implemented two recommendations.
PTD sent the CAD’s board members surveys soliciting their views and comments on the ASR. Two board members responded, with one respondent reporting that he is a new board member and chose not to complete the survey. The other board member agreed that the ASR contained information useful to the appraisal district. The board member also felt that the CAD needed the recommendations costing money and that they resulted in improved operations. The board member strongly agreed that the board has been supportive of the ASR’s recommendations, the chief appraiser regularly brings recommendations to the board for its consideration and the board and chief appraiser are working together to accomplish the recommendations. The most significant recommendation contained in the ASR, according to the board member, was the need to keep all CAD policies and procedures up-to-date. The board member added that the most difficult decision faced because of the ASR was planning and scheduling deadlines to accomplish the recommendations, and the most significant challenge remaining in the CAD today is keeping up with the county’s growth.
PTD will continue to monitor the CAD’s progress toward full implementation. The following pages outline specific steps the CAD still should take.
History and Significant Events
Rains CAD received an ASR because PTD found Rains ISD’s property values to be invalid with the PVS, and the school district was eligible for the grace period as provided in Government Code Section 403.3011. Within Rains ISD, property values for single-family residential properties, rural properties and commercial properties fell outside the state’s acceptable value range. The ASR reported that the CAD was not performing ratio studies within these categories to determine levels of appraisal and appraisal accuracy. Rains ISD received another invalid finding in the 2004 PVS, its second year in the grace period, with study results showing properties in the same categories continuing to be misappraised. The CAD’s other school district, Miller Grove, is shared with Hopkins CAD. The Rains CAD portion of Miller Grove ISD received local value in the 2004 PVS.
In 2005, the chief appraiser began working on a classification guide. The CAD completed the guide in 2006, but staff appraisers used portions of the guide in 2005. The chief appraiser’s efforts produced positive results with Rains ISD and the Rains CAD portion of Miller Grove ISD receiving local values in the 2005 PVS and the 2006 preliminary PVS. In January 2006, the CAD began working on a written reappraisal plan implementing the successful procedures used in 2005.
The results of the 2005 and 2006 PVS indicate that Rains CAD has improved its appraisal practices, but the CAD still faces challenges in documenting these practices and procedures. Until the CAD can provide written documentation as to what and how it performs the recommended tasks, the Comptroller is unable to consider it in compliance with PTD’s recommendations.
Status of Recommendations: What Remains To Be Done
Appendix A lists the 11 recommendations identified in the ASR, with a summary of actions to date. The Comptroller acknowledges the work the CAD has performed over the last year and encourages it to remain on task to implement all recommendations. The chief appraiser advises that time has been a major issue preventing the completion of each recommendation within the past year.
Five of the recommendations are complete. Four of the recommendations are works in progress with the CAD having made significant progress towards full implementation. The remaining two recommendations lack documentation demonstrating how the CAD plans to implement them.
Recommendation 2: Revise the professional appraisal services contract to reflect the guidelines in the IAAO Standard on Contracting for Assessment Services.
The CAD has not completed this recommendation. Rains CAD’s current contract for professional appraisal services does not comply with the International Association of Assessing Officers (IAAO) standard on contracting. Specifically, the contract does not contain deadlines for the contractor to complete and deliver appraisals to the CAD, nor does it contain provisions for monitoring the contractor’s performance.
The board extended the current contract for 2006 in December 2005. PTD released the ASR in August 2005. The chief appraiser advised that the contractor is aware of the recommendation, and the 2007 contract for professional appraisal services will comply with IAAO. Given the timing of the ASR’s release, the CAD will not approve the 2006 appraisal contract without insuring it complies with IAAO standards. The chief appraiser indicated the contractor has never failed to deliver appraisals in a timely manner. The board chairman concurred.
To complete this recommendation, the board must approve a 2007 appraisal contract in accordance with the IAAO standard on contracting prior to any 2007 appraisal work by the contractor. The CAD must mail a copy of the 2007 contract to PTD no later than May 31, 2007.
Recommendation 3: Develop a policies and procedures manual for performing administrative activities.
The CAD has not completed this recommendation. According to the chief appraiser, staff refers to procedural manuals developed by various software vendors to perform data entry functions for appraisals, payroll, accounts payable, tax collections, exemptions and a variety of other administrative tasks. According to the chief appraiser, time has been the main factor preventing the CAD from developing a local policies and procedures manual. The chief appraiser’s goal is to have a manual completed by December 31, 2007.
