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Chapter 2:
Findings of the Appraisal Standards Review

This chapter of the report addresses findings, commendations and recommendations from the Appraisal Standards Review of the Reeves CAD in two sections:

2.1 Generally Accepted Appraisal Practices
2.2 Other Recommendations

2.1
Generally Accepted Appraisal Practices

Three general appraisal methods or approaches–cost, income and market–must be considered in determining the market value of property. The appraiser must use the method most appropriate to a particular property.

Additional information about the approaches to determining or appraising value may be found in appraisal textbooks and IAAO Technical Standards. Appraisers usually determine the value of producing mineral deposits, such as oil, gas and coal, and the value of many 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.

FINDING
Reeves CAD does not have typical degree-of-intensity standards for qualification of local agricultural land classes and lacks written guidelines for calculating productivity values for open-space land.

The chief appraiser stated she relies on the Property Tax Code, the Comptroller's Guidelines for the Appraisal of Agricultural Land and her knowledge of what is typical in Reeves County when determining if acreage qualifies for agricultural appraisal. Local guidelines establishing standards for degrees of intensity typical for agricultural operations in Reeves County do not exist.

The CAD's agricultural appraisal advisory board has consisted of only two members since 2004. One member is a local rancher, and the other is a local farmer. A third board member passed away in 2004, and the chief appraiser indicated she will appoint a third member who is the representative from the Natural Resource Conservation Service. She stated she consults with the board regularly and gets input from members when completing the Comptroller's Farm and Ranch Survey each year. The chief appraiser stated most of the open-space land in Reeves County qualifies for agricultural use. The chief appraiser reviews each agricultural use application and conducts an onsite inspection when an application needs further verification that it conforms to the chief appraiser's personal knowledge of what is typical in Reeves County.

The chief appraiser indicated that agricultural productivity appraisals are performed each year, based on information provided by the agricultural appraisal advisory board. The chief appraiser submits the income and expense data to the CAD's software vendor, who calculates the values, updates the agricultural values in the automated appraisal system and prints hard copies of the agricultural appraisal schedules for the CAD. According to the chief appraiser, she feels the data provided by the agricultural appraisal advisory board for calculating agricultural productivity values in Reeves CAD is accurate because the members are actively involved in agricultural operations. A staff member in PTD's land section confirms that agricultural information provided in Reeves CAD's Farm and Ranch Surveys is used in PTD's calculations, but PTD also uses information from other sources, such as the Reeves County Extension Agency, Farm Service Agency and Agricultural Credit Association.

The Reeves County ISD Productivity Values Report from the 2005 PVS shows that the ratio for the productivity value for Qualifying Acres was 74.39 percent. Ratios for the component land classes of Category D1 value were 86.34 percent for native pasture and 66.27 percent for irrigated cropland. Native pasture comprises 96 percent of all Qualified Acres in Reeves CAD and less that 4 percent of Qualified Acres is classified as irrigated cropland. Without documentation supporting the agricultural appraisal process, the disparity of ratio ranges within and among land classes of Qualified Acres is significant between local and state values. Exhibit 6 contains agricultural appraisal values for native pasturelands in Reeves and surrounding counties.

The peer-group evidence shows that, when compared to the surrounding counties that have many of the same land conditions, the CAD is not appraising property according to local conditions and in compliance with the Comptroller's Guidelines for the Appraisal of Agricultural Land.

Exhibit 6
2005 Native Pastureland Values: Reeves and Neighboring Counties

County	Percent of Total Productivity Acres in Native Pastureland	Reported Value/Acre	PTD Value/Acre	Appraisal Ratio
Reeves	96%	$3.54	$4.10	0.86
Culberson	99%	$6.30	$6.90	0.91
Jeff Davis	100%	$15.04	$15.10	1.00
Pecos	88%	$7.32	$12.30	0.60
Ward	100%	$4.58	$6.40	0.72
Average of Surrounding Counties	97%	$8.31	$10.18	0.80

Source: 2005 School District Report of Property Value.

Exhibit 7 shows the net-to-land calculations used by the CAD and by PTD in 2005 for native pasture, the predominant land category in Reeves County. The CAD reports five classes of native pasture. Exhibit 7 represents the average of the five classes reported by Reeves CAD.

Exhibit 7
2005 Net-to-Land Calculations for Native Pasture:
Reeves CAD and Property Tax Division

Income and Expenses	Reeves CAD 1999	Reeves CAD 2000	Reeves CAD 2001	Reeves CAD 2002	Reeves CAD 2003	Reeves 2005(5-yr avg.)	PTD 1999	PTD 2000	PTD 2001	PTD 2002	PTD 2003	PTD 2005 (5-yr avg.)
Hunting Income	$0.10	$0.10	$0.10	$0.10	$0.10	$0.10	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00
Lease Income	$0.42	$0.42	$0.42	$0.42	$0.42	$0.42	$0.85	$1.00	$1.00	$1.00	$1.00	$0.97
Total Income	$0.52	$0.52	$0.52	$0.52	$0.52	$0.52	$0.85	$1.00	$1.00	$1.00	$1.00	$0.97
Fence Expense	$0.05	$0.05	$0.05	$0.05	$0.05	$0.05	$0.25	$0.26	$0.33	$0.39	$0.40	$0.32
Taxes	$0.08	$0.08	$0.08	$0.08	$0.08	$0.08	$0.09	$0.10	$0.09	$0.08	$0.08	$0.09
Well/ Water	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.08	$0.08	$0.08	$0.08	$0.08	$0.08
Mgmt	$0.04	$0.04	$0.04	$0.04	$0.04	$0.04	$0.06	$0.07	$0.07	$0.07	$0.07	$0.07
Brush Control	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00
Total Expenses	$0.17	$0.17	$0.17	$0.17	$0.17	$0.17	$0.48	$0.51	$0.57	$0.62	$0.63	$0.56
Net to Land	$0.35	$0.35	$0.35	$0.35	$0.35	$0.35	$0.37	$0.49	$0.43	$0.38	0.37	$0.41

Cap rate	10.00%	10.00%
Value	$3.50 (rounded)	$4.10 (rounded)

Sources: Reeves CAD 2005 net-to-land calculations and PTD 2005 net-to-land calculations Reeves County.
Note: Data represents per acre values.

Reeves CAD did not provide evidence of how expense data are derived for productivity calculations shown in Exhibit 7. Land that is qualified for the special agricultural appraisal uses the productivity valuation process and requires:

• compiling historical income and expense data for typical production inputs for local land categories;
• calculating the net to land; and
• applying an income capitalization rate that is set by law to the net to land.

To document the CAD's productivity calculation process, the chief appraiser referred PTD to a study entitled Agricultural Land Valuations for Reeves County Appraisal District 2005, which was performed by the CAD's outside appraisal services firm. The study includes a sample of cash leases for 2005 and shows five-year pasture lease rates of $0.32 for every year from 1999 to 2003. Some of the sample leases (i.e., nos. 25, 26 and 27), however, belong to the General Land Office (GLO), which does not include expenses in its lease rates, and should therefore be adjusted upward for the landowner's excluded expenses to derive net to land. According to the Comptroller's Guidelines:

If a lease provides for an unusual owner expense – such as maintaining fences – adjust the payment by subtracting that expense. Suppose, for example, that fence maintenance in one lease costs the owner 40 cents per acre, per year. The nominal lease payment is $4.75 per acre. After adjustment, the payment is $4.35 per acre.

