The Comptroller's office conducts appraisal standards reviews when a school district is eligible for the grace period. By conducting ASRs, the Comptroller's office helps school districts understand the reason for the invalid finding, so that they can work with their appraisal district to correct problems and determine accurate taxable values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy and compliance with state law and appraisal standards.
An ASR examines and evaluates appraisal practices including planning, procedures and methodology and the application of appraisal standards. The Texas Property Tax Code and Comptroller rules are the major criteria used to measure appraisal district performance.
The Texas Property Tax Code dictates certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practice (USPAP), specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. The International Association of Assessing Officer's (IAAO's) Standards on Assessment Practice also is used as the professional and industry standard.
The two principal focuses of the ASR are to determine why the local value was deemed invalid and to recommend improvements in appraisal practices. The review evaluates five functional areas of operations: governance and management; generally accepted appraisal practices; resources and management; information processing and data collection; and assessment administration.
Upon completion of the review process, the Comptroller issues a report of findings that includes commendations for exemplary appraisal practices and recommendations for improvements. The appraisal district is required by law to comply with the recommendations within one year of the release of the report.
By law, if the appraisal district fails to comply with the report's recommendations in the report and the Comptroller finds that the appraisal district board of directors failed to take remedial action within a year from the issuance of the report, the Comptroller must notify the judge of each district court in the county for which the appraisal district is established. The district judge then must appoint a board of conservators consisting of five members to implement the recommendations. The board of conservators must exercise supervision and control over the appraisal district's operations until each school district is determined to have appropriate local value in the annual PVS. The appraisal district must bear the costs related to its supervision and control by the board of conservators.
While the Comptroller's review of Titus CAD found a number of commendable practices implemented by dedicated and hard-working appraisal district employees, Titus CAD also faces a number of challenges, including:
- improving appraisal accuracy;
- documenting policies and practices; and
- improving accounting and budgeting practices.
Key Findings and Recommendations
Improve Appraisal Accuracy
- Complete, adopt and use a detailed written biennial reappraisal plan. Titus CAD has no reappraisal plan. This lack of a comprehensive reappraisal plan may have contributed to an invalid finding in the 2004 PVS for Mount Pleasant ISD and Harts Bluff ISD in three property categories, and the preliminary 2005 PVS results suggest that Daingerfield-Lonestar ISD, Mount Pleasant and Chapel Hill ISD are at unacceptable levels in the same three categories. If these school districts continue to receive invalid findings, they will lose state funds in the school funding formula. A detailed reappraisal plan should provide for the reappraisal of all real property in each district at least once every three years, and offer a blueprint for performing the work and a training tool that encourages consistency in staff appraisals.
- Develop complete appraisal manuals for use in commercial and rural residential property appraisals. Titus CAD lacks detailed, documented procedures for commercial and rural real property appraisals. The CAD may have avoided some of the invalid findings in 2004 and 2005 if it had made detailed appraisal procedures for all property types available to its staff. Updated appraisal manuals help appraisers be uniform and consistent in appraising property.
- Prepare and analyze ratio studies frequently to identify areas of concern and to take corrective actions to mitigate issues of value. Titus CAD has not conducted any ratio studies in the past several years. The absence of ratio studies contributed to its falling out of the acceptable ratio range in commercial properties in Mount Pleasant ISD and rural land in Harts Bluff ISD. Without ratio studies, appraisal districts cannot pinpoint what is contributing to insufficient market values in the PVS. By preparing and analyzing ratio studies, the CAD could plan appraisal maintenance programs that take the relationship between appraised or assessed values and market values into account, to ensure uniformity in appraisals and assessments.
Document Policies and Practices
- Develop a comprehensive board policy manual outlining board and chief appraiser roles, responsibilities and duties to guide the CAD in managing its operations effectively. The Titus CAD board lacks well-defined policies outlining the roles and responsibilities of the board and the chief appraiser. As a result, several examples were found in which roles and responsibilities between the board and chief appraiser became indistinct. A policy manual would help the board make important decisions carefully and in advance, rather than in response to crises.
- Develop a well-defined job description and a written evaluation tool for the chief appraiser and use the tool to annually evaluate the chief appraiser. The board does not evaluate the chief appraiser's job performance in writing annually, and has not developed a well-defined job description or evaluation tool for the position, with specific goals and performance expectations. By not doing so, the board is missing an opportunity to provide feedback regarding performance and identify any necessary corrective actions needed to meet the board's goals and objectives. Similarly, the chief appraiser is missing the opportunity to communicate specific concerns and work jointly with the board to address them. A well-written job description linked to the evaluation tool would provide a framework for measuring the chief appraiser's performance accurately and objectively.
- Create and implement an annual process for updating personnel policies that includes a review of the personnel manual against current employment law. Titus CAD's personnel policies manual is not up to date and does not address employee conflict-of-interest statements or cover topics such as the Americans with Disabilities Act or sexual harassment. Without an updated manual, the CAD may not have the information and procedures to comply fully with state and federal laws and consistent communication of policies with staff members. An up-to-date personnel manual should communicate the CAD's policies and explain employee rights and remedies; this would increase compliance and reduce misunderstandings.
Improve Accounting and Budgeting Practices
- Analyze variances for funds that have not been obligated to improve budget accuracy and comply with Tax Code, Section 6.06(j), requirements for excess funds. Because Titus CAD does not accurately estimate budget expenditures, it cannot properly credit excess funds to the taxing units or designate these funds for specified use. A review of the CAD's audited financial statements for 2005 showed it had accumulated a fund balance of $640,303 in violation of the Tax Code Section 6.06(j), which requires the CAD to credit the excess funds to its taxing entities. Inaccurate budgeting negatively affects taxing units by creating larger expenditure requirements than necessary that the units must incorporate into their annual budgets. Accurate budgeting would ensure that the CAD budget realistically reflects expenditures and financial obligations.
- Adhere to Tax Code requirements by complying with the budget calendar and expanding the budget detail to include staff benefit costs by position and a detailed listing of capital expenditures. Titus CAD has not complied with the statutory requirements for adopting a budget. The CAD budget does not allocate benefit costs by individual positions and does not list individually proposed capital expenditures, nor did it meet dates for submission of the budget requests to taxing entities or adoption of the budget in 2002, 2004, 2005 and 2006 as required by Tax Code Section 6.06(a). Without detailed budgets, the public, board and taxing units will not have sufficient information to understand how money is spent and to decide whether the proposed expenditures are adequate. Statutory budget milestones give the board, taxing units and the public access to proposed budgets in sufficient time to gather input and discuss pertinent issues before adopting the budget.
Titus CAD has some commendable practices that might prove useful for other county appraisal districts.
- Titus CAD developed a comprehensive plan for appraising personal property and designated one employee for this task resulting in acceptable market value in this category. Titus CAD has a system in place for personal property appraisal, which contributes to the achievement of consistent and acceptable market values in the PVS for this category. Historically, Titus CAD has achieved acceptable levels in the personal property category of the PVS because of the presence of a full-time appraiser, whose sole responsibility has been inspecting, analyzing renditions and performing appraisals of all personal property within the appraisal district. This position contributes to the achievement of consistent and acceptable market values in the PVS for this category.