DEATH SERVICES

State Regulation of 

the Death Care 

Industry Varies and 

Officials Have Mixed 

Views on Need for 

Further Federal 

Involvement

Report to Congressional Requesters

December 2011

GAO-12-65

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-65, a report to 

congressional requesters. 

December 2011 

DEATH SERVICES 

State Regulation of the Death Care Industry Varies 

and Officials Have Mixed Views on Need for Further 

Federal Involvement

 

Why GAO Did This Study

Media reports have identified instances 

of desecration of graves and human 

remains at cemeteries, and in one 

instance, reported that bodies were 

removed from graves and the sites 

resold. Allegations have also surfaced 

about the mismanagement of pre-need 

plans that are designed to provide 

consumers the opportunity to fund 

funeral and cemetery arrangements 

before they are needed. The FTC’s

Funeral Rule requires that, among 

other things, funeral providers give 

consumers lists that disclose the cost 

of funeral goods and services before 

they enter into funeral transactions. 

Proposed legislation introduced in 

March 2011 would increase the federal 

government’s role in regulating the 

industry by, among other things, 

requiring that the FTC regulate aspects 

of cemetery operations. GAO was 

asked to review the regulation of the 

death care industry. This report 

discusses (1) how federal and state 

governments regulate the industry and 

how regulation has changed since 

2003 and (2) state regulators’ views on 

the need for additional regulation. 

GAO reviewed FTC’s Funeral Rule and 

interviewed officials representing the 

FTC and national industry and 

consumer associations; surveyed state 

officials to gather data on state 

regulation of the death care industry; 

and, where possible, compared the 

results of the 2011 surveys with those 

of similar surveys GAO conducted in 

2003. The response rate for our 2011 

surveys ranged from 78 to 84 percent. 

GAO also reviewed laws and 

regulations. GAO is not making any 

recommendations in this report. 

What GAO Found

The extent to which the federal and state governments regulate the death care 

industry—funeral homes, cemeteries, crematories, pre-need funeral plans, and 

third party sales of funeral goods—varies, as does the extent to which regulation 

has changed since GAO last reported on the regulation of the death care industry

in 2003. The Federal Trade Commission (FTC) continues to annually conduct 

undercover shopping at various funeral homes to test compliance with the 

Funeral Rule. Of the over 2,400 funeral homes that the FTC shopped since 1996, 

the FTC reported an overall compliance rate of about 85 percent. With respect to 

state regulation, consistent with GAO’s findings in 2003, the way in which states 

regulate the industry varies across industry segments and states. Also, the extent 

to which state regulators reported that they had specific rules or regulations for 

each industry segment in both 2003 and 2011 varied. Most consistent across 

states in both years was reporting that there were specific rules or regulations for 

funeral homes (94 and 95 percent in 2003 and 2011, respectively). In contrast, 

77 percent of state regulators of cemeteries reported that their states had specific 

rules or regulations for cemeteries in 2003, and 88 percent reported this in 2011.

Certain state regulators also reported that their states made various statutory or 

regulatory changes since 2003, primarily to clarify legislation or regulation or to 

enhance consumer protections, and that they believe these changes 

strengthened their regulatory program to varying degrees. State regulators 

reported that these changes came about for a variety of reasons, including 

accounts of desecration of human remains or proposals from state agencies and 

industry groups. 

State regulators’ views on the need for additional federal and state regulation of 

the industry varied, as shown in the figure below. 

State Regulators’ Views on the Need for the Federal and State Governments to Take a More 

Active Role in Regulating the Death Care Industry, as Reported in 2011 

The FTC provided technical comments, which GAO incorporated where 

appropriate.

View GAO-12-65 or key components.

For more information, contact William O. 

Jenkins, Jr. at (202) 512-8777 or 

jenkinswo@gao.gov. To view the esupplement online, click on GAO-12-91SP. 
Page i GAO-12-65 Death Services 

Letter 1 

Background 4

Federal and State Regulation of the Death Care Industry and the 

Extent to Which It Has Changed Vary 9

Views on Increasing Federal and State Regulation Varied 36

Agency Comments and Third-Party Views 42

Appendix I Survey Methodology 43

Appendix II Pre-Need Plans, Consumer Education and Protection, and Allegations

of Fraud and Mismanagement 48

Pre-Need Contracts for Funeral and Cemetery Arrangements 48

Complete Data on Consumer Funds Invested in Pre-Need 

Contracts Are Not Available 51

Federal and State Consumer Guides Help Educate and Protect 

Consumers 52

Allegations of Fraud and Mismanagement of Pre-Need Funds 55

Appendix III Colorado’s Regulation of the Death Care Industry 61

Regulatory Structure 61

Requirements and Enforcement Mechanisms 61

Legislative Changes and Rationale 66

Appendix IV Illinois’s Regulation of the Death Care Industry 68

Regulatory Structure 68

Requirements and Enforcement Mechanisms 68

Legislative Changes and Rationale 77

Appendix V Oregon’s Regulation of the Death Care Industry 80

Regulatory Structure 80

Requirements and Enforcement Mechanisms 80

Legislative Changes and Rationale 87

Appendix VI Tennessee’s Regulation of the Death Care Industry 89

Regulatory Structure 89

Requirements and Enforcement Mechanisms 89

Legislative Changes and Rationale 95

Contents
Page ii GAO-12-65 Death Services 

Appendix VII Wisconsin’s Regulation of the Death Care Industry 96

Regulatory Structure 96

Requirements and Enforcement Mechanisms 96

Legislative Changes and Rationale 101

Appendix VIII GAO Contact and Staff Acknowledgments 102

Tables

Table 1: Number of Funeral Homes Shopped by the FTC, Number 

of Funeral Homes Found to Be Compliant or 

Noncompliant, and Associated Compliance Rates, 2004-

2010 10

Table 2: Trusting Requirements: Required Percentage of Total 

Value of Purchased Pre-Need Goods and Services That 

Must be Placed in Trust for Five Types of Goods and 

Services, by Number of States in Each Category, as 

Reported in 2011 25

Table 3: Number of State Regulators Who Reported Different 

Refund Requirements for Cancellations of Pre-Need 

Contracts, as Reported in 2011 26

Table 4: State Regulators’ Views on Factors That Prompted Change 

in State Law or Regulation, as Reported in 2011 34

Table 5: Comparison of State Survey Respondents, 2003 and 2011 46

Table 6: General Definitions of Pre-Need Contract Provisions 50

Figures

Figure 1: Number of State Regulators Who Responded to Our 2011 

Surveys and Number Who Reported That Their State Has 

Specific Rules or Regulations 13

Figure 2: Extent to Which State Regulators Reported That Their 

State Had Rules or Regulations Specific to Each Industry 

Segment, 2003 and 2011 29

Figure 3: Extent to Which State Regulators Reported That Their 

State Had Licensing Requirements by Industry Segment, 

2003 and 2011 31

Figure 4: Extent to Which State Regulators Reported in 2011 That 

Statutory and Regulatory Changes Strengthened Their 

Regulatory Programs 33
Page iii GAO-12-65 Death Services 

Figure 5: State Regulators’ Views on the Need for the Federal 

Government to Take a More Active Role in Regulating the 

Death Care Industry, as Reported in 2011 37

Figure 6: State Regulators’ Views on the Need for Their State 

Government to Take a More Active Role in Regulating the 

Death Care Industry, as Reported in 2011 41

Abbreviations

FTC Federal Trade Commission 

View GAO-12- 91SP key component

DEATH SERVICES: 2011 Surveys of State Regulators (GAO-12-91SP), 

an E-supplement to GA0-12-65

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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necessary if you wish to reproduce this material separately.
Page 1 GAO-12-65 Death Services 

United States Government Accountability Office 

Washington, DC 20548

December 15, 2011

The Honorable Herb Kohl

Chairman

Special Committee on Aging

United States Senate

The Honorable G.K. Butterfield

Ranking Member

Subcommittee on Commerce, Manufacturing and Trade

Committee on Energy and Commerce

House of Representatives

The Honorable Bobby L. Rush

House of Representatives

In recent years, the media has reported on instances of desecration of 

graves and human remains at cemeteries and, in at least one instance, 

reported that at Burr Oak Cemetery in Illinois, bodies were removed from 

graves and the sites were resold. Concerns have also arisen over the 

sale and management of pre-need plans—plans that involve the 

prepayment and prearrangement of funeral and cemetery goods and 

services to be provided at the time of death—because of allegations of 

the mishandling of funds.1 Aside from the Federal Trade Commission’s 

(FTC) Funeral Rule—a rule that affords consumers certain rights when 

making funeral arrangements, such as requiring funeral providers to 

provide price lists to consumers—the federal government generally does 

not regulate the marketing practices of the death care industry, which 

includes businesses that provide funeral and cemetery goods and 

services.2

 

1 For more information on pre-need plans and reported incidents regarding these plans, 

see app. II.

Recent concerns have inspired a discussion regarding whether 

the federal government should take a greater role in regulating various 

segments of the death care industry. For example, federal legislation 

introduced in March 2011—the Bereaved Consumer’s Bill of Rights Act of 

2 See 16 C.F.R. pt. 453 (codifying the FTC’s Trade Regulation Rule on Funeral Industry 

Practices, commonly referred to as the “Funeral Rule”). 

 
 

Page 2 GAO-12-65 Death Services 

2011—would, if enacted, expand the FTC’s role in protecting consumers 

in arranging death care transactions, including services at cemeteries.3

The death care industry encompasses (1) funeral homes, (2) cemeteries, 

(3) crematories, (4) pre-need plans, and (5) third party sales of funeral 

goods.4 Our prior work on the death care industry found that most 

regulation of the industry occurred at the state level and that states varied 

in their approaches to regulating the death care industry. We reported in 

both 1999 and 2003 that it is not possible to determine the extent of the 

problems in the death care industry since accurate data on the number 

and types of consumer complaints made against the industry were not 

available.5

To address our objectives, we analyzed the FTC’s Funeral Rule, as well 

as proposed federal legislation relevant to the death care industry—the 

Bereaved Consumer’s Bill of Rights Act. We also analyzed FTC 

documents to gain a better understanding of the Funeral Rule, such as 

reports on funeral providers’ compliance with the Funeral Rule and 

consumer and industry guides. We also contacted the National 

Association of Attorneys General to obtain perspectives on states’ 

coordination with the FTC. Further, we reviewed national association 

documents relevant to the management and regulation of the industry, 

such as model guidelines and consumer guides. In addition, we 

interviewed officials from the FTC and six national associations to obtain 

their views on the level of state and federal regulation, how it has 

However, in light of recent concerns over instances of 

wrongdoing and allegations of mismanagement within the industry, you 

asked us to update our previous work on state and federal regulation. 

This report follows up on our previous work and discusses (1) how the 

federal and state governments regulate the death care industry, and how 

regulation has changed since 2003, and (2) to what extent regulators 

believe that more regulation is needed.

 

3 See H.R. 900, 112th Cong. (1st Sess. 2011). A substantially similar bill had been 

introduced in September 2009. See H.R. 3655, 111th Cong. (2d Sess. 2009).

4 Third party sellers of funeral goods includes retailers of caskets, urns, monuments, that 

are not affiliated with a funeral home or cemetery.

5 GAO, Funeral-Related Industries: Complaints and State Laws Vary, and FTC Could 

Better Manage the Funeral Rule, GAO/GGD-99-156 (Washington, D.C.: Sept. 23, 1999), 

and Death Care Industry: Regulation Varies across States and by Industry Segment, 

GAO-03-757 (Washington, D.C.: Aug. 25, 2003).
 

Page 3 GAO-12-65 Death Services 

changed, and what more, if anything, is needed.6 We also surveyed state 

regulators from all 50 states that have responsibility for regulating or 

oversight of each of the five death care industry segments to gather 

information on each state’s regulatory efforts and their views on the 

current level of regulation.7 To do this, we gathered information from a 

variety of industry sources to identify state regulators for each the five 

industry segments in all 50 states, contacted each state regulator to 

confirm their information, and then distributed a total of 250 surveys—one 

survey for each of the five industry segments in all 50 states. Our 

surveys, which were administered from April 2011 through June 2011, 

were designed to garner responses to many of the same questions we 

asked in our 2003 survey of state regulators to enable us to determine 

whether there had been changes in states’ approach to regulating the 

various segments of the industry.8 We received a response rate of 78 to 

84 percent for each of our surveys.9

 

6 We interviewed officials from the following associations: the (1) Cremation Association of 

North America; (2) Funeral Consumers Alliance; (3) International Cemetery, Cremation, 

and Funeral Association; (4) International Conference of Funeral Service Examining 

Boards; (5) North American Death Care Regulators Association; and (6) National Funeral 

Directors Association. We also contacted the National Association of Insurance 

Commissioners to obtain information on pre-need insurance plans, but an official from the 

association stated that it had limited information on the issue because pre-need is not 

considered a separate line of business from other insurance programs. We selected 

associations based on referrals from FTC staff and our preliminary discussions with 

industry officials. 

Finally, we collected more specific 

information from state regulatory officials and state industry and 

consumer association representatives in five states—Colorado, Illinois, 

Oregon, Tennessee, and Wisconsin. We selected these states based on 

the results of our preliminary work, including whether legislative or 

regulatory changes had been made or proposed and whether any major 

incidents or issues related to the death care industry had occurred in this 

7 We did not include the District of Columbia in our 2003 survey and, as a result, did not 

include the District of Columbia in our 2011 survey either since we planned to compare 

survey responses from both years.

8 Our surveys primarily asked state regulators to provide current information on the 

regulation of the industry. However, some questions asked regulators to provide data 

since 2003, some asked questions for data since 2008, and other questions asked about 

specific data for each year in 2008, 2009, and 2010.

9 All but two states—Michigan and New Hampshire—responded to at least one of our five 

surveys. We did not independently verify the accuracy or completeness of the responses 

to the surveys. This report does not contain all the results from the surveys. The surveys 

and a more complete tabulation of the results can be viewed at GAO-12-91SP. 
 

Page 4 GAO-12-65 Death Services 

state in recent years. For each of these states, we reviewed relevant 

documents, such as death care related statutes and regulations, task 

force and audit reports, and position papers to better understand (1) how 

their state regulates the industry; (2) what, if any, concerns exist; and 

(3) how, if at all, requirements have changed. In addition, within these 

states, we interviewed officials from a total of eight regulatory entities, 

seven industry-related state associations, two consumer-oriented state 

associations, and an attorney general’s office.10

We conducted this performance audit from October 2010 to December 

2011 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. Additional details on our 

survey methodology are contained in appendix I.

Because we used 

nonprobability sampling to select case study states, the information we 

obtained from these five states cannot be generalized to all states. 

However, the case studies provided us with additional information on how 

states regulate the industry.

Funeral homes, cemeteries, crematories, pre-need plans, and third party 

sales of funeral goods are all various segments of the death care 

industry, and the federal and state governments both have a role in 

regulating the industry. In 1999 and 2003, we reported on various aspects 

of federal and state regulation of the death care industry.11

 

10 In each of these states, we selected the regulatory entities that had regulatory 

responsibilities over the industry. We selected associations based on referrals from state 

regulators and national associations. 