When a lease rate excludes an expense, as in the case of the GLO leases from the Agricultural Land Valuations for Reeves County Appraisal District 2005, then the nominal lease payment should be adjusted upward for the omitted expense.

The processes for determining degrees of intensity and deriving net to land have procedures in common, such as an identification of local categories of land, the land's productive capacity within the area and an analysis or breakdown of the steps of production in terms of the inputs. Where local procedures for establishing typical degree-of-intensity standards do not exist, an essential step in the qualification process could be lacking. If Reeves CAD has established local land categories, then a degree-of-intensity standard should be established for each of these categories.

The degree-of-intensity standard is a test intended to exclude land from qualification for agricultural appraisal on which token agricultural use occurs in an effort to obtain tax relief. Because the law does not specify what degree of intensity qualifies a particular type of land – in a state as large as Texas, no single statutory definition could cover all possible uses – the chief appraiser must determine the typical degree of intensity for the area for each category of land according to agricultural practices that are typical in the area.

Local guidelines that establish the degree of intensity of a prudent manager in the area must be applied in a flexible and reasonable manner. When applied in such a way, local guidelines can help the CAD maintain operations if key staff are lost and can help the public understand how the CAD qualifies land for the special agricultural appraisal. Local guidelines, however, may not be used to unreasonably deny agricultural appraisal. For example, an owner who keeps eight cattle on 10 acres should not be denied the special appraisal because the guidelines state that a cattle ranch must have nine cattle for every 10 acres, if the owner is otherwise clearly qualified.

For example, to document its agricultural appraisal process, Atascosa CAD developed an agricultural valuation manual. The manual contains:

• a definition of agricultural productivity valuation;
• qualification criteria;
• degree-of-intensity standards (livestock/hay, orchard, grain);
• management practices (fencing, weed control, economic returns);
• animal unit carrying capacities per pasture type; and
• rollback tax information.

The manual included 2004 lease data used for the 2006 agricultural productivity calculations. The manual divides lease data by land use (dry cropland, irrigated cropland, improved pasture, native pasture, brush and peanuts) and provides lease prices per acre submitted from area farmers and ranchers. The manual also lists the 2006 net-to-land calculations for each land class with corresponding expenses (taxes, insurance and fences). To document the agricultural appraisal process for a recent follow-up review, the CAD provided PTD with documentation of how expenses are used for net-to-land calculations, along with copies of the productivity data surveys submitted by landowners.

RECOMMENDATION 1
Establish typical degree-of-intensity standards for qualification of local agricultural land classes and develop productivity calculations according to Property Tax Code Section 23.51 and the steps outlined in the Comptroller's Guidelines for the Appraisal of Agricultural Land.

FINDING
Reeves CAD does not have written procedures for gathering and analyzing sales or appraisal maintenance.

According to the chief appraiser, sales information is obtained from property owners, Realtors, title companies, and fee appraisers. However, upon reviewing the draft of this report, the chief appraiser stated she does not get information from Realtors, MLS, title companies or fee appraisers. She indicated that sales of improved parcels outside of Pecos are scarce, although the CAD encounters vacant land sales via Internet auctions to absentee landowners. The Internet sales are for small tracts purchased "sight unseen," and most parcels lack easements and utilities. The chief appraiser indicated Internet sales are not considered arms-length transactions because buyers are uninformed. PTD field studies rejects the validity of Internet sales of unplatted parcels to uninformed buyers. The CAD mails sales letters to each grantee when a deed is filed in Reeves County. The chief appraiser estimates about 500 letters are mailed each year with the CAD receiving less than a 10 percent response rate.

The chief appraiser indicated that when sales information is received she reviews the information and enters it into the automated appraisal system. If needed, sales are adjusted based on the appraisal knowledge and expertise of the chief appraiser, but guidelines for adjusting sales are not written nor does the CAD have written procedures relating to the qualification of Internet sales. The chief appraiser reviews sales data annually when testing cost schedules for accuracy by performing sales ratio studies. According to the chief appraiser, sales are also used during the appeals process to help support the CAD's appraised values.

In Balmorhea ISD in 2005, the CAD lacked market sales data and building cost information to support the adjustment of residential building cost schedules in the school district. According to the chief appraiser, however, all building schedules in Balmorhea ISD were reduced by 20 percent in 2005 because of economic conditions. She further indicated that building schedules in Balmorhea ISD and areas outside of Pecos have been adjusted for years. The CAD has no evidence to justify a market-value-derived adjustment to its building schedules and, due to the lack of sales data in these areas, ratio studies are unreliable.

As a result of not using local guidelines for verifying, confirming and adjusting sales data, the CAD risks conducting appraisal maintenance with flawed sales data that inaccurately reflect current market value. Confirmation and validation of sales are critical for determining local market values. Performing appraisal maintenance without sales is equally risky. Balmorhea ISD received an invalid finding in the 2005 PVS due, in part, to Single-Family Residential being appraised below market value. Category A, Single-Family Residential, in Balmorhea ISD tested with a weighted mean ratio of 0.8749. If Category A had not been reduced by 20 percent in 2005, the resulting appraisals would have been more in line with estimates of market value.

Non-market and improperly adjusted sales also contribute to inaccurate ratio studies, which the chief appraiser indicated are used for updating appraisal schedules.

According to IAAO's textbook, Property Appraisal and Assessment Administration, Chapter Five, Data Collection and Management, the reliability of any valuation model or sales ratio study depends upon the quantity and quality of its data. Sales data must be collected, edited and adjusted to obtain valid indicators of market value. Accurate sales data are needed for specifying and calibrating valuation models and for sales ratio studies. The reliability of any valuation model or sales ratio study depends on the quantity and quality of data.

Three basic sources of sales data are deeds, contracts or agreements of sale and affidavits of property value. When this information is unavailable, is incomplete or requires verification, sales information can be obtained from buyers and sellers by mail questionnaire, by telephone inquiry or face to face interviews. As a final resource, Realtors, multiple listing services, title companies, private appraisers, leasing agents and certified property managers are useful sources of information.

IAAO also points out in Chapter 1 that standards of practice require written procedures, and regularly scheduled updates of the procedures are essential. As well as establishing work procedures, written procedures promote uniformity of approaches to necessary tasks.

Nueces CAD, for example, has a well-written Market Analysis Procedures Manual that describes the processes used to obtain sales information and the procedures necessary for sales confirmation. Written procedures help ensure consistent market analyses regardless of personnel changes.

RECOMMENDATION 2
Develop written procedures based on IAAO Technical Standards for gathering and analyzing sales data, and for conducting appraisal maintenance.

After reviewing the draft of this report, the chief appraiser said that, although taxpayers rarely return the sales letter the CAD sends out, the CAD biannually conducts a computerized sales ratio study. The chief appraiser did not provide documentation of the ratio studies or the procedures used to gather and analyze sales data and stated, "the IAAO is too expensive for rural poor districts." The Reeves CAD Plan for Periodic Reappraisal 2007/2008, a board-approved copy of which was submitted to the Comptroller Oct. 11, 2006, states on Page 5, the CAD conducts ratio studies "in compliance with the current Standard on Ratio Studies of the International Association of Assessing Officers."

FINDING
Reeves CAD does not have a comprehensive appraisal manual that includes locally developed procedures for appraisals.