In March 2005, the CAD purchased new appraisal and tax collection software. According to the chief appraiser, the vendor developed step-by-step instructions for using all system applications, including entering appraisal data, maintaining exemptions, entering sales data, updating ownership, generating and certifying appraisal rolls, maintaining appraisal review board records, tax collections and effective tax rate calculations. The chief appraiser says staff refer to these manuals on a daily basis.
On September 22, 2005, the board adopted the Rains County Appraisal District Employee Handbook. In addition to general personnel information, the manual discusses the CAD’s policy on purchasing and payroll.
The appraisal and tax collection system also have an accounting application that the CAD uses to generate checks. The vendor developed written instructions on how to use the accounting application. The CAD only uses the printing function and maintains accounting records in QuickBooks, which it purchased in January 2006. Staff use the written documentation developed by QuickBooks for payroll, accounts payable, accounts receivable and fixed assets.
The chief appraiser intends to develop and complete procedures for administrative activities such as payroll, purchasing, accounts payable, tax collections and exemptions for staff to use in conjunction with the vendor-developed manuals.
To complete this recommendation, the CAD should prepare a specific work plan with a timeline that ensures completion by December 31, 2007. The chief appraiser should include this item on the board’s monthly agendas, and the chief appraiser should also provide the board with an update on the progress at every meeting.
Recommendation 4: Develop an implementation plan and timeline to complete the integration of the district’s appraisal software and geographic information systems.
While the CAD has made progress in integrating these systems, it has not developed a plan and timeline for completing the integration process.
In March 2005, the CAD purchased new appraisal software with integration capabilities. The CAD’s mapper integrated about 30 percent of the CAD’s maps with the appraisal system and continues to integrate all new parcels. The chief appraiser’s goal is to integrate all CAD maps with the appraisal system by September 2008.
To integrate these systems without a plan of action fails to address the recommendation and makes it impossible to determine whether or not the integration project is on time and on track. To complete this recommendation, Rains CAD must develop a plan and timeline for completing the integration of the mapping and appraisal systems. The plan and timeline will serve as a tool to assist the mapper in his duties, serve as an instrument for evaluating the mapper’s job performance and present benchmarks noting progress toward completion.
As suggested in an earlier recommendation, the chief appraiser should place this item on every board agenda and keep the board apprised of the progress or of any obstacles to completion by the projected dates. The CAD must mail a copy of the implementation plan and timeline to PTD no later than May 31, 2007.
Recommendation 6: Develop training plans for staff members, and include necessary training funds in the budget annually.
The CAD has not developed individual training plans for staff members.
In anticipation of upgrading training and fulfilling this recommendation, the CAD board approved increases in training funds in the 2006 and 2007 budget. The 2006 budget appropriated $6,000 for staff education and training, and the CAD budgeted $8,000 for training in 2007.
According to the chief appraiser, she routinely trains CAD staff on new aspects of the CAD’s automated appraisal and tax collection system, such as using the file transfer protocol (FTP) and using the recently purchased pen pads. In addition, appraisers attend classes as required by the Board of Tax Professional Examiners (BTPE) to obtain professional designations. In July 2006, the Class I appraiser attended BTPE Course 2. In October 2006, the senior appraiser will take BTPE Course 4 and the Level III exam, and the newly hired appraiser will take BTPE Course 1.
The Rains County Appraisal District Employee Handbook, adopted by the board in September 2005, contains a section on professional development and education. Chapter 4, Section M of the handbook describes BTPE’s registration requirements and the CAD’s policies on attending job related seminars, courses, conferences and required professional education programs.
To complete this recommendation, the CAD needs to develop training plans for all staff members. The chief appraiser can use and monitor these plans in each staff member’s annual performance evaluation. The CAD must mail copies of the training plans, including the list of classes staff will attend and when they will take the classes, to PTD no later than May 31, 2007.
Recommendation 8: Develop an appraisal manual that includes typical Rains County properties and comprehensive instructions on how to perform an appraisal.
The chief appraiser is developing an appraisal manual with specific instructions for appraisal staff to follow.
In addition to appraisal instructions, the chief appraiser developed a classification guide and cost tables for residential properties. The chief appraiser used local properties to develop the guide and used market data in the appraisal manual.
To comply with this recommendation fully, the chief appraiser must keep the board informed as to the progress of the appraisal manual and mail a copy of the completed manual to PTD no later than May 31, 2007.
Recommendation 10: Implement a plan to annually inspect all personal property parcels.