Among other 

things, we stated that with respect to the federal government’s role in 

regulating the death care industry, aside from the FTC’s Funeral Rule, 

there is no other regulation that specifically addresses the marketing 

practices of the death care industry at the federal level; most regulatory 

11 GAO/GGD-99-156 and GAO-03-757. 

Background

Regulatory Roles
 

Page 5 GAO-12-65 Death Services 

responsibilities regarding the industry are handled at the state level.12 The 

FTC’s Funeral Rule, which became fully effective in April 1984, provides, 

among other things, that consumers are entitled to price information 

about funeral goods and services before they purchase them, which 

would enable the consumer to use the information for comparative 

shopping if he or she wishes. For example, the Rule declares it an unfair 

or deceptive act or practice for funeral providers—that is, any business 

that sells or offers to sell both funeral goods and funeral services to the 

public—to (1) fail to furnish accurate itemized price information to funeral 

consumers; (2) misrepresent federal, state, local, or other requirements 

related to the provision of funeral goods and services; (3) require 

consumers to purchase items they do not want to buy; and (4) embalm 

deceased human remains for a fee without authorization.13

Beginning in October 1994, the FTC initiated a test-shopping enforcement 

approach, called sweeps, targeting funeral homes in a particular region, 

state, or city. Under this approach, FTC staff in its regional offices, state 

investigators (such as those from offices of state attorneys general), or 

other volunteers (such as members of AARP—formerly known as the 

American Association of Retired Persons)

Thus, among 

other things, compliance with the Funeral Rule requires that funeral 

providers furnish consumers with various price lists. For example, at the 

beginning of the discussion about arrangements for funeral goods and 

services, funeral providers must provide the consumer an itemized 

general price list. Funeral providers must also provide the consumer a 

casket price list before showing casket options. FTC staff opinions have 

also clarified various aspects of the Funeral Rule. For example, FTC staff 

opinions have provided that if a consumer purchases a casket from a 

third party vendor, a funeral provider cannot require a consumer’s 

presence when the casket is delivered to the funeral home or charge a 

fee for certain services, such as storage of third-party caskets delivered a 

few days before they are needed.

14

 

12

pose as consumers of funeral 

goods and services—thereby simulating a funeral transaction—to 

determine if the funeral home is in compliance with the Rule. In 1996, the 

GAO-03-757. 

13 See 16 C.F.R. §§ 453.2 (price disclosures); 453.3 (misrepresentations); 453.4 (required 

purchase of funeral goods or funeral services; and 453.5 (services provided without prior 

approval).

14 AARP is a nonprofit, nonpartisan membership organization for people age 50 and over. 
 

Page 6 GAO-12-65 Death Services 

FTC implemented the Funeral Rule Offenders Program as a nonlitigation 

alternative to civil penalty actions for Rule violations.15

According to FTC staff, funeral homes are the segment of the death care 

industry most affected by the Funeral Rule, but federal legislation has 

been introduced that if enacted, could expand the scope of federal 

regulation. Since the Funeral Rule only applies to businesses providing 

both funeral goods and services, it tends to apply to funeral homes and 

not other segments of the death care industry that may provide either only 

merchandise or only services.

Under this 

program, violators of the Funeral Rule are offered the option to attend the 

Funeral Rule Offenders Program. Those who choose to enroll in the 

program must agree to make voluntary payments to the U.S. Treasury 

equal to 0.8 percent of their average annual gross sales over the prior 3 

years and participate in training designed to teach them how to comply 

with the Rule.

16 Under the proposed Bereaved 

Consumer’s Bill of Rights Act of 2011, other segments of the death care 

industry, including cemeteries, would fall under federal regulation, and 

would further authorize both the FTC and state-level enforcement of the 

rules prescribed in accordance with the bill.17

 

15 See 15 U.S.C. § 57b (authorizing FTC to commence a civil action against any person, 

partnership, or corporation for violating any rule prohibiting unfair or deceptive acts or 

practices in a U.S. district court or any court of competent jurisdiction of a state).

Specifically, the bill would 

require the FTC to prescribe rules that, among other things, (1) require 

cemeteries to disclose their written rules and regulations in a timely 

manner; (2) require clear and conspicuous disclosure of all fees and costs 

to be incurred in the future or at the time funeral goods or services are 

provided, and for any penalties that may be incurred for cancellation of 

prepaid contracts or transfer of them to other providers; and (3) require 

cemeteries to retain all extant records. The Bereaved Consumer’s Bill of 

16 A 2009 FTC opinion (Opinion 09-1), explained that while the Funeral Rule generally 

does not apply to cemeteries, there may be some circumstances in which commercial 

cemeteries are funeral providers and are obliged to comply with the Rule. For example, if 

a commercial cemetery provides funeral services and offers or sells funeral goods, it 

would be obligated to comply with the Rule. A 2008 FTC opinion (Opinion 08-1) provided 

that a crematory must comply with the Funeral Rule if it offers and sells cremation 

services and any funeral goods, such as caskets, alternative containers, or urns. 

According to a 2004 FTC guide, the Funeral Rule also applies to pre-need and at-need 

funeral arrangements. Sellers of pre-need contracts that act on behalf of a funeral home, 

but do not provide funeral goods and service, must comply with the Rule.

17 See H.R. 900, 112th Cong. (1st Sess. 2011).
 

Page 7 GAO-12-65 Death Services 

Rights Act was referred to the House Committee on Energy and 

Commerce, Subcommittee on Commerce, Manufacturing and Trade, in 

March 2011, and no further action has been taken as of November 2011.

We also reported in 2003 that states vary in their approach to regulating 

the various segments of the death care industry, and that not all 

segments are subject to regulation in each state.18 A 2009 FTC consumer 

guide provides an example of this, stating that laws of individual states 

govern the prepayment of funeral goods and services but that protections 

vary widely from state to state and some states offer little or no effective 

protection. In addition, some states have incorporated the Funeral Rule or 

aspects of the Funeral Rule into their statutes.

While accurate national data are not readily available on how much 

consumers spend each year on death care transactions, in 2010, AARP 

reported that funeral expenses are one of the most expensive events in a 

person’s life. The FTC reported in 2009 that a traditional funeral costs 

about $6,000, but that many funerals can cost well over $10,000. 

According to the National Center for Health Statistics, there were over 2.4 

million deaths registered in the United States in 2007—the most recent 

year for which final data were available.19 The Casket & Funeral Supply 

Association of America estimated that about 73 percent of the 

approximately 2.4 million deaths in 2007 resulted in a traditional casket 

burial. The National Funeral Directors Association reported that the 

average adult funeral cost was $6,560 in 2009.20

Although the Casket & Funeral Supply Association of America reported 

that the majority of people selected burial as the means of final 

disposition in 2007, trends in other methods of disposition are 

Multiplying this figure by 

1,752,000 (73 percent of the approximately 2.4 million deaths in 2009) 

provides an estimate of over $11.5 billion spent on funeral costs in the 

United States in 2009.

 

18 GAO-03-757. 

19 National Center for Health Statistics preliminary data show 2,473,018 deaths for 2008 

and 2,436,682 deaths for 2009. 

20 This average excludes cemetery costs, including the cost of an outer burial container 

(such as a vault or a grave liner) that is required by many cemeteries, monument or 

marker costs, and miscellaneous cash-advance items, such as flowers and obituaries. 

Consumer Costs and 

Industry Trends
 

Page 8 GAO-12-65 Death Services 

increasing—such as cremations or burials that that have minimal 

environmental impact. According to the Cremation Association of North 

America, the number and percentage of cremations is increasing, and the 

association projects that the national average could be over 55 percent by 

2025. Several state and industry officials stated that the increase in 

cremations can partially be attributed to the downturn in the economy and 

increased social acceptance of cremation. With the rise in cremations, 

officials from the Cremation Association of North America stated that the 

weakened economy has contributed to crematories hiring cheap, 

untrained labor, which may create accidents or problems and that 

regulation of this segment of the industry has not kept pace with the 

increase in cremations. In addition, the use of environmentally friendly or 

“green” services or burials has received increasing media coverage, and 

some states have begun to discuss this issue and have proposed or 

passed legislation specifically addressing environmentally friendly or 

green burials. Examples of environmentally friendly burials can include 

the use of caskets or urns that are nontoxic and biodegradable and 

burials at “green” cemeteries in which the landscape is left in a natural 

state.

Finally, although media reports provide examples of incidents that have 

occurred in the industry, it is not possible to determine how prevalent 

these issues are across the death care industry. Our 1999 and 2003 

reports on the death care industry found that comprehensive information 

on consumer complaints was not available because, among other 

reasons, (1) consumers can complain to a variety of entities and these 

entities may compile complaint data in various manners and (2) no single 

entity collects and compiles all complaint data.21 Further, we reported that 

not all consumers who experience problems may file a complaint. For 

example, in our 1999 report, we stated that officials from organizations at 

all levels told us that factors, such as the emotional component of death, 

may inhibit a consumer from making a complaint. The challenges in using 

consumer complaints to determine the extent of the problems that may 

occur in the death care industry remain the same today.22

 

21 GAO/GGD-99-156 and GAO-03-757. 

22 According to FTC staff, the agency has a Consumer Sentinel law enforcement 

database designed to be a central location for all consumer complaints, including 

complaints concerning the death care industry. The FTC staff said they are trying to get 

more agencies to use the database, but currently not everyone is using it.
 

Page 9 GAO-12-65 Death Services 

The Funeral Rule has not changed since it went into effect in1994, and 

according to FTC staff, implementation of the Funeral Rule has generally 

remained the same since we last reported on the Rule in 2003. The FTC 

conducts undercover shopping through enforcement sweeps of funeral 

homes to ensure compliance with the Funeral Rule and to maintain 

consumer confidence.23 Since the Funeral Rule Offenders Program was 

introduced in 1996, the FTC has shopped over 2,400 funeral homes of 

the approximately 20,000 funeral homes that FTC staff stated are in the 

United States.

24 The FTC reported an overall compliance rate of about 85 

percent for all the sweeps conducted since 1996. Since 2004 through 

2010, the yearly compliance rate fluctuated from 72 to 91 percent, as 

shown in table 1. FTC staff stated that they have no reliable basis to 

determine why the compliance rate is lower in recent years.

 

23 The sweeps involve staff from the FTC’s regional offices, who pose as consumers and 

visit funeral homes in a particular urban or rural geographic area to determine whether 

they are in compliance with the Funeral Rule.

24 Some funeral homes have been shopped more than once.

Federal and State 

Regulation of the 

Death Care Industry 

and the Extent to 

Which It Has Changed 

Vary 

Federal Regulatory 

Structure Largely 

Unchanged
 

Page 10 GAO-12-65 Death Services 

Table 1: Number of Funeral Homes Shopped by the FTC, Number of Funeral Homes Found to Be Compliant or Noncompliant,

and Associated Compliance Rates, 2004-2010

Year

Number of funeral homes 

sweeps were conducted at

Number of funeral

homes in compliance

Number of funeral

homes not in compliance Compliance rate

2004 72 62 10 86%

2005 71 63 8 89%

2006 117 106 11 91%

2007 174 148 26 85%

2008 104 78 26 75%

2009 175 126 49 72%

2010 126 91 35 72%

Source: GAO analysis of Federal Trade Commission data.

When the Funeral Rule was first implemented, FTC staff stated that the 

typical violations they identified were related to not providing, or not 

providing in a timely manner, the general price list.25 However, staff stated 

that this is much less of an issue today and that they now tend to uncover 

more issues with funeral homes not providing a casket price list before a 

consumer is shown caskets.26 FTC staff stated that in 2007, they directed

staff in their regional offices to conduct sweeps of funeral homes that had 

previously participated in the Funeral Rule Offenders Program. Of the 34 

funeral homes that have since been revisited, FTC staff stated that most 

were in compliance with the Rule, but they are addressing compliance 

issues at a few of the funeral homes.27

 

25 The FTC does not maintain aggregate, national data on violations identified during 

sweeps. These data are maintained at the regional offices.

In 2011, the Department of 

Justice, at the request of the FTC, charged two funeral homes with 

violating the Funeral Rule. The FTC is seeking civil penalties against 

these funeral homes because they failed to provide consumers with price 

lists during an FTC sweep. According to FTC staff, these are the second 

and third cases (and the first since 1999) to be litigated since the Funeral 

Rule Offenders Program was implemented.

26 In addition, FTC staff stated that they received complaints from third party sellers about 

funeral homes not accepting caskets. However, when FTC staff pursued the leads, they 

were unable to obtain sufficient evidence to support a law enforcement action.

27 As of September 2011, information on these cases has not been released publicly 

because the cases are still open.
 

Page 11 GAO-12-65 Death Services 

As we also reported in 1999,28

In our 1999 report, we recommended that the FTC review possible 

approaches to determine the most cost-effective means for the FTC to 

conduct sweeps that would result in both a more convincing sample of 

funeral providers and implement a plan for carrying out such an approach 

in a systematic manner.

FTC staff stated in September 2011 that 

they have coordinated with the states’ attorney general’s offices to 

conduct sweeps of funeral homes for Funeral Rule compliance and that 

this coordination has been positive. However, the FTC also noted that in 

some states, the attorney general’s offices do not have the resources to 

assist with the sweeps. Of the three states’ attorney general’s offices we 

contacted that had helped the FTC conduct sweeps in their respective 

states, all generally reported that the coordination efforts were positive. 

Further, officials from two offices stated that their involvement in the 

sweeps required minimal resources from their offices, but an official from 

another office stated that their office’s coordination resulted in about 75 

hours worth of staff time and about $2,000 in travel expenses. According 

to one attorney general’s office, the last funeral sweep it conducted with 

the FTC occurred around the year 2000, and officials stated that it was 

beneficial in that it identified violations, highlighted the importance of 

complying with the Funeral Rule for providers, and helped to educate 

consumers. According to an official from another state’s attorney 

general’s office, their office coordinated with the FTC on sweeps of 

funeral homes twice—once in 1995 and once in 2010—and noted that 

these efforts were valuable because they helped identify issues that may 

not have been brought to their attention otherwise. However, an official 

from this office also noted that funeral home sweeps could be done more 

systematically—possibly selecting funeral homes based on a sampling 

method—and more frequently.

29

 

28

In August 2003, FTC staff told us that that they 

constantly evaluate the methods by which the Funeral Rule may be 

enforced and reported that they make decisions about their approach 

yearly as part of their strategic plan. In September 2011, FTC staff stated 

that they continue to discuss Funeral Rule sweeps as part of their 

strategic planning, and as such, hold conference calls with each region to 

discuss where they will conduct sweeps. Furthermore, FTC staff stated 

that their goal is to conduct sweeps at a variety of funeral homes in 

GAO/GGD-99-156. 

29 GAO/GGD-99-156. 
 

Page 12 GAO-12-65 Death Services 

various locations. However, according to these staff, the number of 

sweeps they conduct is also driven by resources, including the availability 

of staff to conduct the sweeps and funds so that staff can travel to various 

locations. They explained that funeral home sweeps can be resource 

intensive because staff who pose as shoppers have to travel to the area 

of the sweep to physically visit funeral homes, gather the information and 

record it shortly after the visit is conducted, reshop the funeral home if 

violations are uncovered, and then take any necessary actions to secure 

compliance.