Reeves CAD appraisal staff consists of the chief appraiser and an appraiser/clerk who is responsible for appraising personal property. The chief appraiser has been with the CAD for 25 years and the appraiser/clerk for nine years. Currently, appraisal staff must rely on their appraisal knowledge, CAD-developed land and improvement cost schedules and the Comptroller's Field Appraisers Guide (2000 Edition), which is not an authorized publication. The version of this guide that the CAD is using is seven years out of date, no longer published, was never intended to be relied on by appraisal districts and was developed as an internal tool only for Comptroller staff.

Updated in 2004, the Reeves County Appraisal District Building Cost Schedule consists of appraisal schedules for residential and commercial properties. The chief appraiser indicated the residential schedules are market-based, while the commercial schedules are based on construction costs. The Schedule contains classification codes for each type of residential and commercial property appraised by the CAD, including mobile homes. Depreciation tables and a one-page guide describing condition, desirability and usefulness (CDU) can be found in the Schedule. CDU ratings range from unsound to excellent and are used for establishing depreciation. According to the chief appraiser, residential schedules are updated using local sales data and commercial schedules are updated as new construction cost information becomes available. Written procedures instructing appraisers on how to classify improvements or use the schedules do not exist, but all of the cost schedules are integrated into the CAD's automated appraisal system. By entering data unique to each property, the appraisal system accesses the correct cost schedule and generates an appraised value.

Reeves CAD appraises land based on location, size and use. The CAD's reappraisal plan states land schedules are updated using sales. Written procedures for appraising land do not exist, but all land schedules are automated within the CAD's computerized appraisal system. According to the chief appraiser, land schedules were reviewed and updated in 2006.

The first chart in Exhibit 8 shows a decreasing trend in the median level of appraisal in both ISDs in Reeves CAD measured by the 2004-06 PVSs. Low ratios are due to a low land schedule, low improvement schedule or high depreciation schedule. The second chart in Exhibit 8 shows good results in uniformity from the Category A, Single-Family Residential COD in one school district but not the other. Reeves CAD's appraisal problem appears irregular and is due to either inconsistent judgments made by appraisers or inaccurate specific-feature adjustments.

If there are workload changes in appraisal staff, or use of contracted field appraisers as there is in Reeves CAD, lack of a detailed appraisal manual will promote lack of uniformity in appraisals and result in property values that deviate from market value. The deviation from market value could result in school districts in Reeves County receiving invalid local value in the state's PVS. For example, Balmorhea ISD received an invalid finding in the Comptroller's 2005 PVS, and an invalid finding, if not corrected, might eventually cause the school district to receive less funding from the state than expected. If the level of appraisal (percentage of market value) varies from taxpayer to taxpayer, some taxpayers will bear a greater share of the local tax burden than others.

By providing each appraiser with a local appraisal procedures manual and assuring that it is properly implemented, the CAD's appraisal performance will be equitable and appraisal uniformity will improve. A functional appraisal manual should contain, at a minimum, the following: local procedures and practices for each parcel category the CAD staff appraises; typical property classification characteristics with photographs; instructions for gathering and processing appraisal data; and instructions for reviewing and evaluating appraisal values through internal ratio studies.

Tom Green CAD, for example, has an up-to-date local appraisal manual, which thoroughly explains how the CAD appraises residential and commercial property, business personal property and land. The manual also contains the CAD's USPAP Mass Appraisal Report.

RECOMMENDATION 3
Develop, implement and distribute to appraisal staff a comprehensive appraisal manual that includes locally developed procedures for appraisals that comply with the Property Tax Code and IAAO Technical Standards.

After reviewing the draft of this finding, the chief appraiser said the CAD's appraisal manual was in compliance at one time; she added, however, that it is only a guide and that local data is updateded constantly and new categories are set up. No documentation, however, was provided. The chief appraiser stated that she will commit to documenting and updating all local manuals and schedules.

2.2
Other Recommendations

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. Some recommendations may refer to compliance with state law. As a governmental agency, appraisal districts are required to comply with state laws.

Governance and Management

The quality of the property tax system depends largely on an appraisal district's board of directors (board). The board should provide knowledge, judgment and expertise to establish policies and procedures for the appraisal district's organization and operation.

The Reeves CAD's board of directors consists of 11 members shown in Exhibit 9.

Exhibit 9
Reeves CAD Board of Directors Members

Board Member	Entity Representative	Start Date	Occupation
VaLera Gatewood, Chairwoman	City of Pecos	1991	Realtor
Brenda McKinney, Vice Chairwoman	Pecos-Barstow-Toyah ISD	1992	Bank Vice-President
Linda Gholson, Secretary	Pecos-Barstow-Toyah ISD	1997	Chamber of Commerce Director
Hugh Box	Pecos-Barstow-Toyah ISD	1997	Petroleum Industry
Damon Compton	City of Toyah	2000	Deputy Sheriff Reeves County
Emily Fernández	Pecos-Barstow-Toyah ISD	1999	Retired Educator
Crissy Martínez	Pecos-Barstow-Toyah ISD	2004	Self-employed Electrician
Dudley Montgomery	Pecos-Barstow-Toyah ISD	2004	Retired Banker
Paul Ward	Balmorhea ISD	1993	Farmer
Elfida Zúñiga	Non-voting	1999	Reeves County Tax A/C
Vacant	City of Balmorhea	Vacant	Vacant

Source: Reeves CAD, December 2006.

According to Property Tax Code Sections 6.03 through 6.13, the board has the following primary responsibilities:

• establish the appraisal district's appraisal office, Section 6.05;
• adopt the appraisal district's annual operating budget, Section 6.06;
• approve appraisal contracts, Sections 6.05 and 25.01(b);
• hire a chief appraiser, Section 6.05;
• hire a taxpayer liaison officer (in counties with a population of more than 125,000), Section 6.052;
• appoint appraisal review board members, Section 6.41;
• set general policy on the appraisal district's operations, Section 6.04;
• contract for an annual financial audit, Section 6.063; and
• designate the district depository, Section 6.09.

Appraisal review board (ARB) members are appointed by the board for fair and equitable appraisals and to certify appraisal rolls. Reeves CAD's ARB has attended training required by Property Tax Code Section 5.041.

The board contracts with a vendor for professional appraisal services. The current contract contains dates for deliverables and a list of properties to be appraised as required by IAAO.

The Comptroller's office asked the board to complete a written survey about its activities. Two of the 11 board members responded. The survey includes questions on board policies and procedures; chief appraiser and staff; property appraisals; appraisal review boards; and budgeting and financial management. Board members who responded gave Reeves CAD high marks, responding in the affirmative (strongly agreeing or agreeing) to most questions. One respondent stated the chief appraiser does a "super job" and the CAD was fortunate to have her.

Exhibit 10 presents a summary of professional services contracts.

Exhibit 10
Reeves CAD Professional Service Contracts

Contract	In Writing (Yes or No)	Key Terms and Conditions	2004 Budget	2004 Actual	2005 Budget	2005 Actual	2006 Budget	2006 Actual (uaudited)
Appraisal Software	Yes	Appraisal Software/Hardware Maintenance and Support	$23,120	$24,345	$24,000	$23,716	$25,000	$25,000
GIS system	Yes	Digital Mapping	$ 0	$ 0	$ 0	$21,000	$ 0	$10,500
Professional Appraisal Services Firm	Yes	Mineral, Industrial, Utility, Personal Property Appraisals	$51,900	$51,900	$54,495	$54,495	$54,495	$54,495

Source: Reeves CAD, invoices and contracts 2004, 2005 and 2006.
Note: Additional costs incurred due to optional "per item" printing costs.

