Applying Appraisal Principles in Practice

Applying Appraisal Principles in Practice Felicia Nelson, AIC USDA:APHIS:VS

APHIS Appraisal Process • Subject to Federal Regulations and VS Memorandums • CFRs on the web (Title 9, Parts 50-56) • http://www.access.gpo.gov/nara/cfr/cfr-table-search.html#page1 • VS Memos on the Web (No. 534.1) • http://inside.aphis.usda.gov/vs/downloads/memos/534_1.pdf • Includes guidelines for private appraisers • Updated guidelines for private appraisers as well as poultry values • http://inside.aphis.usda.gov/cei

APHIS Appraisal Process • According to USDA-OGC the appraisal process is NOT a series of negotiations between USDA and the owner, nor is any contract implied during discussion with owner • However, best not to use the word “offer” which can imply a contract • Better to use the word “proposed” or “proposal” and any values discussed must be approved by higher level officials • Make clear up front to the owner no contract is implied • Have contract when VS Form 1-23 is signed by all parties • A fair offer based upon relevant information is what is desired

APHIS Appraisal Process • The owner will claim above average quality animals, thus deserve above average compensation • Owners need to document above average quality • Let the owner tell his story, especially in whole herd/flock depopulations • Identify top quality within the herd & owner’s valuation • Identify average quality within the herd & owner’s valuation • Identify bottom quality within the herd & owner’s valuation

APHIS Appraisal Process • Work with the owner to document quality / value • Good cop / bad cop routine • You’re the good guy gathering information to convince the evil “bean counter” in Fort Collins that the owner has high valued animals • Includes both production and financial records • Receipts of sales and purchases • It is a “red flag” when owners either claim they don’t have or are unwilling to share their records and yet claim high value animals

APHIS Appraisal Process • Locate relevant markets for quality/type of animals, may not be the local auction • Owner can help with this • Analyze market prices of comparable (similar quality) animals to determine appraisal value • It is very important to document how you arrived at your values in order to pass any OIG audits

APHIS Indemnity Process • Once value has been determined, calculate indemnity • Indemnity = appraisal value x indemnity rate (%) • Sometimes there is a maximum payment limit

Example of Appraisal

APHIS Indemnity Process • Present appraisal value & indemnity amount to owner on VS Form 1-23 • http://inside.aphis.usda.gov/vs/downloads/vs-form1-23.pdf • Use correct version: Apr 2002 • If indemnity rate is less than 100%, show the full appraisal value, not the indemnity value in the appraisal columns. Otherwise owner may feel his animals were not properly appraised. • Once signed, send to Regional Office • Regional Epidemiologist can help with this (more later)

If the Owner Refuses to Sign • Remind the owner that USDA assumes healthy animals and thus there is a high probability he will receive more than what he could earn in trying to sell diseased or exposed animals at a market • Can the owner document and justify additional value? • If there appears to be a reasonable justification / additional documentation, then USDA can reappraise the animals • Otherwise formal appeal to VS Deputy Administrator, which is final • Remind the owner that current federal law prohibits APHIS being sued on its valuation

Appraiser-to-OwnerExperience • Owner's Records • Owner's Memory • Owner's Acceptance

Your experience determining dairy values with limited cow data • Available data • Lactation • Date bred or due • Average daily milk produced • Normal days dried off • Extrapolated data • Days carried calf • Days in milk • Annual milk production

Applying Appraisal Principles in Practice