States vary in their approach to regulating the death care industry across 

states and across industry segments. Overall, most of the state regulators 

we surveyed reported having rules or regulations specific to funeral 

homes, cemeteries, crematories, and pre-need sellers; however, more 

than two-thirds of the state regulators who responded to our 2011 survey 

reported that they did not have rules or regulations specific to third party 

sellers of funeral goods, as shown in figure 1.

State Regulation of the 

Industry Varies by State 

and Industry Segment
 

Page 13 GAO-12-65 Death Services 

Figure 1: Number of State Regulators Who Responded to Our 2011 Surveys and 

Number Who Reported That Their State Has Specific Rules or Regulations

Further, as highlighted by state regulators from our case study states, 

what it means to regulate can vary from state to state. For example, in 

Colorado, funeral homes are required to register with the state but funeral 

directors and embalmers are not, while in Tennessee, funeral homes, 

funeral directors, and embalmers are all required to be licensed, and 

funeral homes are to be inspected once a year. The following sections 

provide more specific information on the regulation of each segment of 

the death care industry—(1) funeral homes, (2) cemeteries, 

(3) crematories, (4) pre-need funeral plans, and (5) third party sellers of 

funeral goods. Much of the information below was obtained through our 

surveys of state regulators, and although we obtained about an 81 

percent average response rate on our five surveys, not every state 

regulator provided a response to each question. As a result, the total 

number of respondents for each question may vary.
 

Page 14 GAO-12-65 Death Services 

See appendixes III through VII for more detailed information on the five 

case study states’ regulation of each of the industry segments.30

GAO-12-91SP

To view 

the surveys and the responding state regulators’ answers to the survey 

questions, go to . 

As stated above, the majority of state regulators reported having specific 

rules or regulations that address all funeral homes that operate in their 

states. Specifically, of the 40 state regulators who responded to our 2011 

survey on the regulation of funeral homes, 38 reported having specific 

rules or regulations.31

In addition, the majority of state regulators also reported that funeral 

homes, funeral directors, and embalmers are required to be licensed in 

their respective states.

Arizona was the only state that reported that some 

funeral homes were exempt from regulation, specifically, funeral homes 

on tribal grounds. State regulators who provided data on the number of 

funeral homes in their states reported having between 18 and 1,874 

funeral homes operating in their states in 2011.

32

 

30 For each of these appendixes, we group information for each of the industry segments 

into several categories, such as licensing requirements and inspection and audit 

requirements. Each state may use different terminology and we explain this in the 

appendix text, but for consistency, the categories are generally the same across each of 

these appendixes.

For example, of the state regulators who 

responded to these issues on our survey, 37 of the 38 reported that 

funeral homes are required to be licensed. State regulators reported that 

licenses were required to be renewed at various frequencies, if at all, 

although most reported that licenses had to be renewed every at least 

once every 1 or 2 years. In four of our five case study states, funeral 

directors and embalmers are required to obtain a license to operate and 

such applicants are generally required to (1) pay a fee, (2) pass an exam, 

(3) obtain some level of education, and (4) have some experience—which 

may be as an intern or an apprentice. Licensees in each of these four 

states are required to renew their licenses once every 2 years.

31 One of the state regulators who reported not having specific rules or regulations 

addressing funeral homes did, however, report that the state has specific rules and 

regulations addressing funeral directors and embalmers.

32 In some states, such as Illinois, Indiana, and Pennsylvania, state regulators reported 

that one license covers both funeral directors and embalmers.

Funeral Homes, Funeral 

Directors, and Embalmers 
 

Page 15 GAO-12-65 Death Services 

With respect to inspections, 35 of the 38 state regulators who responded 

to this issue on our survey reported that the inspection of funeral homes 

was required, although the frequency of these required inspections 

varied. In our case study states, for example, Oregon requires that funeral 

homes be inspected every 2 years and Tennessee requires funeral 

homes to be inspected once a year.33 In Colorado and Illinois, state 

regulators stated that funeral homes are not inspected on a regular basis, 

although regulators have the authority to do so. Further, the 32 state 

regulators who responded to our question regarding the number of 

inspectors they have reported having between one and nine inspectors. 

However, only 1 of the 26 state regulators who provided information on 

the percentage of time their inspectors spend inspecting funeral homes 

reported that the state’s inspectors spend 100 percent of their time 

inspecting funeral homes.34

As a result of inspections or other enforcement mechanisms, state 

regulators reported identifying a wide variety of violations and taking 

various types of enforcement actions against funeral homes, funeral 

directors, and embalmers. Of the 38 state regulators who responded to 

this issue on our survey, 33 reported tracking violations of funeral homes, 

funeral directors, and embalmers. Twenty-two state regulators provided 

data on the approximate number of violations identified since 2008, with 

14 reporting that there were fewer than 40 violations in their respective 

states.35

 

33 In Tennessee, for example, inspectors use a standard report form in conducting 

inspections and inspect for cleanliness, proper documentation of licensing records, and 

Funeral Rule compliance, among other things. In addition, inspectors will compare the 

funeral homes’ price lists to invoices for a select number of sales to ensure that funeral 

homes are charging according to their price lists.

Of the 26 state regulators who provided narrative responses to 

our survey about the most frequent violations they identified, the most 

frequent were violations related to licensing, such as unlicensed or 

unregistered practice, with 10 state regulators reporting this as being a 

common violation. Other violations reported by state regulators included 

34 State regulators who responded to this issue generally reported that inspectors also 

spend some of their time inspecting other facilities or conducting other work. Other 

facilities that inspectors were reported to inspect include crematories, cemeteries, and 

food establishments. Other work that state regulators reported that inspectors conducted 

included licensing and administrative work.

35 Of the remaining state regulators who provided responses, 4 reported that there were 

between 100 and 200 violations, 3 reported between 300 and 500 violations, and 1 

reported over 1,800 violations since 2008.
 

Page 16 GAO-12-65 Death Services 

those related to unprofessional conduct, FTC Funeral Rule violations, 

reporting deficiencies, and service issues.36

States also varied in the number of consumer complaints they received 

regarding funeral homes, funeral directors, and embalmers. Of the 39 

state regulators who responded to this issue on our survey, 33 reported 

that their state tracks data on consumer complaints. For the years 2008, 

2009, and 2010, state regulators reported that their state received 

between 0 and 300 complaints, approximately, each year—although the 

vast majority reported that their state received fewer than 100 complaints 

each year.

Finally, 34 of 38 state 

regulators who responded to our question about taking enforcement 

actions against funeral homes, funeral directors, or embalmers reported 

that they have taken some actions since 2008, including actions ranging 

from notices of non-compliance and letters of reprimand to suspension of 

licenses and civil or criminal prosecutions.

37

Most state regulators reported having specific rules or regulations that 

address some cemeteries that operate in their states. Specifically, of the 

42 state regulators who responded to our 2011 survey on the regulation 

of cemeteries, 37 reported having rules or regulations specific to 

cemeteries. Further, of the 36 state regulators who responded to the 

question regarding whether all cemeteries are subject to state regulation, 

29 reported that some cemeteries were exempt from regulation in their 

state. Examples of cemeteries that were exempt from regulation in some 

states include religious, municipal, family, private, and public cemeteries. 

Common complaints reported in our case study states 

included unlicensed practice, overcharging, and customer service 

concerns. Further, conducting investigations of legitimate consumer 

complaints was most frequently reported by state regulators who 

responded to our survey as being the consumer protection that was most 

effective in protecting consumers.

 

36 States do not necessarily categorize violations in the same manner, and not all states 

track violations in the same manner.

37 Specifically, of the state regulators who provided data on the number of complaints the 

state received each year, 20 of 24 reported fewer than 100 complaints in 2008, 19 of 25 

reported fewer than 100 complaints in 2009, and 21 of 26 reported fewer than 100 

complaints in 2010. Not all the state regulators who reported tracking data on consumer 

complaints provided the total number of complaints for each year. In addition, consumers 

may have submitted complaints to an agency other than the state regulatory agency that 

responded to our survey.

Cemeteries and Cemetery 

Operators
 

Page 17 GAO-12-65 Death Services 

The number of cemeteries operating in the states is not always known, as 

18 of the 37 state regulators who responded to this issue reported that 

they did not maintain data on the number of cemeteries that operate in 

their states. Five state regulators provided data on the number of 

cemeteries that operated in their states—reporting having as few as 124 

to as many as 3,600 cemeteries operating in their states.

In addition, many state regulators reported that some cemeteries and 

cemetery operators are required to be licensed in their respective states. 

Specifically, of the state regulators who responded to these issues on our 

survey,

• 22 of the 37 reported that some but not all cemeteries are required to 

be licensed, 10 reported that no license is required, 4 reported that all 

cemeteries are required to be licensed, and 1 checked “No 

response”38

• 20 of the 37 reported that cemetery operators are not required to be 

licensed, 11 reported that some but not all cemetery operators are 

required to be licensed, 1 reported that all are required to be licensed, 

and 5 checked “No response.”

and

39

State regulators reported that licenses were required to be renewed at 

various frequencies, if at all. In our case study states, for example, 

Tennessee requires cemeteries to renew their license once a year, while 

Oregon requires cemeteries to renew their licenses once every 2 years.

With respect to inspection, 21 of the 37 state regulators who responded to 

this issue on our survey reported that inspections of cemeteries were not 

required, and those that did require them reported that the frequency of 

the required inspections varied. In our case study states, for example, 

Oregon requires cemeteries to be inspected once every 2 years, while in 

Wisconsin state regulators have the authority to conduct inspections, but 

according to Wisconsin regulators, these are not done on a regular basis. 

 

38 For example, some state regulators who responded that some but not all cemeteries 

were required to be licensed noted that some cemeteries, such as religious, public, family, 

and municipal cemeteries, were exempt from their state’s licensing requirements.

39 In those states in which cemetery operators were not required to be licensed, state 

regulators provided additional clarification on their state’s requirements. For example, two 

state regulators reported that although cemetery operators did not need to be licensed, 

they were required to be registered.
 

Page 18 GAO-12-65 Death Services 

The 12 state regulators who responded to our survey question regarding 

the number of inspectors available to inspect cemeteries reported having 

between zero and nine inspectors. However, 1 of the 11 state regulators 

who provided information on what percentage of their time their 

inspectors spend inspecting cemeteries reported that their inspectors 

spend 100 percent of their time inspecting cemeteries.40

As a result of inspections or other enforcement mechanisms, state 

regulators reported identifying a variety of violations and taking various 

types of enforcement actions against cemeteries and cemetery operators. 

Of the 34 state regulators who responded to this issue on our survey, 18 

reported tracking violations of cemeteries and cemetery operators, and 11 

reported on the approximate number of violations identified since 2008—

which ranged from 0 to 122 in their respective states.41 Of the 16 state 

regulators who provided narrative responses to our survey about the most 

frequent violations they identify, violations included those related to 

(1) record keeping, (2) maintenance, (3) unprofessional conduct, and 

(4) licensing.42

States also reported receiving some consumer complaints regarding 

cemeteries and cemetery operators. Of the 41 state regulators who 

Finally, 22 of 36 state regulators who responded to our 

question about taking enforcement actions against cemeteries or 

cemetery operators reported that they have taken some actions since 

2008, including actions ranging from notices of non-compliance to 

monetary fines and civil or criminal prosecutions. However, as pointed out 

by one of our case study state regulators, although they receive 

complaints about cemetery maintenance issues, these issues don’t 

normally develop into an actual case that could result in an enforcement 

action.

 

40 State regulators who responded to this issue generally reported that inspectors also 

spend some of their time inspecting other facilities or conducting other work. Other 

facilities that inspectors were reported to inspect include funeral homes, crematories, and 

companies that sell pre-need plans. Other work that state regulators reported that 

inspectors conducted included licensing and administrative work.

41 Specifically, 3 state regulators reported that there were no violations, 4 reported 

between 1 and 15 violations, 3 reported between 50 and 100 violations, and 1 reported 

122 violations since 2008. Not all the state regulators who reported tracking data on 

violations provided the total number of violations since 2008.

42 States do not necessarily categorize violations in the same manner and not all states 

track violations in the same manner.
 

Page 19 GAO-12-65 Death Services 

responded to this issue on our survey, 25 state regulators reported that 

their state tracks data on consumer complaints. For the years 2008, 2009, 

and 2010, state regulators reported that their state received between 0 

and 113 complaints, approximately, in each respective year regarding 

cemeteries or cemetery operators, with the majority reporting that their 

state received 40 complaints or fewer each year.43

Most state regulators reported having rules or regulations that specifically 

address crematories that operate in their states. Specifically, of the 39 

state regulators who responded to our 2011 survey on the regulation of 

crematories, 35 reported having specific rules or regulations. Four of 

those that reported having rules or regulations also reported that some 

crematories were exempt from regulation. The types of crematories that 

were reported to be exempt included pet crematories and a university 

medical center crematory. State regulators who provided data on the 

number of crematories reported having between 7 and 208 crematories 

operating in their states in 2011.

Common complaints 

reported in our case study states included maintenance issues and 

incorrect monument placements. Conducting investigations of legitimate 

consumer complaints was most frequently reported by state regulators as 

being the consumer protection that was most effective in protecting 

consumers.

In addition, most state regulators reported that crematories are required 

to be licensed in their respective states but varied on whether a license 

was required for crematory operators. Of the 35 state regulators who 

responded to this issue on the survey,

• 28 reported that all crematories are required to be licensed, 4 reported 

that some but not all are required to be licensed, and 3 reported that 

no license is required44

 

43 Specifically, of the state regulators who provided data on the number of complaints the 

state received each year, 13 of 17 reported fewer than 40 complaints in 2008, 14 of 19 

reported fewer than 40 complaints in 2009 and 2010. Not all the state regulators who 

reported tracking data on consumer complaints provided the total number of complaints 

for each year. In addition, consumers may have submitted complaints to an agency other 

than the state regulatory agency that responded to our survey.

and

44 For example, some state regulators who responded that some but not all crematories 

were required to be licensed noted that some crematories, such as pet crematories, were 

exempt from their state’s licensing requirements.

Crematories and Crematory 

Operators
 

Page 20 GAO-12-65 Death Services 

• 16 reported that all crematory operators are required to be licensed, 4 

reported that some but not all are required to be licensed, and 15 

reported that no license was required.45

State regulators reported that licenses were required to be renewed at 

various frequencies, if at all, although the majority reported that licenses 

had to be renewed at least once every 1 or 2 years. In our case study 

states, for example, Wisconsin requires crematory operators to renew 

their registration once every 2 years, while Illinois has no requirement for 

crematory operators to renew their licenses.