FINDING
Reeves CAD board members have not completed open government training as required by law.

The chief appraiser indicated she was not familiar with the law that went into effect Jan. 1, 2006, requiring board members to complete open meetings and public information training. She also indicated she had not received any information from the Texas Attorney General's (AG) office, the state agency responsible for developing open records training materials. According to the chief appraiser's response to the IAAO Self-Evaluation Questionnaire, however, she keeps "the BOD advised of what the CAD must do to stay in compliance with existing and ever-changing laws." The chief appraiser further indicated that some of the board members may have attended the training required by Local Government Code Sections 551.005 and 552.012 through their respective jurisdictions. Five CAD board members are elected officials.

The chief appraiser stated she would poll all board members to determine if any had taken open government training and would also contact the AG's office for training materials. Officials completing training through the AG's office receive certificates of completion. The chief appraiser should maintain copies of each board member's completion certificate as evidence of compliance with the law.

Appraisal district records and information are open to public inspection under the Public Information Act. As the CAD's governing body, the board is responsible for, but has not made sure, that its members and appointees comply with the act. By complying with the open government training requirement, the CAD board will better understand its legal obligations and possible liabilities under the Public Information Act and the Open Meetings Act.

Local Government Code Section 552.012 states that officials who are in office before Jan. 1, 2006, have one year, until Jan. 1, 2007, to complete the required training. Officials who are elected or appointed after Jan. 1, 2006, have 90 days within which to complete the required training. A certificate of completion is to be maintained by the CAD's board of directors and made available for public inspection upon request.

Harrison CAD, for example, registered seven new ARB members for the 2006 training seminar in Waco, Texas. On March 9, 2006, all seven members attended and completed the training class. The chief appraiser submitted class certificates to PTD at the time of the follow-up confirming attendance of the seven board members.

RECOMMENDATION 4
Complete and document open government training for board members as required by law.

After reviewing this finding, the chief appraiser noted that this recommendation is in the process of being completed.

FINDING
The CAD does not have a current depository contract.

According to the chief appraiser, the board decided several years ago to alternate depositories every two years between the county's only two banks. She indicated the board felt this was a fair and equitable alternative for allowing each bank to serve as the CAD's depository. The chief appraiser further indicated that since each bank would be receiving the CAD's banking business every other two years, and because they had a history of submitting equivalent bids, the board stopped soliciting bids and did away with the depository contract process. The last documented depository contract was in 1984. According to Property Tax Code Section 6.09(a), the depository "must be a banking corporation incorporated under the laws of this state or the United States or a Savings & Loan association in this state whose deposits are insured by FSLIC."

Trans-Pecos Bank of Pecos is the CAD's current depository. In January 2005, CAD deposits were moved from West Texas National Bank of Pecos to Trans-Pecos Bank for a two-year term. According to the chief appraiser, Trans-Pecos Bank will serve as the CAD's depository until Dec. 31, 2006. The chief appraiser indicated the two-year rotation between depositories is automatic and does not require board approval.

Property Tax Code Section 6.09(b) states the board shall designate as the district depository the financial institution(s) that offers the best terms. Without soliciting bids, the board precludes competing offers from banks and savings and loan associations that could better promote the CAD's interests.

The chief appraiser indicated that she notifies the board when the depository changes. Taxing units are directed, however, under Property Tax Code Section 6.06(f), that "payments shall be made to a depository designated by the district's board of directors."

Although the last documented depository contract was in 1984, the two board members who completed the written survey believed that a depository contract existed and responded in the affirmative – the board chairwoman strongly agreeing – to the following item:

The district has a depository contract that provides a market rate of interest and a comprehensive list of needed services to the district.

The CAD's funds are insured by the Federal Deposit Insurance Corporation (FDIC) for the maximum allowed under the law, which is currently $100,000. Because the taxing entities make quarterly payments for the cost of operating the district, the CAD's fund balances are sometimes in excess of $100,000. To the extent the CAD's funds exceed the amount insured by the FDIC, its uninsured funds are at risk if the depository bank has not pledged securities to guarantee them. Notes to financial audits indicate collateral held in the CAD's name by West Texas National Bank in 2004, and Trans-Pecos Bank in 2005, in excess of $100,000 on Dec. 31 of the respective years.

The lack of a bidding process can be resolved through a formal bidding process that requires the CAD to open bidding and then designate a depository bank that, when needed, should pledge approved securities to guarantee deposits over the $100,000 threshold. The contract process requires the solicitation of bids in order to negotiate the best interest rates and low administration costs. The lack of open bidding means that the CAD is not evaluating competitive bids for the lowest fees and highest rates for its constituents.

By negotiating a depository agreement, the CAD will solicit competitive bids, protect its deposits and comply with laws and statutes. Property Tax Code Section 6.09 states:

An appraisal district's board of directors shall designate a financial institution as the district's depository for a period of two years and that a depository contract shall remain in effect until a successor has been designated and qualified.

For example, the November 2006 Johnson CAD board minutes reflect that the chief appraiser announced invitations for bids were sent to 15 area banks. Three bids were returned. The sealed bids were opened Nov. 13, 2006, and, based on the chief appraiser's analysis and recommendation, the board director made a motion to award the bid to the best offeror as the CAD depository for 2007-08.

RECOMMENDATION 5
Solicit bids and designate a district depository as required by Property Tax Code Section 6.09.

Upon reviewing the finding, the chief appraiser noted that there are two banks in Reeves County and the CAD alternates its depository between them every two years per the board's request that the CAD bank and shop locally as much as possible. In response to the request for the board's policy manual at the outset of the ASR review, the CAD's board submitted the Comptroller's Appraisal District Director's Manual as its board policy manual. While the Comptroller's Manual is not a substitute for locally developed board policies and procedures, it nevertheless requires a board to select a depository for CAD funds by competitive bidding at least once every two years. The Manual requires the board to choose a federally insured institution with the most favorable terms and conditions for handling the CAD's funds. The CAD did not furnish any of the following items:

• documentation of a board policy for designating its depository;
• a depository contract with the terms and conditions of an agreement with its financial institution; or
• evidence of conducting a competitive bidding process.

FINDING
Reeves CAD's budget lacks information required by the Property Tax Code.

The CAD's budgets contain a listing of each proposed position, but fail to show benefits assigned to each position. Benefits provided by the CAD include a retirement plan and medical and dental insurance. Only the CAD's two full-time employees are eligible for benefits, and the budget formats present benefit by category, not by position.

The budgets do not contain appropriations for capital expenditures; however, in 2005, the CAD spent $21,000 for the purchase of a computerized mapping system. The board approved the $31,500 purchase in April 2004. The mapping purchase contract required $21,000 be paid in 2005 and the balance, $10,500, be paid in 2006. The board did not appropriate funds in either the 2005 or the 2006 budgets for the mapping project outlay. The chief appraiser indicated the mapping system was purchased with excess funds, but an explanation of the purchase is not provided and the 2005 budget was not amended. At the time of this review, the fiscal 2006 budget had not been audited or amended.

Exhibit 11 provides a summary of recent budgets.