The CAD has not completed this recommendation. The chief appraiser cited time and limited staff as reasons for not implementing this recommendation.
The chief appraiser said that about 90 percent of business owners file business personal property renditions, and she reviews the renditions for reasonableness. According to the chief appraiser, physical inspections of personal property accounts did not occur in 2006 because the CAD did not have the staff or time.
In May 2006, the chief appraiser hired a new appraiser who will receive training to perform personal property appraisals. Personal property inspections will begin in January 2007. The chief appraiser and personal property appraiser will work together to accomplish the inspections for the 2007 tax year.
The chief appraiser must keep the board informed on how the plan is progressing, as well as when the inspection of all personal property accounts for the 2007 tax year has occurred. To complete this recommendation, the chief appraiser must mail of copy of the plan to inspect personal property annually to PTD no later than May 31, 2007.
Appendix A
Rains CAD ASR Implementation Status Report
2.1 Board of Directors
| Rec. # | Recommendation | Implementation Status | If not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 1 | Expand the budget document that is distributed to taxing units to include the salary and benefits for each position and a list of each proposed capital expenditure. | Complete |
Rains CAD prepared the 2007 budget according to the requirements of the Tax Code 6.06 (a). The CAD’s copy contains a list of all proposed positions, including proposed salaries and benefits for each position. The budget also contains an explanation for a budgeted $20,000 capital expenditure. The proposed expenditure covers new aerial photography software. Section 6.06 of the Tax Code requires appraisal districts to send copies of its adopted budget to each taxing entity in the appraisal district. Initially, the CAD distributed copies of the budget to the taxing entities for their approval without the proposed benefit detail. The chief appraiser and board chairman indicated that the salary and benefit information was available and discussed at the public hearing on the proposed budget. Subsequent to the onsite review for this follow-up report, the CAD forwarded copies of the complete budget document to the taxing entities. |
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| 2 | Revise the appraisal services contract to reflect the guidelines in the IAAO Standard on Contracting for Assessment Services. | Not implemented | May 31, 2007 |
In December 2005, the board approved a one-year extension to its professional appraisal services contract with Capitol Appraisal Group, Inc. (CAG), but the extension does not include dates for deliverables or monitoring provisions, as required by IAAO. According to the chief appraiser, the 2007 contract for professional appraisal services will comply with IAAO standards. The board will mail copies to PTD no later than January 31, 2007. |
2.2 Appraisal District Policies, Procedures and Operations
| Rec. # | Recommendation | Implementation Status | If not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 3 | Develop a policies and procedures manual for performing administrative activities. | Not Implemented | December 31, 2007 |
According to the chief appraiser, staff refers to procedural manuals developed by various software vendors to perform data entry functions. The chief appraiser intends to develop local procedures for administrative activities such as payroll, purchasing, accounts payable, tax collections and exemptions for staff to use in conjunction with the vendor-developed manuals. She hopes to have the documentation completed by December 31, 2007. |
| Rec. # | Recommendation | Implementation Status | If not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 4 | Develop an implementation plan and timeline to complete the integration of the district's appraisal software and geographic information systems. | In Progress | May 31, 2007 |
While the CAD has not formally developed an implementation plan and timeline for integration of the appraisal software and mapping systems, the CAD is well into the integration process. The CAD purchased an automated appraisal system with integration capabilities in March 2005. The chief appraiser advised that she will develop an implementation plan and timeline for integrating the appraisal and mapping systems by September 2008. The CAD must submit a copy of the plan and timeline to PTD by May 31, 2007. |
2.4 Staffing, Personnel Qualifications and Positions
| Rec. # | Recommendation | Implementation Status | If not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 5 | Comply with the BTPE registration requirements for all tax appraisers. | Complete |
On January 18, 2006, CAD records show it submitted renewal registrations to the Board of Tax Professional Examiners (BTPE) for all CAD appraisers and tax collection staff employed at that time. Registrants include the chief appraiser (RPA, RTA), senior appraiser (Class II), appraiser (Class I) and the tax collection clerk (RTC). In May 2006, the CAD hired an additional field appraiser and submitted an application for registration with BTPE on August 10, 2006 (after the employee's 3-month probationary period). |
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| 6 | Develop training plans for staff members, and include necessary training funds in the budget annually. | In Progress | May 31, 2007 |