With respect to inspections, most state regulators reported that 

inspections of crematories were required. Specifically, 28 of the 34 state 

regulators who responded to this issue in our survey reported that the 

inspection of crematories is required, and although the frequency of the 

required inspections varied, about half required crematories to be 

inspected at least once a year. Of our case study states, for example, 

Tennessee requires crematories to be inspected once a year, Oregon 

requires them to be inspected every 2 years, and according to state 

regulators in Wisconsin, inspections are done if there is a complaint. The 

27 state regulators who responded to our question regarding the number 

of inspectors they have to inspect crematories reported having between 

one and nine inspectors. However, 20 of the 22 state regulators who 

provided information on what percentage of time their inspectors spend 

inspecting crematories reported that their inspectors spend less than 25 

percent of their time inspecting crematories.46

As a result of inspections or other enforcement mechanisms, states 

reported identifying a variety of violations and taking various types of 

enforcement actions against crematories and crematory operators. Of the 

 

45 In those states in which crematory operators were not required to be licensed, state 

regulators provided additional clarification on their state’s requirements. For example, 

several stated that the crematory operator did not need to be licensed but that a licensed 

funeral director was required to be in charge of the crematory. State regulators from 

another state reported that although crematory operators did not need to be licensed, they 

were required to be registered.

46 State regulators who responded to this issue generally reported that inspectors also 

spend some of their time inspecting other facilities or conducting other work. Other 

facilities that inspectors were reported to inspect include funeral homes and cemeteries. 

Other work that state regulators reported that inspectors conducted included investigating 

consumer complaints and administrative work.
 

Page 21 GAO-12-65 Death Services 

35 state regulators who responded to this issue on our survey, 31 

reported tracking violations of crematories and crematory operators. 

Twenty-three state regulators provided data on the approximate number 

of violations identified since 2008—10 reported no violations, 9 reported 1 

to 3 violations, and the remaining 4 reported 15 to 43 violations.47

Most states also track consumer complaints and reported receiving fewer 

than 10 consumer complaints a year. Specifically, 32 of the 39 state 

regulators who responded to this issue on our survey reported that their 

state tracked consumer complaints. For the years 2008, 2009, and 2010, 

state regulators reported that their state received between 0 and 7 

complaints, approximately, in each respective year regarding crematories 

or crematory operators, with 0 being the most frequent response for each 

year.

Of the 

16 state regulators who provided narrative responses to our survey about 

the most frequent violations they identify, violations included those related 

to (1) record keeping, (2) the handling of bodies or human remains, 

(3) obtaining the proper authorization to cremate or issues with following 

the wishes of the person with control over final disposition, and 

(4) licensing, such as unlicensed or unregistered practice. Finally, 12 of 

34 state regulators who responded to our question about taking 

enforcement actions against crematories or crematory operators reported 

that they have taken some actions since 2008, including actions ranging 

from notices of non-compliance to monetary fines and civil or criminal 

prosecutions.

48

 

47 Not all the state regulators who reported tracking data on violations provided the total 

number of violations since 2008.

Specifically, in 2008 and 2009, more than 60 percent of the state 

regulators reported that their state received no complaints and in 2010 

more than 45 percent reported that their state received no complaints. 

Complaints reported in our case study states included procedural 

concerns, such as cremating without proper identification tags and not 

obtaining proper authorization before cremation, and environmental 

concerns. Conducting investigations of legitimate consumer complaints 

was most frequently reported by state regulators as being the consumer 

protection that was most effective in protecting consumers.

48 Not all the state regulators who reported tracking data on consumer complaints 

provided the total number of complaints for each year. In addition, consumers may have 

submitted complaints to an agency other than the state regulatory agency that responded 

to our survey.
 

Page 22 GAO-12-65 Death Services 

Most state regulators reported having rules or regulations that specifically 

address sales of pre-need plans—plans that involve the prearrangement

and prepurchase of funeral and cemetery goods and services.49

Specifically, of the 40 state regulators who responded to our survey on 

the regulation of the sales of pre-need plans, 38 reported having specific 

rules or regulations. Seven of the 37 state regulators who responded to 

the question regarding whether all pre-need sales are subject to state 

regulation reported that some pre-need sales were exempt from 

regulation in their state.50

Most state regulators reported that sellers of pre-need plans—which 

includes companies and their sales agents—are required to be licensed 

in their respective states. Specifically, of the 38 state regulators who 

responded to this issue on our survey, 27 reported that all sellers of preneed plans are required to be licensed, 8 reported that some but not all 

had to be licensed, and 2 reported that no license was required.

State regulators reported that the types of preneed sales that are exempt from regulation in their state included third 

party sales and sales of cemetery plots. State regulators who provided 

data on the number of sellers of pre-need plans—which can include 

companies and their sales agents—in their state reported having up to 

1,167 companies that sold pre-need plans and up to 1,697 individual 

sales agents operating in their states in 2011.

51

 

49 For our survey, we noted that the term "pre-need funeral plans" refers to the purchase 

of funeral goods and services to be provided at a later date when death occurs. It does not 

refer to the purchase of a final expense insurance policy from which the beneficiary would 

claim and receive payment on the policy and be responsible for paying any costs for 

funeral goods and services on behalf of the deceased. Although funds from pre-need 

contracts tend to be placed in insurance policies or trust funds, state regulators from our 

case study states generally reported that they have seen more insurance-funded pre-need 

contracts compared to trust-funded ones. For more information on pre-need plans, see 

app. II.

State 

regulators reported that licenses were required to be renewed at various 

frequencies, if at all, although the majority reported that licenses had to 

be renewed at least once a year. In our case study states, for example, 

Colorado requires pre-need sellers to renew their licenses every year, 

Tennessee and Wisconsin require them to renew every 2 years, and

50 Specifically, 34 state regulators reported that their state’s rules and regulations cover 

sales of pre-need plans made at funeral homes, 27 reported that their state’s rules and 

regulations cover sales of pre-need plans made at cemeteries, and 18 reported that their 

state’s rules and regulations cover sales of pre-need plans made by third party sellers.

51 One state regulator who responded to this question checked “No response.”

Sales of Pre-Need Plans
 

Page 23 GAO-12-65 Death Services 

there is no requirement in Illinois for pre-need sellers to renew their 

licenses. In addition, 17 state regulators reported that sellers of pre-need 

plans are required to be associated with a funeral home or cemetery and 

8 reported that a seller must be a licensed funeral director. 

In our case study states, various methods were used to measure preneed sellers’ compliance with state laws and regulations. For example, 

Colorado, Illinois, Oregon, Tennessee, and Wisconsin require pre-need 

sellers to submit annual reports that state regulators review for various 

things, such as if funds were properly trusted and abnormal fluctuation in 

funds. Tennessee also examines pre-need sellers every year, and 

Colorado also examines the records of pre-need sellers every 5 years. 

Twenty-five of the 38 state regulators who responded to our question 

about violations reported tracking violations regarding the sales of preneed plans. Fifteen state regulators provided data on the approximate 

number of violations identified since 2008—5 reported no violations, 4 

reported between 1 to 5 violations, 4 reported between 50 and 134 

violations, 1 reported 379 violations, and another reported 1,578 

violations during this time.52 Of the 17 state regulators who provided 

narrative responses to our survey about the most frequent violations they 

identify, violations related to improper trusting or misappropriating funds 

were frequently cited by state regulators as being a common violation. 

Other violations mentioned included record keeping issues, unlicensed 

practice, and contract issues.53

 

52 Not all the state regulators who reported tracking data on violations provided the total 

number of violations since 2008.

Finally, 24 of 38 state regulators who 

responded to our question about taking enforcement actions against 

sellers of pre-need plans reported that they have taken some actions 

since 2008, including actions ranging from notices of non-compliance to 

revocation or suspension of licenses and civil or criminal prosecutions. 

According to a state regulator in one of our case study states, although 

the state has revoked about four to five licenses in the last 10 years with 

the assistance of the attorney general’s office, the state regulatory agency 

is very limited in the disciplinary actions it is authorized to take and the 

process is very slow and costly.

53 States do not necessarily categorize violations in the same manner and not all states 

track violations in the same manner.
 

Page 24 GAO-12-65 Death Services 

In addition, some state regulators reported having other consumer 

protections in their states with respect to sales of pre-need plans—

including consumer protection accounts, trusting requirements, and 

cancellation and transferability of contracts—although these also varied 

by state. The following briefly discusses each.

Consumer protection account. A consumer protection account collects 

and maintains funds for the benefit and protection of consumers of preneed plans. Of the 40 state regulators who responded to this issue on our 

survey, 10 reported that their state has a consumer protection fund that 

would protect consumers of pre-need plans who suffered financial losses 

because of issues such as fraud, default, or insolvency. Three of our five 

case study states reported maintaining consumer protection accounts, 

although the purpose of these accounts varied. For example, in Illinois 

and Oregon, funds from these accounts are used for consumer 

restitution, while in Tennessee, funds from this account are used to 

support general operation and expenses of the state regulator, as well as 

any receivership actions initiated. The 9 state regulators who provided 

data on the maximum amount of funds available in their state’s consumer 

protection account since 2003 reported having between $30,000 and 

$1.5 million. 

Trusting requirements. Trusting requirements refer to the amounts of 

funds from pre-need sales that are required to be deposited into a trust 

account. Whereas each state’s laws or regulations will dictate applicable 

trusting requirements, in general, the seller of pre-need goods or services 

must deposit a specified percentage of a pre-need sale into a trust 

account to cover the costs of funeral goods and services at the time of 

death. Of the state regulators who responded to this issue on our survey, 

33 of 38 reported that they have specific trusting requirements, although 

the percentage of pre-need sales revenue that is required to be trusted 

for funeral and cemetery goods and services varies. Specifically, as 

shown in table 2, trusting requirements for funeral goods and services 

tend to be higher than those for cemetery goods and services across all 

states whose regulators responded to this issue on our survey.
 

Page 25 GAO-12-65 Death Services 

Table 2: Trusting Requirements: Required Percentage of Total Value of Purchased Pre-Need Goods and Services That Must 

be Placed in Trust for Five Types of Goods and Services, by Number of States in Each Category, as Reported in 2011

Percentage of funds that are 

required to be trusted

Funeral

goods

Funeral

services

Cemetery

goods

Cemetery 

services

Third party 

sellers

Zero percent — — 2 2 4 

One to 19 percent — — 1 2 — 

Twenty to 39 percent 1 — 2 1 — 

Forty to 59 percent 2 — 5 3 1 

Sixty to 79 percent 3 3 4 4 1 

Eighty to 99 percent 9 10 3 5 5 

One hundred percent or more 15 17 6 8 8 

Source: GAO survey of state regulators of the sales of pre-need plans.

Once funds are deposited, trustees in some states may withdraw funds 

from the trust for things such as administrative fees. Specifically, of the 

state regulators who responded to this issue on our survey,

• 14 reported that administrative fees can be withdrawn,

• 9 reported that no funds may ever be withdrawn,

• 7 reported that a specified percentage of the interest can be 

withdrawn,

• 5 reported that a specified percentage or amount of trust funds dollars 

may be withdrawn,

• 3 reported that there are no specific requirements, and

• 2 reported that any funds over 100 percent of the purchase price can 

be withdrawn.

Canceling and transferring pre-need contracts. Of the 39 state 

regulators who responded to the question on our survey about 

cancellation requirements, regulators frequently reported that if a 

consumer cancels a pre-need contract, the consumer is entitled to 

receive the principal and interest, as shown in table 3.
 

Page 26 GAO-12-65 Death Services 

Table 3: Number of State Regulators Who Reported Different Refund Requirements for Cancellations of Pre-Need Contracts, 

as Reported in 2011

If purchasers of pre-need funeral plans within your state cancel their pre-need contracts, what refunds, if 

any, are they entitled to from their investment?

Number of

state regulators

They are entitled to receive the principal they invested, plus any interest that has accrued 12

This depends on the individual contract 5 

Other 7 a

They are entitled to receive the principal they invested, less any administrative and/or revocation fees 4 

They are entitled to receive the principal they invested, plus any interest that has accrued, and less any 

administrative and/or revocation fees

4 

They are not entitled to receive any refund 2 

They are entitled to receive only the principal they invested 2 

No response 3 

Source: GAO survey of state regulators of the sales of pre-need plans.

a

State regulators who responded “other” provided various explanations of their cancellation 

requirements. For example, in Florida, how much is refunded depends upon when the contract is 

cancelled, and in Texas, the amount refunded depends on whether the contract is trust funded or 

insurance funded. 

With respect to consumers’ right to transfer pre-need contracts to another 

state, of the 40 state regulators responding to this issue on our survey, 12 

reported that there are no specific requirements in their state, 11 reported 

that consumers are permitted to transfer their contract to another state 

and no penalties will apply, 8 reported that consumers can transfer the 

contract but penalties may apply, 4 reported that consumers are not 

permitted to transfer their contracts to another state, and 5 checked “No 

response.” 

The amount of funds invested in pre-need plans is not always known 

because not all states track the amount of funds invested in these plans. 

Eighteen of the 39 state regulators who reported on whether their state 

tracked the amount of funds invested in pre-need plans stated that they 

did track this amount, and 9 reported the amount of funds invested in preneed plans in 2010, which ranged from $100,000 to $2.9 billion. (See 

app. II for more information on this issue.) Based on information obtained 

from our case study states, individual contracts may also be tracked in 

states. In Oregon, for example, sellers of pre-need plans are required to 

provide numbers for each contract in consecutive order to help ensure 

that each contract can be tracked.

Finally, most state regulators reported that they track consumer 

complaints regarding sales of pre-need plans and reported receiving 
 

Page 27 GAO-12-65 Death Services 

some complaints. Specifically, 27 of the 39 state regulators who 

responded to this issue on our survey reported that their state tracks 

consumer complaints. For the years 2008, 2009, and 2010, state 

regulators generally reported that their state received between 0 and 25 

complaints, approximately, in each respective year regarding sellers of 

pre-need plans—although 2 state regulators reported that their state 

received more than 25 complaints in all 3 years, with 180 complaints 

being the highest number reported in all 3 years.54

Most state regulators reported that they did not have rules or regulations 

specifically addressing third party sellers of funeral goods—which 

includes retailers of caskets, urns, and monuments that are not affiliated 

with a funeral home or cemetery. Specifically, of the 41 state regulators 

who responded to our survey on the regulation of third party sellers, 13 

reported having specific rules or regulations, although 1 of these 13 

reported that the specific rule or regulation was that all third party sales 

were prohibited or were restricted.

Common complaints 

reported in case study states included failure to trust funds and contract 

disputes. Conducting investigations of legitimate consumer complaints 

was most frequently reported by state regulators who responded to this 

issue as being the consumer protection that was most effective in 

protecting consumers.

55

 

54 Specifically, of the state regulators who provided data on the number of complaints the 

state received each year, 12 of 14 reported 25 or fewer complaints in 2008, and 13 of 15 

reported 25 or fewer complaints in 2009 and 2010. Not all the state regulators who 

reported tracking data on consumer complaints provided the total number of complaints 

for each year. In addition, consumers may have submitted complaints to an agency other 

than the state regulatory agency that responded to our survey.

Further, of the 12 state regulators 

who responded to this issue on our survey, 5 reported that some third 

party sellers were exempt from regulation in their state. State regulators 

reported that various third party sales were exempt, including cemetery 

merchandise sales and immediate-need sales of funeral goods.

55 Three state regulators who responded to this question checked “No response.” 

Although potentially in conflict with the Funeral Rule, one state regulator we surveyed 

reported that their state prohibits or restricts third party sales. A state regulator from one of 

our case study states told us that their state law may be in conflict with the Funeral Rule 

because funeral homes did not have to accept third party caskets. GAO did not undertake 

to determine whether the practice of any state conflicts with the Funeral Rule as part of 

this review.