Exhibit 11
Reeves CAD Adopted Appraisal Budgets 2005 through 2007

Contract Appraisal Costs

Item	2005 Budget	Percent	2006 Budget	Percent	2007 Budget	Percent	Percentage Increase (Decrease) 2005-2007
Minerals, Oil and Gas	$54,495	20.5%	$54,500	19.0%	$57,225	18.1%	5.0%
DP/Computers/EDS	24,000	9.0%	25,000	8.7%	27,000	8.6%	12.5%
Contract Field Appraiser	0	0.0%	0	0.0%	10,000	3.2%	0.0%
Schedules	1,000	0.4%	1,000	0.4%	1,500	0.5%	50.0%
Total Contract Costs	$79,495	29.9%	$80,500	28.0%	$95,725	30.3%	20.4%

Occupancy Costs

Item	2005 Budget	Percent	2006 Budget	Percent	2007 Budget	Percent	Percentage Increase (Decrease) 2005-2007
Utilities	$4,100	1.5%	$4,300	1.5%	$4,500	1.4%	9.8%
Telephone	2,100	0.8%	2,100	0.7%	2,300	0.7%	9.5%
Janitorial Supplies	700	0.3%	700	0.2%	700	0.2%	0.0%
Maintenance and Repair	1,300	0.5%	1,300	0.5%	1,800	0.6%	38.5%
Building Insurance	1,100	0.4%	1,100	0.4%	1,100	0.4%	0.0%
Alarm Lease	600	0.2%	600	0.2%	600	0.2%	0.0%
Total Occupancy Costs	$9,900	3.7%	$10,100	3.5%	$11,000	3.5%	11.1%

Operating Costs

Item	2005 Budget	Percent	2006 Budget	Percent	2007Budget	Percent	Percentage Increase (Decrease) 2005-2007
Public Official Liability, Bonds, Workers Comp	$2,500	0.9%	$2,700	0.9%	$2,500	0.8%	0.0%
Office Supplies	2,500	0.9%	2,500	0.9%	2,700	0.9%	8.0%
Postage	6,000	2.3%	8,000	2.8%	8,000	2.5%	33.3%
Legal Services	5,000	1.9%	5,000	1.7%	5,000	1.6%	0.0%
Dues, Memberships, Subscriptions	1,460	0.6%	1,500	0.5%	1,500	0.5%	2.7%
Seminars, Schools, Travel	3,380	1.3%	4,400	1.5%	4,400	1.4%	30.2%
Abstract Services	900	0.3%	900	0.3%	900	0.3%	0.0%
Audit Service	2,500	0.9%	2,500	0.9%	2,500	0.8%	0.0%
Outside Services	600	0.2%	600	0.2%	700	0.2%	16.7%
Miscellaneous	400	0.2%	400	0.1%	400	0.1%	0.0%
Equipment Repair and Maintenance	700	0.3%	700	0.2%	700	0.2%	0.0%
Total Operating Costs	$25,940	9.8%	$29,200	10.2%	$29,300	9.3%	13.0%

Vehicle Costs

Item	2005 Budget	Percent	2006 Budget	Percent	2007 Budget	Percent	Percentage Increase (Decrease) 2005-2007
Fuel - Chief Appr.	$1,000	0.4%	$2,000	0.7%	$3,000	1.0%	200.0%
Commuting Allowance/Chief Appr.	400	0.2%	400	0.1%	400	0.1%	0.0%
Maintenance	1,000	0.4%	1,500	0.5%	2,000	0.6%	100.0%
Insurance	900	0.3%	900	0.3%	900	0.3%	0.0%
Fuel: Field Work	800	0.3%	1,500	0.5%	4,250	1.4%	431.3%
Total Vehicle Costs	$4,100	1.5%	$6,300	2.2%	$10,550	3.3%	157.3%

Payroll Costs

Item	2005 Budget	Percent	2006 Budget	Percent	2007Budget	Percent	Percentage Increase (Decrease) 2005-2007
Chief Appraiser	$46,000	17.3%	$49,680	17.3%	$51,170	16.2%	11.2%
Appraiser/Clerk	25,000	9.4%	27,500	9.6%	27,780	8.8%	11.1%
Deed Clerk (p/t)	10,080	3.8%	12,000	4.2%	12,000	3.8%	19.1%
Appraiser	15,000	5.7%	0	0.0%	0	0.0%	-100.0%
Clerk (p/t)	0	0.0%	15,000	5.2%	10,000	3.2%	N.M.*
Field/Farmland (p/t)	1,000	0.4%	5,000	1.7%	6,500	2.1%	550.0%
2 Students (p/t)	0	0.0%	0	0.0%	9,000	2.9%	N.M.*
Janitor	1,800	0.7%	1,800	0.6%	1,800	0.6%	0.0%
Appraisal Review Board	1,300	0.5%	1,800	0.6%	1,800	0.6%	38.5%
Bookkeeper (p/t)	8,208	3.1%	8,640	3.0%	8,640	2.7%	5.3%
Deed Clerk (p/t)	10,080	3.8%	10,080	3.5%	10,000	3.2%	-0.8%
Total Payroll Costs	$118,468	44.6%	$131,500	45.8%	$138,690	43.9%	17.1%

Payroll Taxes and Employe Benefits Costs

Item	2005 Budget	Percent	2006 Budget	Percent	2007 Budget	Percent	Percentage Increase (Decrease) 2005-2007
Social Security	$8,967	3.4%	$9,800	3.4%	$11,000	3.5%	22.7%
TWC	800	0.3%	1,600	0.6%	1,600	0.5%	100.0%
Medical	11,700	4.4%	11,700	4.1%	11,700	3.7%	0.0%
Dental	320	0.1%	320	0.1%	320	0.1%	0.0%
Retirement	6,020	2.3%	6,020	2.1%	6,020	1.9%	0.0%
Total Payroll Taxes and Benefits	$27,807	10.5%	$29,440	10.3%	$30,640	9.7%	10.2%
Total Budget	$265,710	100.0%	$287,040	100.0%	$315,905	100.0%	18.9%
Less Excess Funds and Misc. Income	$0.00	0.0%	$0.00	0.0%	($13,000)	0.0%	N.M.*
Budget Amount Billable to Taxing Entities	$265,710	100.0%	$287,040	100.0%	$302,905	1.0%	14.0%

Source: Reeves CAD fiscal year budgets 2005, 2006 and 2007.
^* Not meaningful.

Although Reeves CAD has not complied with the required formats for listing information relating to benefits and capital expenditures, the CAD has estimated the amount of the budget allocated to each taxing unit, it has provided proper notice and held public hearings as required by the Property Tax Code. The CAD provides public notice of its budget with an announcement in The Pecos Enterprise newspaper.

The budgets summarized in Exhibit 11 do not give sufficient details to comply with the law or for a member of a taxing entity or a member of the public to understand how appraisal district funds are spent. Specifically, one cannot determine the amount and type of benefits associated with each proposed budgeted position or how capital outlays were made. The total payroll taxes and benefits grew 10.19 percent from 2005-07, but with benefits allocated only by category, the Reeves CAD's budget does not show how much each position's benefits grew. With more than 50 percent of the appraisal budget going towards wages and benefits, both taxing units and the public need the detail required by state law to be assured that staff is adequately and equitably compensated.

Property Tax Code Section 6.06(a) requires an appraisal district to 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.

By adopting budgets that include explanations of benefits and capital expenditures, the CAD will make sure that taxing entities and the public are provided the budget detail required by law.

Hidalgo CAD, for example, developed and uses a model budget for appraisal district operations and uses its budget to inform taxing entities and citizens how it will spend money and how much each taxing entity must contribute to the budget.

RECOMMENDATION 6
Expand the budget to comply with Property Tax Code Section 6.06(a).