The CAD has not developed individual training plans for staff members. The chief appraiser advised that she will develop these training plans by December 31, 2006. In anticipation of upgrading training and fulfilling this recommendation, the CAD board approved increases in training funds in the 2006 and 2007 budget. The 2006 budget appropriated $6,000 for staff education and training, up from $5,000 in 2005. The CAD budgeted $8,000 for training in 2007. To complete this recommendation, the CAD needs to develop training plans for all staff members. The chief appraiser can use and monitor these plans in each staff member's annual performance evaluation. The CAD must mail copies of the training plans, including the list of classes staff will attend and when they will take the classes, to PTD no later than May 31, 2007. |
2.5 Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standard
| Rec. # | Recommendation | Implementation Status | If not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 7 | Perform ratio studies to evaluate the level of appraisal and uniformity of appraisals at least semi annually. | Complete | During the months of January through May 2006, the chief appraiser entered sales data into Excel spreadsheets to calculate sales ratios for each class of residential property. In May 2006, the chief appraiser used the results of the ratio studies to determine the levels of appraisal and appraisal uniformity among residential properties and adjusted appraisal schedules accordingly. Residential classes whose weighted mean ratios fell outside of a 95 - 105 percent threshold were adjusted. The CAD achieved local values in the 2005 PVS. The chief appraiser stated that ratio studies generated by the CAD's former appraisal system were not accurate because the system could not account for multiple parcels included in a sale. The CAD's new appraisal software can capture multiple parcels, and the chief appraiser advised she can generate ratio studies from the system after staff enters all sales data. Transferring sales data from the old system to the new system was not part of the conversion process, and staff is doing it manually. The chief appraiser plans to use ratio studies generated from the new appraisal system to determine levels of appraisal and appraisal uniformity for 2007. The chief appraiser ran trial ratio studies with the new software in August 2006. Until the ratio studies application is 100 percent functional, the chief appraiser will continue to maintain ratio studies in an Excel format. She expects to begin performing computer generated ratio studies in February 2007 and continue performing ratio studies several times before mailing appraisal notices in May 2007. |
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| 8 | Develop an appraisal manual that includes typical Rains County properties and comprehensive instructions on how to perform an appraisal. | In Progress | May 31, 2007 | In January 2006, the chief appraiser began developing an appraisal manual that includes local procedures for CAD appraisers to use when appraising property and establishes general protocol for field procedures, such as appearance, behavior and a list of "do's and don'ts" when representing the appraisal district. The manual contains comprehensive instructions on how to appraise each category of property appraised locally, including basic measuring procedures and instructions for calculating depreciation. According to the chief appraiser, this part of the manual is a work in progress, and she will complete it by the end of the year. These appraisal procedures will complement the classification guide (see Recommendation 9) completed in May 2006. The CAD will combine the appraisal procedures and classification guide into a comprehensive appraisal manual to ensure appraisal uniformity and consistency among appraisal staff. |
| 9 | Develop cost tables, property classifications and descriptions based on actual properties in the county. | Complete |
In May 2006, the chief appraiser completed a classification guide that includes photos of local properties typical within each class of residential property, written descriptions of characteristics and attributes common to each class, and building cost tables based on the local market. The appraisal review board used the guide during their 2006 protest hearings. In 2005 and 2006, appraisers took photographs of each property appraised. The chief appraiser selected photos typical for each residential property class. Property characteristics common to each class were developed. Using the Excel ratio studies described in Recommendation 7, the chief appraiser developed cost tables for each residential class. The chief appraiser added that, due to the absence of local market data on commercial property, the CAD will continue to use the Marshall & Swift Commercial Valuation Guide when appraising commercial property. Field procedures are those locally developed. According to the board chairman, he was pleased with the classification guide, and the ARB members found the guide very useful during appeals. |
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| 10 | Implement a plan to annually inspect all personal property parcels. | Not Implemented | May 31, 2007 | According to the chief appraiser, physical inspections of personal property accounts did not occur in 2006 because the CAD did not have the staff or time. The chief appraiser will develop a plan and instructions for the annual inspection of personal property before December 31, 2006. Personal property inspections will begin in January 2007. The chief appraiser and personal property appraiser will work together to accomplish the inspections for the 2007 tax year. |
| 11 | Develop a detailed reappraisal plan that, at a minimum, includes the essential steps in the process, explains exactly how and when the steps will be executed, outlines training and explains how sufficient resources will be allocated to follow the plan. | Complete | In January 2006, the chief appraiser began developing the CAD's reappraisal plan. According to the chief appraiser, the board adopted the plan on September 14, 2006, and forwarded it to the Comptroller. |