Third Party Sellers of Funeral 

Goods
 

Page 28 GAO-12-65 Death Services 

Of the states that have specific rules or regulations for third party sellers, 

states varied on their licensing requirements. Specifically, of the 12 state 

regulators who responded to our survey question about licensing 

requirements, 4 reported that all third party sellers are required to be 

licensed, 3 reported that some were required to be licensed, and 5 

reported that no license was required. According to the seven state 

regulators who reported that licenses were required, they varied in how 

often licenses had to be renewed.

State regulators reported identifying some violations.56 Of the 5 state 

regulators who provided narrative responses to our survey about the most 

frequent violations they identify, violations related to not properly trusting 

funds and failure to provide services were among the violations 

reported.57 State regulators also reported receiving some consumer 

complaints. Of the 41 state regulators who responded to our survey 

question about consumer complaints, 10 reported that their state tracks 

consumer complaints.58 State regulators reported that their state received 

between 0 and 4 complaints, approximately, regarding third party sellers 

in 2008 and 2010, and between 0 and 10 complaints in 2009.59

The extent to which state regulators reported that their state (1) had 

specific rules or regulations, (2) required licensing, and (3) required 

inspections in both 2003 and 2011 varied by industry segment.60

 

56 Six state regulators reported that their state tracks violations. Two state regulators 

provided data on the total number of violations there had been in their state—both 

reporting that there were none since 2008.

For 

57 States do not necessarily categorize violations in the same manner and not all states

track violations in the same manner.

58 Twenty-four state regulators reported that their state did not maintain data on consumer 

complaints, and 7 checked “No response.”

59 Not all the state regulators who reported tracking data on consumer complaints 

provided the total number of complaints for each year. In addition, consumers may have 

submitted complaints to an agency other than the state regulatory agency that responded 

to our survey.

60 Although states may not have changed their requirements on whether a license or 

inspection is required, they may have made changes to how this requirement is 

implemented or enforced. Also, differences from year to year could be attributable to the 

fact that different states responded in 2003 and 2011. Specifically, depending on the 

industry segment, 85 to 98 percent of those that responded to our 2011 survey also 

responded to our survey in 2003.

In Both 2003 and 2011 

States Reported Varied 

Regulatory Requirements, 

with Specific Rules or 

Regulations Most 

Consistently Reported for 

Funeral Homes
 

Page 29 GAO-12-65 Death Services 

example, with regard to funeral homes, 45 of 48 state regulators (94 

percent) who responded to our 2003 survey reported that their state had 

specific rules or regulations for funeral homes, while 38 of 40 state 

regulators (95 percent) reported this in 2011. In contrast, with regard to 

cemeteries, 34 of 44 state regulators (77 percent) who responded to our 

2003 survey reported that their state had specific rules or regulations for 

cemeteries, whereas 37 of 42 state regulators (88 percent) reported this 

in 2011. Figure 2 shows the number of state regulators who responded to 

our surveys and the number who reported that their state had specific 

rules or regulations for each of the industry segments in 2003 and 2011.

Figure 2: Extent to Which State Regulators Reported That Their State Had Rules or 

Regulations Specific to Each Industry Segment, 2003 and 2011

Note: Differences from year to year could be attributable to the fact that different states responded in 

2003 and 2011. Specifically, depending on the industry segment, 85 to 98 percent of those that 

responded to our 2011 survey also responded to our survey in 2003. 

The extent to which state regulators reported that their state required 

licenses also varied by industry segment between 2003 and 2011. For 
 

Page 30 GAO-12-65 Death Services 

example, in 2003 and 2011, almost all of the state regulators who 

responded to our surveys reported that their state required all funeral 

homes to be licensed. Specifically, 42 of 43 state regulators (98 percent) 

who responded to our 2003 survey reported that their state required all 

funeral homes to be licensed, while 37 of 38 state regulators (97 percent) 

reported this in 2011. In contrast, there was more variation in state’s 

licensing requirement for cemetery operators in 2003 compared to 2011. 

For example, whereas 17 of 33 state regulators (52 percent) who 

responded to our 2003 survey reported that their state did not require 

cemetery operators to be licensed, 20 of 32 state regulators (63 percent) 

reported this in 2011. Figure 3 shows the number of state regulators who 

reported their state’s licensing requirements by each of the industry 

segments in 2003 and 2011.
 

Page 31 GAO-12-65 Death Services 

Figure 3: Extent to Which State Regulators Reported That Their State Had Licensing Requirements by Industry Segment, 2003 

and 2011

Note: Differences from year to year could be attributable to the fact that different states responded in 

2003 and 2011.Specifically, depending on the industry segment, 85 to 98 percent of those that 

responded to our 2011 survey also responded to our survey in 2003. 

Furthermore, the number of state regulators who reported that their state 

required inspections varied by industry segment between 2003 and 2011. 

Specifically, 19 of 33 state regulators (58 percent) who responded to our 

2003 survey reported that their state did not require the inspection of 

cemeteries, while 21 of 37 state regulators (57 percent) reported this in 

2011. By comparison, with respect to the inspection of funeral homes and 

crematories,

• 37 of 43 state regulators (86 percent) who responded to our 2003 

survey reported that their state required the inspection of funeral 
 

Page 32 GAO-12-65 Death Services 

homes, while 35 of the 38 state regulators (92 percent) reported this 

in 2011, and

• 33 of 36 state regulators (92 percent) who responded to our 2003 

survey reported that their state required the inspection of crematories, 

while 28 of the 34 state regulators (82 percent) reported this in 2011.

Many state regulators who responded to our 2011 survey also reported 

that their states made changes to their laws or regulations since 2003 that 

primarily provided clarification or enhanced consumer protections. To a 

lesser degree, some state regulators also reported that these changes 

imposed stricter licensing requirements on the various industry segments. 

State regulators views on the extent to which these changes 

strengthened their regulatory program varied, as shown in figure 4.
 

Page 33 GAO-12-65 Death Services 

Figure 4: Extent to Which State Regulators Reported in 2011 That Statutory and 

Regulatory Changes Strengthened Their Regulatory Programs

State regulators who responded to this issue on our 2011 survey reported 

that changes came about as a result of various factors, as shown in 

table 4.
 

Page 34 GAO-12-65 Death Services 

Table 4: State Regulators’ Views on Factors That Prompted Change in State Law or Regulation, as Reported in 2011 

Industry segment

Accounts of 

desecration of 

human remains

Accounts of fraud 

or deceptive 

practices

Proposals

from state

regulatory 

agencies

Lobbying 

efforts 

of the death 

care industry

Lobbying

efforts of

consumer groups

Funeral homes 3 6 17 12 6 

Cemeteries 5 9 16 10 6 

Crematories 5 4 11 11 3 

Sales of pre-need plans 0 15 16 7 6 

Third party sellers of funeral 

goods 0 0 1 1 0 

Source: GAO surveys of state regulators.

Note: Some state regulators also checked other in response to this question and these responses are 

not included in the table above. 

Some of these changes, and the reason for these changes, were 

highlighted in our case study states, as shown below.

• Pursuant to a Colorado bill passed in 2009, funeral homes and 

crematories must now register with the state—prior to this, no such 

requirements existed. According to state regulators, this change came 

about as a result of lobbying efforts from the death care industry. 

Officials from a state association stated that the association sought 

out the regulation of the industry because although it believed that 

many reputable people operate the industry, a few bad individuals can 

give the entire industry a poor reputation.

• In Illinois, the Cemetery Oversight Act, passed in 2010, requires 

(1) the operators and other specified parties at nonexempt cemeteries 

to be licensed to operate in the state, (2) cemeteries to conspicuously 

display a consumer hotline number, and (3) cemeteries to file 

cemetery maps and enter burials and cremations into a state 

database.61

 

61 See 2009 Ill. Laws 863 (approved Jan. 19, 2010). As of November 2011, rules 

necessary to implement provisions of this act had not been implemented.

According to state regulators, the bill was passed in 

response to an incident at an Illinois cemetery where graves were 

reported to be desecrated and vandalized in a scheme to resell burial 

plots to unsuspecting members of the public (see more on this 

incident in app. II).
 

Page 35 GAO-12-65 Death Services 

• An Oregon law passed in 2009 requires the licensure of death care 

consultants and the adoption of rules promoting environmentally 

sound death care practices.62 According to state regulators, the 

statutory changes regarding the environmentally sound death care 

practices will help position them for future technological changes in 

the industry, such as alternative methods of final disposition.63

• In Tennessee, revisions to death care industry law and regulation in 

2007 and 2008 included, among other things, requiring state or 

commissioner approval for a (1) change in trustee, (2) cemetery sale, 

and (3) pre-need contract. State regulators stated that these revisions 

were in reaction to a pre-need incident that involved the looting of 

about $20 million from pre-need trusts in Tennessee (see more on 

this incident in app. II).

• A Wisconsin law passed in 2008 brought more cemeteries under 

regulation. According to state regulators, as a result of this act, about 

1,200 to 1,500 cemeteries fall under registration or licensing 

requirements, compared to 1991 when 5 cemeteries were required to 

be licensed. Officials also stated that the genesis for the legislative 

expansion was a general recognition by the state legislature that it 

was appropriate to have oversight of more cemeteries and that the 

effort to pass the law was spearheaded by a Wisconsin industry 

association.

See appendixes III through VII for more detailed information on the 

changes to state law and regulation in the five case study states. To view 

the survey covering funeral homes, funeral directors, and embalmers and 

the responding states’ answers to the survey questions, go to 

GAO-12-91SP. 

 

62 Pursuant to Oregon law, a person practices as a death care consultant if the individual 

offers, for payment, consultations directly relating to the performance of a funeral or final 

disposition services. See Or. Rev. Stat. § 692.025(3). 

63 Alternative methods of final disposition may include such practices as alkaline 

hydrolysis, where a water-based chemical process is used to rapidly reduce a body to 

residue.
 

Page 36 GAO-12-65 Death Services 

State regulators’ views on the need for the federal government to take a 

more active role in the regulation of the death care industry varied. State 

regulators who responded to this issue on our 2011 surveys frequently 

reported that they did not believe that there was a need for the federal 

government to take a more active role in regulating the death care 

industry; however, several also reported that they believe more federal 

involvement was needed, as shown in figure 5.64

 

64 In some states, the same individual state regulator completed more than one of the 

surveys. The FTC promulgated the Funeral Rule in accordance with its authority to 

prohibit “unfair or deceptive acts or practices” and to prescribe “rules which define with 

specificity acts or practices which are unfair or deceptive acts or practices in or affecting 

commerce” and that such rules “may include requirements prescribed for the purpose of 

preventing such acts or practices.” See 15 U.S.C. §§ 45(a)(1), 57a(1). GAO did not 

evaluate whether existing practices in the death care industry outside of the scope of the 

Funeral Rule fall within the scope of FTC’s regulatory authority. If enacted, H.R. 900, the 

Bereaved Consumer’s Bill of Rights Act of 2011, would grant FTC explicit authority to 

expand the scope of its regulation in the death care industry. 

Views on Increasing 

Federal and State 

Regulation Varied

Views on Federal 

Regulation
 

Page 37 GAO-12-65 Death Services 

Figure 5: State Regulators’ Views on the Need for the Federal Government to Take a 

More Active Role in Regulating the Death Care Industry, as Reported in 2011

State regulators who reported that they believe there was a need for the 

federal government to take a more active role in regulating the death care 

industry frequently stated that this was because minimum federal 

standards would help to provide uniformity across states.65

 

65 In some states, the same individual state regulator completed more than one of the 

surveys. 

Other reasons 

reported included (1) states do not have the resources to regulate the 

industry effectively and (2) minimum federal standards would help to 

prevent incidents or scandals from occurring. Of the state regulators who 

reported that they believe that there was not a need for the federal 

government to take a more active role in regulating the death care 
 

Page 38 GAO-12-65 Death Services 

industry, they frequently reported that this was because the state is a 

better entity to regulate the industry. Other reasons reported included that 

current state or federal rules and regulations are sufficient.

The FTC and national associations’ support of the Bereaved Consumer’s 

Bill of Rights Act varied.66 In a January 2010 statement, the 

Commission—which is headed by five FTC commissioners—testified that 

it supported the goals of the Bereaved Consumer’s Bill of Rights Act 

which would extend the key consumer protections of the Funeral Rule to 

other segments of the death care industry, including cemeteries. In this 

statement, the Commission stated that an active enforcement program 

would be essential to ensure compliance with the requirements of the bill, 

as was the case with the Funeral Rule. FTC staff noted that although the 

number of cemeteries is unknown,67

Three of the six national associations we interviewed—including two 

industry associations and one consumer association—supported the 

Bereaved Consumer’s Bill of Rights Act. However, officials representing 

two of the three associations that supported the bill stated that they were 

concerned that the proposed law would not require that all cemeteries be 

regulated. As one consumer association stated, “all grieving consumers 

are entitled to the same minimum protections.” A fourth association—

which represents state regulators—reported that it supported the 

existence of minimum standards and guidelines that could be established 

at the federal level, particularly since a comparable level of consumer 

protection does not exist in all states. However, this association also 

reported that the regulation of the death care industry should be done at 

they anticipate that if the bill were 

enacted, it would likely double or triple the number of entities they have

jurisdiction over. A 2010 report by the Congressional Budget Office states 

that based on information from the FTC, the agency would require five 

additional staff positions at a cost of about $1 million per year to develop 

and enforce the new requirements, train staff, and develop educational 

materials. The Congressional Budget Office estimates that implementing 

the legislation would cost the FTC about $5 million over a 5-year period.

 

66 As stated previously, this bill was introduced in 2011. However, a substantially similar 

bill had also been introduced in September 2009.

67 Some states do not require cemeteries to register or require all types of cemeteries to 

be registered or licensed; as a result, the total number of cemeteries is not known. As 

stated previously, some states exempt religious, municipal, and family cemeteries from 

registration or licensing requirements.
 

Page 39 GAO-12-65 Death Services 

the local level, and as such, the association reported that it would want an 

opt-out provision in the bill for states with an overall level of protection to 

consumers equal to or greater than that set forth in the Bereaved 

Consumer’s Bill of Rights Act. Further, officials representing this 

association stated that if the bill is enacted, they are concerned that much 

of the work would be passed to the states. Finally, representatives from 

one industry association stated that it did not support the Bereaved 

Consumer’s Bill of Rights Act for various reasons, including that it could 

impose excessive penalties for some relatively minor matters, such as 

fines of $16,000 for minor omission of consumer disclosures.68

Although the level of support for the Bereaved Consumer’s Bill of Rights 

Act varied, officials representing four of the national associations, 

including some that supported the bill, stated that they believed the 

legislation would not ensure that incidents, such as the one that occurred 

at Burr Oak Cemetery—in which grave sites were reused—would be 

prevented from occurring in the future. According to documentation from 

one national association that represents state regulators, the association 

believes that it is unlikely that a federal system of examinations and 

investigations would discover such abusive conduct. The association 

document stated that absent a large appropriation of funds and more 

staff, the FTC would be severely challenged to establish a large enough 

footprint to be effective from an enforcement standpoint. This association 

further reported that it believes that enforcement is the key ingredient in 

protecting against inappropriate industry practices. Officials representing 

an industry association stated that they believe that the incidents that 

occurred at Burr Oak Cemetery involved actions that were already 

violations of state laws, and while laws and regulations can be enacted to 

provide consequences for violations, they do not prevent people from 

findings ways to violate the law or regulation. However, officials 

representing another industry association stated that they believed the 

Funeral Rule has dramatically improved the way funeral homes operate—

making funeral homes more service oriented and resulting in no major 

incidents since the Rule was implemented, and if the Rule applied to 

other segments of the death care industry, these scandals possibly could 

be prevented.