Upon review of the report draft, the chief appraiser responded to this finding that she will add detail to the budget.

FINDING
Reeves CAD's method of crediting taxing entities for excess funds is arbitrary, not well-documented and results in untimely credits.

The chief appraiser stated that excess funds are credited to taxing entities proportionately based on their budget allocations for the year following the release of a financial audit. In other words, funds are credited in the second year after they occur. For example, the results of the 2002 financial audit were presented to the board in April 2003. The reported $12,000 in excess funds at the end of fiscal 2002 was credited to the taxing entities by reducing their allocations to the 2004 budget. Similarly, the 2005 financial audit identified approximately $13,000 in surplus funds that were not credited to the taxing entities until the 2007 budget allocations.

According to the chief appraiser, the board occasionally designates all or part of a year's excess funds be retained for capital expenditures. She indicated that the board designated $19,000 in excess funds from fiscal 2003 to pay for electronic data storage of old appraisal records (PACRAT). According to the chief appraiser, the board also designated that a $10,158 surplus from fiscal 2004 be used to purchase a computerized mapping system.

The audit report for fiscal 2003 was presented to the board in April 2004 and showed approximately $19,000 in excess funds. Board minutes do not show that any discussion took place or that any action was taken to retain the surplus funds. A review of CAD budgets from 2004-07 does not show where excess funds from 2003 were spent for capital expenditures.

Board minutes and budgets also do not show that the 2004 year surplus was ever appropriated or approved for retention. In April 2004, the board approved the purchase of a computerized mapping system. The initial cost was $31,500, with $21,000 due in 2005 and the balance to be paid in 2006. The April 2004 board minutes do not state that the purchase of the mapping system is to come from excess funds. The 2005 audit report shows the $21,000 expenditure was made from the CAD's operating budget, although the funds had not been appropriated. The 2005 budget was not amended to reflect the $21,000 mapping system purchase because at year's end, according to the chief appraiser, the expenditure did not cause the budget to exceed its originally approved $265,710 total.

When the chief appraiser prepares each year's budget, she includes a summary of what are referred to as "retained earnings," which, by definition, are net profits kept to accumulate in a business after dividends are paid. According to the chief appraiser, these are excess funds that have been approved by the board for designated purposes. The summary shows activity that has occurred over the years within the various restricted accounts. The chief appraiser indicated the "retained earnings summary" serves to let the taxing entities and public know when excess funds are being withheld and how they are being spent. Despite the chief appraiser indicating that, when the taxing entities approve the CAD budget, they are approving the use of excess funds for the purposes shown in the retained earnings summary, the taxing units' approval of the CAD keeping surplus funds must be explicit.

Exhibit 12 shows the retained earnings as presented in the CAD's budgets for the years 2004-07.

Exhibit 12
Reeves CAD Retained Earnings Budget Years 2004 - 2007

Line Item	2004	2005	2006*	2007**
Mapping	$8,000	$7,195	$7,195	$10,500
Micrographics	$10,121	$10,121	$10,121	$7,614
Depreciation	$5,622	$5,152	$5,152	$4,410
Emergencies/Legal	$50,000	$50,000	$50,000	$25,695
Total	$73,743	$72,468	$72,468	$48,219

Source: Reeves CAD fiscal year budgets 2004, 2005, 2006 and 2007.
* A note states the board approved $31,500 for a mapping project in April 2004.
** $23,405 was transferred from Emergencies/Legal to Mapping in 2005 and $21,000 was spent for a mapping system.

Exhibit 12 shows that, in 2004, Reeves CAD had accumulated almost $74,000 in excess funds, but by 2007 had only spent $25,524.

Reeves CAD's practice of designating excess funds for special purchases is arbitrary, confusing and disallowed by the Property Tax Code. The Property Tax Code allows for boards to retain obligated excess funds for special purchases. Prudent boards anticipate future needs and budget accordingly. If a need arises during the year, the funds should be appropriated and the budget amended with the taxing units' approval. Unless the budget clearly indicates that they are excess funds and the voting taxing units approve keeping the funds, not crediting taxing entities with the proportionate share of excess funds could be in violation of the Property Tax Code. It is important that the CAD budget accurately reflects expenditures and financial obligations in order to calculate excess funds and taxing unit credits or refunds.

Property Tax Code Section 6.06(c) provides:

As a result of not planning, Reeves CAD cannot demonstrate that capital outlays are made according to the originally designated timeframe when the resources were obligated, and that crediting surplus funds back to taxing units has taken place in a timely manner.

According to IAAO, Assessment Practices: Self-Evaluation Guide, Chapter 2, appraisal district boards and management engage in three types of planning:

• strategic planning;
• annual work force planning; and
• project planning.

Work force and project plans lay the foundation for budget requests. Because it retains surplus funds for several years, the CAD deprives itself of the opportunity to perform strategic planning and further define its mission, goals and objectives. By performing board-level planning at the beginning of the budget cycle, Reeves CAD will be able to comply with the statutory requirements outlined in Property Tax Code Sections 6.06(c) and 6.06(j).

Property Tax Code Section 6.06 (j)

In response to this finding, the chief appraiser stated she was working on the finding and cited the following example of why the CAD has not credited surplus funds to taxing entities:

• in April '03, BOD approves 2004 Budget;
• in April or May 2003 or June, CPA audits 2002;
• July '03 – chief appraiser certifies 2003 totals, designates 2002 surplus (if any) and prepares 2004 budget allocations;
• 2003 Budget is 1/2 - 3/4 paid by jurisdictions (by that time); and
• to amend their amounts at the last 1/2 of the year presents total confusion. They request & BOD approves of our current system.

The chief appraiser did not submit documentation that the member entities requested their surplus not be credited back to them. Compliance with Property Tax Code Section 6.06(j) supersedes the board's approval of Reeves CAD's current system.

The chief appraiser also gave the following example:

Our budgets show:

• retained earnings;
• restricted: designated surplus;
• mapping;
• micrographic;
• depreciation (new equipment comes out of this);
• & surplus (years and amounts); and
• emergencies, legal.
• "All approved"

The independent auditors' report of Reeves CAD from Dec. 31, 2005, does not refer to "retained earnings," but, instead, uses the term "unrestricted net assets." The report further states on page four "Member [taxing entity] assessments are based on budget needs less available unrestricted funds remaining from prior years."

RECOMMENDATION 7
Begin the budget cycle with board-level planning and comply with the Property Tax Code by proportionately crediting unobligated surplus funds to the taxing units at the end of the fiscal year, or if necessary, amend the budget to obligate funds for specific outlays with taxing units' approval.

FINDING

The board has not developed written procedures for evaluating the chief appraiser.

An undated list of duties of the chief appraiser was submitted in lieu of a written job description. The current chief appraiser developed the list several years ago and references sections of the Property Tax Code and Comptroller Rules relating to chief appraiser and appraisal district responsibilities. The board does not have a procedure for evaluating the chief appraiser's job performance.

The current chief appraiser has been employed by Reeves CAD since 1981 and became chief appraiser in 1984 after the CAD's first chief appraiser resigned.

The board chairwoman indicated she and the board have confidence in the chief appraiser and are satisfied with her job performance. The chairwoman also said that while the board does not formally evaluate the chief appraiser, it does consider job performance when establishing the chief appraiser's salary during the budget process. The chairwoman indicated the board approved merit pay for the chief appraiser in August 2006 because she reappraised part of the county and rebuilt land and productivity tables. The chief appraiser indicated she was shorthanded and did the 2006 field work by herself, putting in long hours and working most weekends.