 

68 Officials we interviewed from one national association stated that their association had 

not issued a response to the Bereaved Consumer’s Bill of Rights Act.
 

Page 40 GAO-12-65 Death Services 

State regulators reported facing some challenges to regulating the death 

care industry, and their views on the need for their state government to 

take a more active role in the regulation of the death care industry varied. 

In responding to our question about the biggest challenge they 

experience in regulating the death care industry, state regulators 

frequently reported that insufficient funds and/or staff to enforce 

regulations was the biggest challenge in enforcing the state’s rules or 

regulations for each industry segment. However, when asked the degree 

to which this factor, as well as other factors, posed a challenge, state 

regulators reported varying views. For example, 18 of the 36 state 

regulators of funeral homes who responded to this issue reported that 

insufficient funds and/or staff was either not a challenge or a minor 

challenge, while 22 of the 36 state regulators of cemeteries who 

responded to this issue reported this factor was a major or moderate 

challenge.

State regulators views on whether they believe that there was a need for 

their state government to take a more active role in regulating the death 

care industry varied, as shown in figure 6.69

 

69 In some states, the same individual state regulator completed more than one of the 

surveys. 

Views on State Regulation
 

Page 41 GAO-12-65 Death Services 

Figure 6: State Regulators’ Views on the Need for Their State Government to Take a 

More Active Role in Regulating the Death Care Industry, as Reported in 2011

State regulators from three of our case study states reported that their 

states had sufficient rules and regulations or were on the leading edge of 

regulation. Regulators from another state stated that they receive very 

few complaints against death care industry segments they regulate and 

as a result do not see the need for more regulation of such entities.70

 

70 State regulators from the fifth state did not provide information on this issue.
 

Page 42 GAO-12-65 Death Services 

We provided selected excerpts of the draft report to the FTC and the state 

regulators from our case study states to obtain their views and verify the 

accuracy of the information provided. We incorporated their technical 

comments into the report, as appropriate.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Federal Trade 

Commission and interested congressional committees. In addition, the 

report will be available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

William O. Jenkins, Jr. at (202) 512-8777 or jenkinswo@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this report. Key contributors to this report are 

list in appendix VIII.

William O. Jenkins, Jr.

Director, Homeland Security and Justice 

Agency Comments 

and Third-Party Views
Appendix I: Survey Methodology

Page 43 GAO-12-65 Death Services 

To obtain information on the various ways states regulate the death care 

industry, how it has changed, and to what extent more regulation is 

needed we developed and administered five web-based surveys to all 50 

states to provide current information on state regulation for each of the 

five death care industry segments—funeral homes, cemeteries, 

crematories, sales of pre-need funeral plans, and third party sellers of 

funeral goods. The surveys are similar to surveys we administered in 

2003, and are designed to update and expand on information obtained in 

the earlier surveys. We surveyed state officials in all 50 states that were 

responsible for regulation or oversight of each of the death care industry 

segments and asked officials about current state laws and regulations, 

enforcement mechanisms, and consumer protections. We also solicited 

their views on the sufficiency of federal and state regulation.1

Survey development. A GAO social science survey specialist along with 

staff knowledgeable about the death care industry, including those who 

conducted work on two previous reports on the industry, developed the 

five survey instruments.2 These surveys were primarily based on surveys 

that we developed and administered in 2003 for our work on the death 

care industry. We reviewed the engagement files from our 2003 work on 

the death care industry, including records of interviews, survey questions 

and results, and state regulator contact information—which provided a 

context and foundation for development of our current surveys. We also 

conducted interviews with officials at the Federal Trade Commission and 

six national associations to identify any additional issues to follow up on in 

the surveys.3

 

1 We did not include the District of Columbia in our 2003 survey, and as a result, did not 

include the District of Columbia in our 2011 survey either since we planned to compare 

survey responses from both years.

In addition, we conducted a general news and journal

literature search to identify emerging issues or trends we may want to 

address in the surveys.

2 GAO, Funeral-Related Industries: Complaints and State Laws Vary, and FTC Could 

Better Manage the Funeral Rule, GAO/GGD-99-156 (Washington, D.C.: Sept. 23, 1999), 

and Death Care Industry: Regulation Varies across States and by Industry Segment, 

GAO-03-757 (Washington, D.C.: Aug. 25, 2003).

3 The six associations whose officials we interviewed included the Cremation Association 

of North America; National Funeral Directors Association; International Cemetery, 

Cremation, and Funeral Association; International Conference of Funeral Service 

Examining Boards; North American Death Care Regulators Association; and Funeral 

Consumers Alliance. A full description of our scope and methodology is included in the 

front of the report.

Appendix I: Survey Methodology
Appendix I: Survey Methodology

Page 44 GAO-12-65 Death Services 

We conducted pretests of each of the five surveys in at least one state to 

ensure that the questions were clear and concise, and refined the 

instruments based on feedback we received as a result of the pretest. 

The bulk of the survey questions were taken from our 2003 survey and 

were pretested at that time. We wanted to keep many of the original 

questions without changing them in order to compare the results of the 

two surveys. In selecting the pretest states we identified several key 

criteria that guided our selection process. The criteria included 

(1) ensuring that the state regulates the segment of the industry that the 

survey addresses and (2) ensuring that the state has made regulatory 

changes since 2003—so that relevant questions would not be skipped 

during our pretests. We conducted pretests by phone with officials from 

Washington State to pretest the funeral home survey, Virginia for the 

cemetery survey, Kansas for the crematory survey, Mississippi and 

Louisiana for the sales of pre-need plans survey, and South Carolina for 

the third party sellers survey. We reviewed the entire survey with the 

pretest respondents, but focused on selected questions that were new or 

modified from our prior survey. The state regulatory officials responded to 

the questions asked, and we discussed any issues regarding clarity or 

understanding of the question. We made notes of the responses and any 

issues, and adjusted the questions as appropriate.

Identification of survey respondents. To develop an accurate e-mail 

contact list of state regulatory officials for each of the five segments of the 

death care industry for all 50 states, we used multiple sources. We 

started with a list of state regulators from the North American Death Care 

Regulators Association. We then compared this list to other lists we had 

obtained, adding additional detail. These other regulator contact lists 

included our 2003 survey contact list and lists from other national 

regulator, industry, and consumer associations, including the International 

Conference of Funeral Service Examining Boards, the Cremation 

Association of North America, and the Funeral Ethics Organization. We 

then used our consolidated list to contact, confirm, and update the list of 

state regulators who would receive our surveys. We contacted the 

individuals on this list by phone or e-mail to ensure that they were the 

proper contacts regarding regulation of the identified industry segment. 

We attempted to identify officials with direct responsibility for regulation. 

For some states, this meant we identified a number of different officials as 

survey recipients because some industry segments were regulated by 

different state entities. In other states, this meant we identified one official 

as the survey recipient for all five surveys in the state because one entity 

was responsible for regulation of all segments of the death care industry. 

However, if the state did not regulate a specific industry segment we 
Appendix I: Survey Methodology

Page 45 GAO-12-65 Death Services 

sought out the office most appropriate to respond to our questions. In 

some states more than one entity regulated the same industry segment, 

and we selected an official from only one entity to respond to our survey. 

As such, we only collected information from one of the regulatory 

entities.4

Survey time frames and response rates. To ensure that we obtained 

the highest response rate possible, we made the web-based surveys 

available to the designated state contacts from April 14, 2011, through 

June 20, 2011.5 We sent multiple reminders via e-mails and made 

telephone calls to the state officials requesting that they complete the 

surveys. Over this period, we obtained responses from 40 states covering 

regulation of funeral homes, 42 states covering regulation of cemeteries, 

39 states covering regulation of crematories, 40 states covering 

regulation of sales of pre-need funeral plans, and 41 states covering 

regulation of third party sellers of funeral goods.6

Many of the states that responded to our surveys in 2011 were the same 

states that responded in 2003. The response rate for all surveys in 2011 

averaged about 81 percent, while the response rate for 2003 averaged 

about 90 percent. As shown in table 5, a high percentage of the states 

that responded to each of the segment surveys in 2011 also responded in 

2003.

While the overall 

response rate was relatively high, not all states that completed the 

surveys provided responses to all the appropriate questions.

7

 

4 For example, in Maryland, two separate entities regulated sellers of pre-need plans—

one regulates pre-need funeral plans and the other regulates pre-need cemetery plans. As 

stated by one of these regulators, different consumer protections may be available—such 

as a consumer protection account—depending upon which type of pre-need plan is being 

regulated. Further, each entity may be aware of complaints or violations received that the 

other entity is not. However, we could only send one survey to each state.

5 Our surveys primarily asked state regulators to provide current information on the 

regulation of the industry. However, some questions asked regulators to provide data 

since 2003, some asked questions for data since 2008, and other questions asked about 

specific data for each year in 2008, 2009, and 2010.

6 All but two states—Michigan and New Hampshire—responded to at least one of our five 

surveys. 

7 In addition, there were additional states that responded in 2003 that did not respond in 

2011.
Appendix I: Survey Methodology

Page 46 GAO-12-65 Death Services 

Table 5: Comparison of State Survey Respondents, 2003 and 2011

Industry segment

Number of states 

that responded 

in 2003

Response

rate for 2003

Number of 

states that 

responded

in 2011

Response

rate for 2011

Number of 

states that 

responded in 

2011 that also 

responded

to 2003

Percentage of 

states that 

responded in 

2011 that also 

responded

to 2003

Funeral homes 48 96% 40 80% 39 of 40 98%

Cemeteries 44 88% 42 84% 38 of 42 90%

Crematories 45 90% 39 78% 35 of 39 90%

Sales of pre-need 

plans

42 84% 40 80% 34 of 40 85%

Third party sellers 

of funeral goods

45 90% 41 82% 38 of 41 93%

Source: GAO surveys of state regulators, 2003 and 2011.

Notes: All but two states—Michigan and New Hampshire—responded to at least one of our five 

surveys in 2011. All states except for Indiana responded to at least one of our surveys in 2003. 

Survey analysis. In analyzing the five surveys, we computed descriptive 

statistics for all closed-ended survey questions, providing the frequency of 

specific responses as a proportion of the total number of states for which 

the question applied. We also developed a closed-ended question data 

run for each of our five case study states that completed an industry 

segment survey,8

 

8 The five case study states identified earlier in the report are Colorado, Illinois, Oregon, 

Tennessee, and Wisconsin.

and we developed a close-ended data run for each 

question by state to be included in the e-supplement companion to the 

report. Open-ended survey responses were compiled for each of the five 

segment surveys and reviewed for content. In addition, open-ended 

responses for the most prevalent types of violations were compiled for all 

states that responded to the question. We also analyzed and compared 

the responses for survey data for selected questions to the responses we 

received in 2003. Differences in the responses from year to year could be 

attributable to the fact that different states responded in 2003 and 2011. 

Specifically, depending on the industry segment, 85 to 98 percent of 

those that responded to our 2011 survey also responded to our survey in 

2003.
Appendix I: Survey Methodology

Page 47 GAO-12-65 Death Services 

Since this was not a sample survey, there are no sampling errors; 

however, the practical difficulties of conducting a survey may introduce 

errors, commonly referred to as nonsampling errors. For example, 

difficulties in interpreting a particular question, sources of information 

available to respondents, or entering data into a database or analyzing 

them can introduce unwanted variability into the survey results. We took 

steps in developing the questionnaires, collecting the data, and analyzing 

them to minimize such nonsampling errors. For example, as mentioned 

earlier, the surveys were developed by our survey specialist in 

collaboration with our staff with subject matter expertise. In addition, as 

stated earlier, we pretested the surveys with various states to ensure that 

the questions were clear and concise. Since this was a web-based 

survey, respondents entered their answers directly into the electronic 

questionnaire, eliminating the need to key data into a database, 

minimizing the opportunity for error. We examined the survey results and 

performed computer analyses to identify inconsistencies and other 

indications of error. An independent analyst checked the accuracy of all 

computer analyses. However, we did not independently verify the 

accuracy or completeness of the responses to the surveys.9

GAO-12-91SP

This report 

does not contain all the results from the survey. The survey and a more 

complete tabulation of the results can be viewed at . The 

special publication electronic supplement was created in accordance with 

the above described methodology to show the individual responses by 

state officials who replied to each of the questions on our five surveys.

We conducted this performance audit from October 2010 to December 

2011 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

 

9 If state regulators provided responses to survey questions that they were instructed to 

skip or did not provide a response to a question that instructed them to go to the next 

question, such responses are not included in our analyses for this report and are not 

included in the e-supplement.
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 48 GAO-12-65 Death Services 

For the purposes of this report, a pre-need plan is defined as a 

contractual agreement whereby funeral arrangements, cemetery 

arrangements, or both are preplanned and prepaid for by an individual 

prior to his or her death.1

• With an insurance-funded plan, generally the consumer purchases, 

either in a lump sum or by installments, an insurance policy that upon 

the consumer’s death is paid out to provide the goods and services as 

specified in the contract.

Generally, the pre-need contract is between the 

individual for whom the services will be provided and the funeral director 

or cemetery operator. The options for paying pre-need expenses vary 

from state to state, and according to industry information and state 

regulators we contacted, the most commonly used options are trust 

accounts and insurance policies. Upon the individual’s death, the 

representative of the funeral home or cemetery uses the trusted funds or 

the amount covered by the insurance policy to provide the designated 

goods and services.

2 These pre-need insurance policies typically 

have an increasing death benefit to cover future increases in the 

prices of funeral goods and services.

• With a trust-funded plan, the seller is generally required to deposit a 

certain percentage of the funds into a trust that is established in 

accordance with state law and managed by one or several trustees. 

State laws vary on how much of the pre-need funds must be placed 

into a trust, who can qualify as a trustee—such as a bank or other 

financial institution—and who receives any interest earned on a trust 

account.3

 

1 For our survey, we noted that the term "pre-need funeral plans" refers only to the 

purchase of funeral goods and services to be provided at a later date when the death of 

the individual for whom the purchase was made occurs. It does not refer to the purchase 

of a final expense insurance policy from which the beneficiary would claim and receive 

payment on the policy and be responsible for paying any costs for funeral goods and 

services on behalf of the deceased.

The rationale behind this funding method is that interest 

earned on the trust account will accumulate over time and can be 

used to cover all or most of any increases in the cost of the goods and 

2 Another option is to purchase an insurance annuity. Following the death of the 

purchaser, the annuity is paid out by the insurer to the death care provider to cover final 

expenses.

3 The purchaser of the pre-need contract may be responsible for paying taxes on any trust 

account interest earned.

Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Pre-Need Contracts 

for Funeral and 

Cemetery 

Arrangements
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 49 GAO-12-65 Death Services 

services purchased between the time the trust is established and the 

goods and services are provided, which may be a number of years.

According to state regulators from our five case study states, they have 

seen more insurance-funded pre-need contracts than trust-funded 

contracts in recent years. Pre-need insurance policies and trusts are 

generally regulated in accordance with state laws and regulations, which 

vary across states and set out specific requirements in terms of sales, 

licensing of sellers, and trusting or investing requirements. There is no 

uniform approach among states for regulating the pre-need industry.

Pre-need arrangements differ from funeral or cemetery arrangements 

made at the time of death (often referred to as “at-need” arrangements). 

Pre-need plans also differ from other methods a consumers may set up to 

cover some or all of their funeral or burial expenses, such as payable-ondeath savings accounts and final expense insurance, which provide funds 

to pay funeral and cemetery expenses but in which the final disposition 

arrangements have not been made.4

Pre-need plans, and their associated contracts, may include a variety of 

differing provisions. Provisions can vary across states because of 

differing state laws and regulations, and by individual contract. Table 6 

defines some of these provisions.

Another form of death care service 

is cemetery perpetual care, also called endowment care. This differs from 

pre-need plans in that it does not involve direct care of the individual at 

the time of death. Perpetual or endowment care refers to the general care 

and maintenance of developed portions of a cemetery and memorials or 

markers erected thereon and is financed from the income of an 

established trust fund.

 

4 For example, with a payable-on-death savings account, funds deposited by an individual 

remain available to that individual until his or her death, at which time the account 

becomes payable to a designated beneficiary, such as a funeral home or cemetery, for the 

purpose of covering funeral and related expenses. With a final expense insurance plan, 

the beneficiary would claim and receive payment on the policy and be responsible for 

paying any costs for funeral goods and services on behalf of the deceased. The 

beneficiary is generally not, however, legally bound to use the funds for their intended 

purpose. Typically, a spouse or close relative is the beneficiary of a final expense policy in 

order to carry out the policyholder’s final wishes.
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 50 GAO-12-65 Death Services 

Table 6: General Definitions of Pre-Need Contract Provisions

Price-guaranteed and non-priceguaranteed

• Price-guaranteed goods and services refer to those items that are guaranteed for the 

price stated in the pre-need contract. Price guaranteed ensures that no additional funds 

are due at the time of death regardless of the actual cost of the goods and services at 

that time.

• Non-price-guaranteed goods and services refer to those items where the price is not 

guaranteed in the pre-need contract. The contract holder may be required to pay 

additional funds at the time of death if the costs for the goods and services have 

increased.

Revocable and irrevocable • A revocable pre-need contract is one which the consumer may cancel and the money 

paid is refundable. A cancellation fee may apply.

• An irrevocable pre-need contract is one which the funds paid in are not refundable if the 

contract is canceled. 

Portability or transferability Portability or transferability refers to the ability of the consumer to move or transfer a preneed contract, if at all, to another funeral or cemetery provider within the same state, or 

transfer to a provider in another state. Transfer limitations and fees may apply, and can vary 

among the states.

Trusting requirements Trusting requirements include the amount of funds paid by the consumer for a trust-funded 

pre-need contract that the seller must deposit in a trust account. At the time of the 

consumer’s death, the funds are to be used to pay for goods and services as specified in the 

pre-need contract. The percentage of funds that a seller must place in trust varies depending 

upon applicable state requirements. For example, Colorado law requires a seller to trust at 

least 75 percent of funds for funeral goods and services, while Oregon requires a seller to 

trust 90 percent for a guaranteed pre-need sale and 100 percent for a nonguaranteed preneed sale.

Source: GAO analysis based on death care-related documents from state regulators and associations.

a

a

In addition, the amount of funds that a seller is required to trust can vary across the type of goods 

and services, depending on state law. For example, the Illinois law ultimately requires 95 percent 

trusting of the purchase price for funeral services, personal property, and merchandise, but 85 

percent trusting for the purchase price of outer burial containers. It further requires 50 percent trusting 

for cemetery goods and services. An official representing a national consumer association also 

pointed out that some states do not require that all funds be retained in the trust account after initial 

deposit. For example, the association official explained that some states allow a percentage of trust 

funds (including 100 percent of all interest earned in some cases) to be withdrawn for administrative 

expenses. 

Some industry associations have developed guidelines for pre-need laws 

that states can consider in developing their laws and regulations. 

Specifically, the National Funeral Directors Association and the 

International Cemetery, Cremation, and Funeral Association developed 

guidelines for pre-need statutes. However, according to one association’s 

guidelines, the guidelines are not intended to provide states with exact 

statutory language or to be used in their entirety, but rather are intended 
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 51 GAO-12-65 Death Services 

to provide states with things to consider when developing requirements.5

Furthermore, the National Association of Insurance Commissioners 

published model regulations for advertising life insurance and life 

insurance disclosures that also mention disclosure requirements for preneed insurance. In addition, the association published a model regulation 

that discusses minimum standards for establishing reserve liability and

nonforfeiture values.6

GAO-12-91SP

However, this model regulation states that pre-need 

insurance is not well defined and recognizes that what constitutes preneed insurance is subject to different interpretations by states. To view 

the survey covering pre-need plans and the responding states’ answers 

to the survey questions regarding their state’s laws and regulations, go to 

. 

Complete current data on the total funds invested in pre-need plans are 

not available. According to our survey of state regulators of pre-need 

plans, less than half of the state regulators responding (18 of 40) reported 

that they tracked the amount of funds invested in pre-need funeral plans. 

Of the 18 states reporting the tracking of pre-need funds, 9 provided data 

on the amount of funds invested in pre-need plans in their state, with 

amounts for all 9 states totaling $5.9 billion and amounts ranging from 

$1 million to $2.9 billion in each state. According to a 2011 study by a 

 

5 We do not have any basis to determine if these guidelines are appropriate or a best 

practice.

6 A reserve liability may be described as an amount representing actual or potential 

liabilities kept by an insurer to cover debts to policyholders. According to the International 

Risk Management Institute, in a whole life insurance policy, the nonforfeiture value is 

defined as benefits that accrue to the insured when the policy lapses because of 

nonpayment of the premium.

Complete Data on 

Consumer Funds 

Invested in Pre-Need 

Contracts Are Not 

Available
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 52 GAO-12-65 Death Services 

death care industry consulting company, the estimated total dollars in preneed accounts may have been nearly $35 billion in 2009.7

Since making funeral arrangements is often one of the most emotional 

experiences and expensive purchases a consumer will make, the FTC 

and some states have developed information to educate and help protect 

consumers. For example, FTC publishes a consumer guide that 

discusses some of the benefits of preplanning. Specifically, the guide 

states that

“Thinking ahead can help you make informed and thoughtful decisions about 

funeral arrangements. It allows you to choose the specific items you want and 

need and compare the prices offered by several funeral providers. It also spares 

your survivors the stress of making these decisions under the pressure of time 

and strong emotions.” 

However, FTC’s guide also states that

“You may wish to make decisions about your arrangements in advance, but not 

pay for them in advance. Keep in mind that over time, prices may go up and 

businesses may close or change ownership. However, in some areas with 

increased competition, prices may go down over time. It’s a good idea to review 

and revise your decisions every few years, and to make sure your family is aware 

of your wishes.” 

With regard to prepaying, FTC’s guide goes on to say that

 

7 Daniel M. Isard, Funeral Preneed; In Force and Growth Over the Past Three Decades in 

the United States (Phoenix: The Foresight Companies LLC, 2011).The report provides 

information on trust and insurance pre-need accounts, but does not include individually 

funded funeral arrangements such as personal life insurance, final expense life insurance 

or bank accounts marked “POD” or Paid on Death. The author of the study explained that 

there is no central depository for pre-need trust or insurance data, and that many 

companies consider this to be proprietary information. He said that his study represents 

an estimate done for economic understanding rather than a study of scientific 

measurement. He said that pre-need trust and insurance data had to be approximated to 

the nearest billion because banks and many state funeral associations keep their preneed trust data confidential, and many insurance companies sell a variety of insurance 

and do not make their pre-need portfolios available. GAO was unable to determine the 

reliability of this report because data sources could not be identified and confirmed.

Federal and State 

Consumer Guides 

Help Educate and 

Protect Consumers
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 53 GAO-12-65 Death Services 

“Laws of individual states govern the prepayment of funeral goods and services; 

various states have laws to help ensure that these advance payments are 

available to pay for the funeral products and services when they’re needed. But 

protections vary widely from state to state, and some state laws offer little or no 

effective protection.” 

FTC’s guide also outlines some things consumers may want to consider 

before entering into a pre-need contract. Specifically, FTC’s guide states 

that

“If you’re thinking about prepaying for funeral goods and services, it’s important 

to consider these issues before putting down any money:

• What are you are paying for? Are you buying only merchandise, like a 

casket and vault, or are you purchasing funeral services as well?

• What happens to the money you’ve prepaid? States have different 

requirements for handling funds paid for prearranged funeral services.

• What happens to the interest income on money that is prepaid and put into a 

trust account?

• Are you protected if the firm you dealt with goes out of business?

• Can you cancel the contract and get a full refund if you change your mind?

• What happens if you move to a different area or die while away from home? 

Some prepaid funeral plans can be transferred, but often at an added cost.” 

Furthermore, FTC’s guide suggests that a consumer tell their family about 

the plans they have made and where the documents are filed. FTC 

cautions that

“If your family isn’t aware that you’ve made plans, your wishes may not be 

carried out. And if family members don’t know that you’ve prepaid the funeral 

costs, they could end up paying for the same arrangements. You may wish to 

consult an attorney on the best way to ensure that your wishes are followed.” 

States’ guides provide similar educational information and cautions. For 

example, a pamphlet published by an Oregon regulator discusses preneed planning and resources and notes that there are many honest and 

reputable people and companies that offer pre-need funeral planning. 

However, the pamphlet also cautions consumers to become educated 

and obtain complete information on the laws and their rights because 

“there are unscrupulous con artists who sell overpriced plans or will take 

your money with no intention of fulfilling their promises.” Likewise, a 
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 54 GAO-12-65 Death Services 

Massachusetts consumer guide states that preplanning gives consumers 

the opportunity to shop around and the ability to designate their own 

preferences. The Massachusetts guide also provides a summary of 

consumer rights that are protected by law, and includes a checklist for 

pre-need funeral planning and arrangements. For example, 

Massachusetts informs consumers that if they wish to prepay for their 

funerals, the funeral director is to provide a standardized contract 

approved by the Board of Registration in Embalming and Funeral 

Directing, which includes an itemized statement of funeral goods and 

services that is FTC compliant, and a trust document with a bank or 

insurance policy. Funeral directors are also required to

• itemize all costs associated with the funeral and burial specifying 

those items where the cost is guaranteed and those items where the 

price may change,

• explain what will happen if they go out of business or if their funeral 

home is sold,

• disclose if they will receive a commission on the sale of an insurance 

policy, and

• provide written verification of where funds are being held if a trust 

account is used.

Massachusetts’s checklist suggests that, when prearranging and 

prepaying for a funeral, consumers should

• use the standardized state contract,

• know which costs are guaranteed and which may change,

• know the name of the bank trustee if the contract is funded through a 

trust account or know the insurance company and policy number if the 

contract is funded through an insurance policy,

• know whether the funeral director received a commission if the 

contract is funded through an insurance policy,

• know what happens if the funeral home is sold or goes out of 

business,

• know whether and how the contract can be changed,

• know they have 10 days from signing to cancel the contract and get a 

refund, and

• notify a family member or legal representative of this arrangement.
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 55 GAO-12-65 Death Services 

California is an example of another state that has also developed a 

consumer guide—the Consumer Guide to Funeral and Cemetery 

Purchases. Like other states’ guides, the California guide encourages 

pre-need planning and states that

“Planning in advance for your own disposition after death can spare your loved 

ones the anguish of making difficult decisions while in a state of grief. Shopping 

ahead of time, getting correct information, and planning in advance allows you to 

make informed decisions before you purchase, and may save you money.” 

Also, like other states, the California guide discusses various aspects of 

pre-need insurance and trusts, and provides information to educate 

consumers what is allowable under California law. California’s guide also 

advises consumers that they should visit and inspect several funeral 

establishments; and compare services restrictions, rules, and prices; and 

consider doing the following before they enter into a pre-need contract:

• ask for a guaranteed price plan and obtain a written estimate of any 

charges for any items or services that are not included in the plan,

• ensure that the contract includes a cancellation clause,

• ask if the funeral arrangements can be transferred to another funeral 

establishment, and

• find out where the money is being invested and who the trustees are.

Like Massachusetts’ guide, California’s guide suggests that consumers 

check the license status of a funeral provider, and provides links 

explaining key terms and required disclosures.

The pre-need segment of the industry has also come under increasing 

scrutiny in recent years because of various allegations of fraud and 

mismanagement of pre-need funds. These allegations have arisen in 

various states across the country and involve the potential loss of millions 

of dollars in consumers’ investments in pre-need trusts or insurance 

contracts. Some of these allegations involve criminal indictments for wire, 

bank, and mail fraud, and theft of pre-need deposits, while others involve 

civil litigation over the potential misappropriation of funds. Some of these 

allegations are currently pending either as criminal suits, civil suits, or 

both in various state and federal courts. The following are examples of 

reported incidents involving the sale of pre-need funeral and cemetery 

plans.

Allegations of Fraud 

and Mismanagement 

of Pre-Need Funds
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 56 GAO-12-65 Death Services 

National Prearranged Services, Inc. In 2010, the U.S. Attorney for the 

Eastern District of Missouri filed a 50-count federal indictment against 

officials of National Prearranged Services, a Missouri-based company 

that sold prepaid funeral services. The indictment alleges fraud and other 

crimes for conduct spanning at least 35 states with approximate losses to 

purchasers, funeral homes, and state insurance guarantee associations 

ranging from $450 million to $600 million.8

Forest Hill. In 2007, the District Attorney General for Shelby County, 

Tennessee and the Commissioner of the Tennessee Department of 

Commerce and Insurance filed a complaint in Shelby County against the 

owners and other officials of Forest Hill Cemeteries and Funeral Homes 

seeking injunctive and other relief. Subsequently, according to a Shelby 

County District Attorney press release, Clayton Smart—an owner—and 

Missouri and Texas represent 

the two most affected states, where, according to media reports, 85,000 

pre-need customers were affected. Charges alleged in the indictment 

included wire, bank, mail, and insurance fraud; money laundering; and 

multiple conspiracy charges involving the sale of pre-need funeral 

services. The violations allegedly took place from 1998 to 2008 and 

involved a number of illegal schemes. For example, the indictment 

alleged that officials withheld pre-need funds from trust and insurance 

accounts and removed funds from existing accounts for unauthorized 

purposes. The indictment also alleged that company employees used 

white-out or cross-outs to change the names of beneficiaries on pre-need 

insurance applications, including naming the company as sole 

beneficiary, in order to extract money without the customers’ knowledge. 