Two board members responded to the Appraisal District Board of Directors Questionnaire and both agreed that the chief appraiser receives a formal evaluation annually based on a written job description and performance plan. The CAD, however, was unable to provide copies of any documents relating to the chief appraiser's formal evaluation, job description or performance plan. One respondent to the questionnaire stated the chief does a "super job." The chief appraiser stated she does not receive a written evaluation. The lack of a process and procedures for evaluating the chief appraiser diminish Reeves CAD's ability to plan and clarify goals and expectations for its senior leadership.

Chief appraisers are responsible for making sure that competent staff is hired, procedures are documented, appraisals and staff evaluations are performed and for all other functions performed by an appraisal district. Having a qualified chief appraiser is important to effective appraisal district operations. An evaluation process, based on a written job description that objectively assesses performance will allow the board to clarify their expectations and foster strong and consistent leadership for the appraisal district. Measuring those objectives in a formal and predictable process allows the board to ascertain the level of completion by the chief appraiser and, more importantly, to know when the subject's performance went beyond the minimum objectives and merits reward. Merit rewards need to be approved ahead of time as part of an overall compensation plan and included in the budget or a budget amendment, and they may not be made for services already rendered.

Through its policies and procedures, the board determines the appraisal district's goals and operates as the decision-making body on appraisal district operations. It evaluates the effectiveness of the chief appraiser and overall appraisal process. Without an objective system in place to make certain that the board and the chief appraiser are in agreement as to what is expected of the chief appraiser, performance evaluations may be subjective and based on emotion rather than actual performance.

By formally evaluating the chief appraiser on an annual basis using measurable criteria that correspond to the job description, Reeves CAD's board can foster clear communication with the chief appraiser concerning CAD goals. In addition, accurate and up-to-date job descriptions and objective, accurate, up-to-date evaluations are highly recommended by employment lawyers because they can be invaluable evidence if the CAD is ever the subject of a discrimination or other employment-related claim.

Lee CAD, for example, has 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.

After reviewing the draft ASR, the chief appraiser indicated she was working on completing the recommendation and that a job description, and procedures for evaluating the chief appraiser position are forthcoming.

RECOMMENDATION 8
Evaluate the chief appraiser annually using a written process that includes measurable criteria corresponding to a job description.

Resources and Management

In organizing and administering a county appraisal district, the chief appraiser is responsible for hiring, firing and training personnel; ensuring compliance with a wide range of legal requirements; and maintaining policies and procedures for the district's effective operation.

The Reeves CAD staff is profiled in Exhibit 13.

Exhibit 13
Reeves CAD Positions, Certifications,
Years with Reeves CAD and Salaries

Position	BTPE Certification(s)	Years With CAD	Salary
Chief Appraiser	RPA	26	$49,680
Appraiser/Clerk	RPA	10	$27,500
Bookkeeper (part time)	N/A	10	$12.00/hr
Deed/Data Entry Clerk (part time)	N/A	4	$12.00/hr
Clerk/Receptionist (part time)	N/A	6 mos.	$8.00/hr

Source: Reeves CAD, December 2006.

CAD employees who conduct appraisals must be registered professional appraisers (RPAs) or be working towards RPA certification; the latter must be certified within five years of their hire date. Interim certifications include Class II and Class III. In addition, RPAs must recertify every five years to remain registered. All Reeves CAD appraisers are properly registered.

FINDING
The CAD has not developed written job descriptions for staff or criteria for evaluating job performance.

In addition to the chief appraiser, the CAD has one full-time and three part-time staff members. The chief appraiser evaluates the full-time staff annually at the end of each year. The last evaluation was performed in December 2006 using a subjective evaluation form. Because the CAD does not have job descriptions, the evaluation form is not linked to specific duties and responsibilities. It rates the employee's performance in three general areas: dependability, productivity and cooperation. Performance can be ranked on the form in the following terms: needs improvement, satisfactory or good. The evaluation form is signed by the employee and chief appraiser with the employee receiving a copy and the original placed in the employee's personnel file. The chief appraiser indicated that she does not formally evaluate part-time employees. The chief appraiser stated that she feels CAD staff is competent, ethical and conscientious. She believes the staff executes its responsibilities effectively and counsels all employees as needed.

By not formally assigning duties and documenting performance for its employees, the CAD can only measure progress subjectively, leaving no reasonable basis for evaluating, rewarding or disciplining employees based on job duties or performance. The CAD also leaves itself without a valuable source of evidence if discrimination or other violation of employment law is claimed.

An employee's performance of assigned duties and other job-related criteria provides the basis for an annual (at a minimum) employee evaluation. The CAD needs to inform employees of the criteria used to evaluate them. A detailed, accurate and up-to-date job description is essential. The CAD should base evaluation and performance appraisal ratings on an objective evaluation instrument and cumulative performance data gathered by supervisors throughout the year.

IAAO's Property Appraisal and Assessment Administration, Chapter 16, states,

Although employees may improve their skills by their own efforts and the help of peers, managers have organizational responsibility for employee development. They use training, education, counseling, and performance reviews to identify talents and help employees grow.

By performing effective job assessment and enhancement practices like training, education, counseling and performance reviews, Reeves CAD can help employees attain required performance levels and align job duties with CAD goals.

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 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 prior to finalizing the performance evaluation. The evaluation instruments, because of the use of a numeric rating system and the comments section, permit the CAD to measure change over time in the employees' job performance.

RECOMMENDATION 9
Develop accurate, up-to-date written job descriptions and an annual evaluation system and evaluate performance of all CAD staff.

In response to this finding, the chief appraiser said that the recommendation was in place at the present, that she will redo it as soon as possible and that there was only one full-time employee.

Information Processing and Data Collection

Computers have become a necessity for all appraisal districts. Using computers allows the district to amass large amounts of data; perform complex tasks that otherwise would take hundreds of staff hours to perform manually; and more accurately analyze trend data to ensure accurate valuation of similar properties.

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 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, the reduction of costly data errors and better customer service to users, members of the community and the taxing units dependent on the appraisal district's information.

Exhibit 14 presents a list of appraisal and administrative software used in Reeves CAD.

Exhibit 14
Reeves CAD Appraisal and Administrative Software

Name of Software	Standalone or Integrated	When Installed	Last Upgraded	Planned Upgrade
Appraisal Software	Stand-alone	1990	2006	As released
Mapping Software	Stand-alone	2006	2006	As released
Imaging Software	Stand-alone	1996	2006	As released
Firewall Software	Stand-alone	1996	2006	As released
Antivirus Software	Stand-alone	1990	2006	As released
Operating System Software	Stand-alone	2003	2003	As needed

Source: Reeves CAD & P&A, December 2006.

FINDING
Reeves CAD maintains computerized maps that comply with IAAO Standards and Comptroller Rules by outsourcing its mapping functions.

In 2004, the CAD outsourced with a private vendor for computerized mapping services. According to the chief appraiser, outsourcing the mapping function accomplished two goals – reducing the chief appraiser's workload and making sure maps comply with industry standards. The chief appraiser had been responsible for updating maps. Now, she coordinates the exchange of mapping information between the CAD and vendor, which is more efficient.

The initial cost of the parcel base map was $31,500 payable over a two-year period. The CAD furnished the contractor with copies of the CAD's paper maps, and the contractor digitized them into multiple data layers consisting of parcels, abstracts, streets, waterways, jurisdictional boundaries and aerial photography. Using mapping software, the contractor enters metes and bounds of property taken from recorded deeds and plats. Each parcel is given a unique identifying number based on its appraisal record. Parcels can be displayed electronically as a single parcel or as part of a larger group of parcels, such as a subdivision or neighborhood. Computerized maps show parcels in relation to streets, roads, rivers, streams and other topographical areas that can have an influence on property values. The system also identifies taxing entity boundary lines. Aerial photos have been integrated into the computerized mapping system.

To keep the mapping system updated, the CAD sends the contractor field notes from deeds and copies of new plats when parcels need to be split or combined. The contractor makes the changes and uploads the data onto the mapping server housed at the contractor's headquarters. The computerized system is currently a stand-alone application and the CAD connects to the mapping system's server via a dedicated terminal in the CAD office. The CAD pays $3 per parcel for updates.

IAAO's Standard on Digital Cadastral Maps and Parcel Identifiers, Section 3.8, recommends that basic information contained on maps should include parcel boundaries and dimensions, block and lot numbers, jurisdictional boundaries, names and boundaries of subdivisions, location and names of streets, railroads, rivers and parcel identifiers.

COMMENDATION
Reeves CAD improves staff efficiency and complies with IAAO Technical Standards and Comptroller Rules by outsourcing its mapping function.

The chief appraiser indicated the mapping function was paid with mapping line item funds (retained earnings) and balances transferred from emergencies – legal line items.

FINDING
Reeves CAD does not have a disaster recovery plan.

According to the chief appraiser, the CAD does not have a written disaster recovery plan, but the appraisal and mapping systems are backed up each evening by its software vendor. The vendor's information services manager confirmed that the vendor sends a systems notice to each personal computer in Reeves CAD every evening stating that a system backup will occur at 8:00 p.m. and to log off the system. The vendor conducts weekly and annual system backups as well and maintains copies of the backups at its headquarters in Fort Worth and also at its Henderson office. The vendor also provides and maintains the appraisal and mapping software and houses the systems' servers at its headquarters in Fort Worth. The CAD does not own a local server.

A comprehensive disaster recovery plan should address more than just systems restoration. A disaster recovery plan should address:

• immediate response;
• incident control/evaluation;
• notifications;
• environmental restoration; and
• resumption of critical business function.

Disaster recovery plans require that critical staff necessary to carry out the recovery are identified and forewarned. The CAD needs to notify state and local governments, taxpayers, vendors and the public on how and when to contact the CAD in case of an emergency. In the case of loss of CAD facilities, staff need a written plan directing them where and when to report to work. A virtual assembly area is preferable.

Exhibit 15 lists some of the key elements of an effective disaster recovery plan.

Exhibit 15
Key Elements of a Disaster Recovery Plan

Step	Detail
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 for restoring essential operations. Develop a timeframe 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 CAD to operate critical functions in the event of a disaster.Make plans to procure hardware, software and other equipment as necessary to make sure the CAD can resume critical operations as soon as possible. Establish procedures for obtaining off-site backup records. Locate support resources the CAD 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 be taken 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 be taken 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.
Give consideration to other significant issues.	Don't make a plan unnecessarily complicated. Make one individual responsible for maintaining the plan, but have it structured so that others are authorized and prepared to implement if it is needed. Update the plan regularly and whenever system changes occur.

Source: National Center for Education Statistics, –Safeguarding Your Technology.–

The Texas State Library and Archives also has an example of a disaster recovery plan available for use by local governments. It can be accessed on their Web site.

Prudent appraisal districts have a plan to recover 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 tax collection systems.

In response to this finding, the chief appraiser said Reeves CAD was on the county's disaster recovery plan but did not provide documentation of the county's plan or how it would ensure the CAD's continuity of operations in a disaster event. To address the recommendation that the CAD develop and implement a disaster recovery plan, the chief appraiser indicated that the county would give the CAD a copy of its plan. In response to the recommendation to determine minimum space and equipment for restoring operations, the chief appraiser said insurance would rebuild everything.

Though the county's disaster recovery plan can be a source of helpful information on disaster recovery planning, the county's essential services to the citizenry are different from the appraisal district's essential functions provided to taxpayers. One of the requirements for appraisal districts to ensure a viable continuity of operations capability is to properly identify their own essential functions instead of having another governmental entity identify them for the CAD. The CAD is not obligated to implement this recommendation; it is meant to suggest improvements to operational effectiveness and risk assessment.

RECOMMENDATION 10
Develop, implement and test a plan for disaster recovery.

Assessment Administration

Appraisal districts have three primary responsibilities: property discovery, property listing and property appraisal. Although much attention is placed on the appraisal process itself, discovery and listing are equally important.

Another important appraisal district responsibility is the administration of exemptions. An exemption excludes all or part of a property's value from taxation. Texas law grants a number of total and partial exemptions. Between January and May, the chief appraiser decides which taxpayers and properties will receive exemptions.

The chief appraiser is legally responsible for preparing the appraisal roll within a statutory timeframe. Property Tax Code Section 26.01 requires certification of each taxing unit's appraisal rolls by July 25. The Reeves CAD 2004 appraisal roll was certified on July 22, 2004. The 2005 appraisal roll was certified on July 21, 2005 and the 2006 appraisal roll was certified on July 21, 2006.

Property Tax Code Section 5.07(a) requires the Comptroller to prescribe the contents of all forms necessary for the administration of the property tax system in the state. Property Tax Code Section 11.43(f) requires the Comptroller to prescribe exemption applications, though not by rule. The forms must be uniform and the Comptroller may approve substitute forms in certain circumstances. A review of Reeves CAD's forms and applications showed them to be in compliance with state laws.

Appraisal districts must also file various reports with the taxing units and the state and comply with many other laws, rules and regulations. Property Tax Code Section 5.07 also requires the Comptroller to prescribe a uniform record system to be used in submitting data for the school and appraisal district annual studies required by law. Reeves CAD successfully participates in the Comptroller's Electronic Appraisal Roll Submission (EARS).

FINDING
Reeves CAD does not maintain written policies and procedures for administering exemptions.

The chief appraiser stated the CAD follows procedures set forth in the Property Tax Code for administering exemptions. The CAD's appraiser/clerk reviews applications for homestead exemptions, over-65 exemptions, disabled persons and disabled veterans. Proof of residence, age and disability must accompany each application, if applicable. The chief appraiser conducts on-site inspections if residency is in question. The CAD was unable to provide locally written procedures or guidelines for administering exemptions. In response to this review the appraiser/clerk prepared a hand-written list of activities she performs. Included on the list was checking the obituaries in the local newspaper and sending surviving spouses notification of the need to file new homestead exemptions, if applicable.

The chief appraiser stated she reviews all applications for absolute and partial exemptions and makes the determination to grant or deny exemptions based on requirements found in the Property Tax Code.

By developing local policies and procedures for administering exemptions, the CAD will reinforce the Property Tax Code, assist in treating all taxpayers fairly and ensure that applications are processed uniformly and objectively. Procedures detailing how exemption applications are handled from receipt of the application to final disposition, and staff responsibilities should be included in the CAD's operations manual.

Tom Green CAD, for example, has developed written policies and procedures for administering exemptions, including steps for validating all applications.

The chief appraiser indicated she was in the process of compiling documentation for this recommendation.

RECOMMENDATION 11
Document procedures for administering exemptions.

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