Additionally, the indictment alleged that the defendants concealed their 

practices from insurance regulators. As a result of the various fraudulent 

schemes, the company and its associated entities were unable to meet 

their mounting obligations and collapsed in 2008. The case is ongoing in 

federal and various state courts.

 

8 The case involves St. Louis-based National Prearranged Services, Inc, and affiliated 

entities including Texas-based companies Lincoln Memorial Life Insurance Company and 

Memorial Service Life Insurance Company. In a separate civil action, the National 

Organization of Life and Health Insurance Guaranty Associations is the plaintiff on behalf 

of the following state life and health insurance guaranty associations: Arizona, California, 

Colorado, the District of Columbia, Georgia, Idaho, Indiana, Iowa, Louisiana, Maryland, 

Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North 

Dakota, Ohio, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Washington, West 

Virginia, Wisconsin, and Wyoming. Other plaintiffs include the state guaranty associations 

of Missouri, Texas, Illinois, Kansas, Oklahoma, Kentucky, and Arkansas.
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 57 GAO-12-65 Death Services 

others were indicted for violations in Tennessee that took place from 2004 

to 2006, and that involved a number of illegal schemes, including money 

laundering by transferring stolen pre-need funds into accounts in the 

names of various corporations, entities, or investments owned or 

controlled by the defendants. According to the press release, the 

indictment also alleges that the transfers were under the guise of 

investing the funds for the benefit of the funeral home trusts and the 

beneficiaries of the prepaid funeral contracts, but in reality, the 

unauthorized transfers were for the defendants’ benefit, as well as other 

individuals or relatives. The press release further states that as a result of 

these transfers, $20 million of the fund were lost. According to a 2010 

Office of the Tennessee Attorney General annual report, Clayton Smart 

agreed to plead guilty to a charge of theft, as part of a global settlement 

with all the prosecuting jurisdictions. According to a Michigan Office of the 

Attorney General press release, Clayton Smart also pled guilty to counts 

of racketeering, embezzlement, and failing to properly trust or escrow 

funeral or cemetery or prepaid contract funds. The press release states 

that Clayton Smart embezzled up to $70 million in cemetery trust funds in 

Michigan. According to an official from the Tennessee Attorney General’s 

office, the cases for two of the defendants are still pending.

Illinois Funeral Directors Association. In 2006, an audit by the Illinois 

Office of the Comptroller determined that the Illinois Funeral Directors 

Association’s pre-need trust fund was in trouble and underfunded by 

nearly $40 million. According to the audit, the association, acting as a 

trustee for pre-need plans, collected unauthorized excess fees of 

approximately $9.6 million. At the time, the media reported that the trust 

fund was responsible for being able to pay for the contracted pre-need 

funerals of a reported 40,000 state residents at the time of need. State 

regulators told us that they are currently investigating why the trust fund 

was in trouble, and trying to figure out who was involved and what, if any, 

charges should be filed. As of June 2011, state regulators told us that no 

charges have been filed by the state. In 2009, class action lawsuits were 

filed by funeral directors who invested pre-need funds into the 

association’s trust, alleging the fiscal mismanagement of the trust fund.9

 

9 According to media reports, the plaintiffs alleged that the trust operated as a Ponzi 

scheme where money from new purchasers of pre-need contracts was used to pay for the 

funerals of previous purchasers.

The funeral directors alleged that they lost more than $140 million, and 

that some funeral homes could go bankrupt because they have been 
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 58 GAO-12-65 Death Services 

forced to pay the difference between what funerals actually cost and the 

inadequate amounts available from the trust fund.

The California Master Trust. In April 2011, the California Attorney 

General filed a complaint with the Superior Court of the State of 

California, County of Los Angeles against the California Master Trust, the 

California Funeral Directors Association, the Funeral Directors Service 

Corporation, and other defendants seeking a permanent injunction and 

restitution to consumers. According to a press release issued by the 

California Office of the Attorney General, the suit, which seeks to halt 

illegal activity and seeks restitution of about $14 million with interest, was 

filed on behalf of the Cemetery and Funeral Bureau of the Department of 

Consumer Affairs, which regulates the funeral industry in California. The 

suit was based on a June 2010 audit by the Cemetery and Funeral 

Bureau that alleges that millions of dollars of consumers’ money paid to 

the trust was misspent or mismanaged, that defendants paid at least 

$4.6 million in illegal kickbacks to funeral homes, and that the defendants 

paid themselves excessive administrative fees.10

One theme among these examples is that pre-need sellers were charged 

with or sued within the context of violating existing laws covering a variety 

of illegal activities that did not always focus on the state’s laws or 

regulations governing pre-need plans. For example, the National 

Prearranged Services indictment cited charges for wire, bank, mail, and 

 According to the press 

release, the California Master Trust, which as of April 2011 controlled 

about $63.5 million, was created in 1985 by the funeral directors to pool 

the prepaid funeral payments of individual purchasers throughout 

California. The suit also seeks to wrest control of the trust away from the 

Funeral Directors Service Corp., a subsidiary of the California Funeral 

Directors Association, and place it under a new trustee, and seeks a full 

accounting of the trust’s financial transactions as well as the defendants’ 

financial transactions with the trust since 2000. Before this complaint was 

filed, the Funeral Directors Service Corporation, which served as the 

administrator of the California Master Trust, had filed a complaint in 

November 2010 with the Superior Court of the State of California, County 

of Sacramento, which contends, among other things, that the findings of 

the 2010 audit are incorrect. These cases are still pending in court.

 

10 State of California, Department of Consumer Affairs, Cemetery and Funeral Bureau, 

California Master Trust, Trustees, Comerica Bank & Funeral Directors Service Corp. 

Review for Compliance, FD-07-03 (Sacramento: Revised June 2010).
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of 

Fraud and Mismanagement

Page 59 GAO-12-65 Death Services 

insurance fraud; money laundering; and multiple conspiracy charges 

involving the sale of prepaid funeral services. The Clayton Smart 

indictment cited charges of failing to appropriately deposit funds collected, 

transferring funds to be used for unauthorized purposes, failing to submit 

accurate records, and money laundering. Many of the charges in these 

cases could apply to financial transactions associated with any business 

or industry. Nonetheless, officials from two states, Tennessee and Illinois, 

involved in the incidents described above told us that their states have 

made changes to existing laws as a result of the incidents that occurred in 

their respective states.

• In 2007 and 2008, the state of Tennessee conducted a major review 

and revision of its pre-need laws in reaction to the problems that 

occurred in the state. The officials said that in rewriting their laws, they 

wanted to be proactive and address any other future issues that 

potentially could arise. However, the officials told us that “morality 

cannot be legislated” as determined criminals will find a way carry out 

their actions. According to state regulators, Tennessee implemented a 

number of changes to strengthen its state death care laws, such as 

requiring state or commissioner approval, as applicable, for a change 

in trustee, cemetery sales, and pre-need contracts and for rollovers 

from trust funds to insurance. In addition, a pre-need cemetery 

consumer protection account was established in 2007, and a preneed funeral consumer protection account was originally established 

in 2008.

• In 2010, legislation passed in the state of Illinois amended its preneed laws as the result of concerns regarding the Illinois Funeral 

Directors Association’s management of pre-need trust funds. 

Amendments enacted through the new legislation added a number of 

consumer protections. These included establishing a consumer 

protection fund for pre-need funeral plans, requiring an annual notice 

to all consumers regarding the status of their funds with an 

explanation of any fees charged by the trustee, clear identification of 

the trustee or insurance provider as well as the primary regulator of 

the trustee or insurance provider, and an explanation of the 

purchaser’s right to a refund. In addition, all pre-need sales are 
Appendix II: Pre-Need Plans, Consumer 

Education and Protection, and Allegations of

Fraud and Mismanagement

Page 60 GAO-12-65 Death Services 

required to be entrusted with an independent trustee that is a 

corporate fiduciary.11

 

11 According to Illinois state regulators, prior to the new legislation funeral homes could act 

as their own trustee if the fund was smaller than $500,000.
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 61 GAO-12-65 Death Services 

In Colorado, two state entities within the Department of Regulatory 

Agencies regulate some segments of the death care industry.

• The Office of Funeral Home and Crematory Registration regulates 

funeral homes and crematories. The office has two staff who spend a 

portion of their time on these death care-related areas.

• The Colorado Division of Insurance regulates pre-need contracts. 

Three staff in the office work on pre-need matters, as well as other 

insurance-related matters not related to the death care industry. 

These staff spend about 1/12th of their time on pre-need matters.

There are no state issued rules or regulations specific to cemeteries and 

third party sellers of funeral goods in Colorado.

Licensing requirements. Unlike in 2003 when the state regulator we 

surveyed reported that funeral homes are not regulated, as of 2010, 

funeral homes are required to be registered to operate in the state. 

Funeral directors or embalmers are required to practice at a registered 

funeral home but are not required to be registered with the state.1

 

1 Although they are not required to be registered with the state, funeral directors are 

required to have at least 2,000 hours practicing or interning as a funeral director and have 

directed at least 50 services. Embalmers must have at least 4,000 hours practicing of 

interning as an embalmer and have embalmed at least 50 bodies. According to officials 

representing the Office of Funeral Home and Crematory Registration, the funeral home is 

responsible for ensuring that these individuals meet these requirements. Furthermore,

according to an industry association, the association offers a voluntary certification 

program for practitioners, such as funeral directors, since the state of Colorado does not 

require individuals to be registered.

Funeral 

home applicants for registration are required to, among other things, 

(1) pay a registration fee, (2) provide a list of services provided at the 

funeral home, and (3) appoint an individual as designee of the funeral 

home. Funeral homes must renew their registration each year. According 

to the state regulator who responded to our 2011 survey on the regulation 

Appendix III: Colorado’s Regulation of the 

Death Care Industry

Regulatory Structure

Requirements and 

Enforcement 

Mechanisms

Funeral Homes, Funeral 

Directors, and Embalmers
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 62 GAO-12-65 Death Services 

of funeral homes, there were approximately 187 funeral homes operating 

in Colorado.

Inspection and audit requirements. The state has the authority to 

investigate activities of a funeral home, but according to officials 

representing the Office of Funeral Home and Crematory Registration, 

such inspections are not conducted on a regular basis, as they are 

generally only done if there is a complaint made against a funeral home.

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey on the regulation of funeral homes, 

the state received four consumer complaints regarding funeral homes in 

2010, when it began regulating funeral homes, and identified four 

violations against funeral homes including ones related to unregistered 

practice, burying the wrong body, and refusal to release human remains 

until full payment was received. According to representatives from a 

Colorado industry association, they also receive consumer complaints 

and have received about 12 complaints in the last 3 years. Further, the 

state regulator who responded to this issue on our survey reported 

issuing two probations since 2008.

Cemeteries are not regulated at the state level. This was also the case in 

2003 when we surveyed the Colorado state regulator of cemeteries.

Licensing requirements. Unlike in 2003 when the state regulator we 

surveyed reported that crematories were not regulated, as of 2010, 

crematories are required to be registered to operate in the state. 

Crematory operators must practice at a registered crematory but do not 

have to be registered with the state.2

 

2 Although not required to register with the state, a crematory operator is required to have 

at least 500 hundred hours practicing or interning as a crematory operator and have 

cremated at least 50 bodies. According to officials representing the Office of Funeral 

Home and Crematory Registration, the crematory is responsible for ensuring that these 

individuals meet these requirements. Furthermore, according to an industry association, 

the association offers a voluntary certification program for practitioners, such as crematory 

operators, since the state of Colorado does not require individuals to be registered.

Crematory applicants for registration 

are required to, among other things, (1) pay a registration fee, (2) provide 

a list of services provided at the crematory, and (3) appoint an individual 

as a designee of the crematory. Crematories must renew their registration 

Cemeteries and Cemetery 

Operators

Crematories and 

Crematory Operators
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 63 GAO-12-65 Death Services 

every year. According to the state regulator who responded to our 2011 

survey on the regulation of crematories, there were approximately 55 

crematories operating in Colorado.

Inspections and audit requirements. The state has the authority to 

investigate activities of a crematory, but according to officials representing 

the Office of Funeral Home and Crematory Registration, inspections are 

not conducted on a regular basis, as they are generally only done if there 

is a complaint made against a crematory.

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey on the regulation of crematories, the 

state received two consumer complaints regarding crematories in 2010, 

when it began regulating the crematories. In addition, the state regulator 

who responded to our survey reported that there were two violations, and 

reported that the violations typically involved crematories that were not 

registered. The state regulator who responded to our survey also reported 

that since 2008, the state had issued one letter of reprimand.

Cremation rate. According to the Cremation Association of North 

America, Colorado had a 63 percent cremation rate in 2009.3

Licensing requirements. Sellers of pre-need plans must be licensed to 

operate in the state. This was also the requirement in 2003, as reported 

by the state regulator who responded to our survey. Prospective 

licensees are required to, among other things, (1) pay an application fee 

and (2) provide documentation demonstrating a net worth of at least 

$10,000. According to the state regulator who responded to our survey, 

there were approximately 75 companies that sell pre-need plans—the 

majority of which are funeral homes, mortuaries, and cemeteries. 

Licensed pre-need sellers must renew their licenses once a year.

Inspection and audit requirements. The Colorado Division of Insurance 

has the authority to examine and investigate the pre-need contract seller 

to determine whether the pre-need contracts or forms of assignment 

comply with the seller’s certification and Colorado law. According to 

 

3 These data are preliminary. As of September 2011, association officials stated that the 

data had not been finalized.

Sales of Pre-Need Plans
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 64 GAO-12-65 Death Services 

officials at the Colorado Division of Insurance, pre-need sellers are 

required to submit an annual report to them, and they review these 

annual reports to verify that the appropriate amount of money is in the 

trust and that money was properly funded. In addition, sellers are also 

required to keep records that the Colorado Division of Insurance is 

required to examine at least once every 5 years—a requirement that was 

implemented in 2010.4

Contract and trusting requirements. Various contract and trusting 

requirements exist in the state of Colorado.5

• Colorado permits both trust-funded and insurance-funded contracts. 

According to officials at the Colorado Division of Insurance, there are 

many more insurance-funded pre-need contracts in force in Colorado 

now than trust-funded contracts because of the rate of return, 

although the exact number was not provided. Contracts are required 

to be price guaranteed, and irrevocable and revocable contracts are 

both permitted.

• All pre-need contracts sold in Colorado must contain certain 

information and disclosures to assist consumers. Required 

information or disclosures include (1) a clear identification of the 

purchaser and the beneficiary, (2) a complete description of the goods 

and services purchased, and (3) the cancellation policy.

• Sellers are required to trust at least 75 percent of the sales of 

cemetery and funeral goods and services. A trustee must be a 

chartered state bank, savings and loan association, credit union, or 

trust company that is authorized to act as fiduciary and that is subject 

to supervision by the state bank or financial services commissioner or

a national banking association, federal credit union, or federal savings 

and loan association authorized to act as fiduciary in Colorado.

 

4

 Pre-need sellers are required to pay for the examination that is conducted by contract 

examiners hired by the state. According to an industry association, the audit costs from 

$4,000 to $5,000 and is not structured in the most effective manner to identify fraud. The 

association officials stated that they are currently discussing these matters with the 

Colorado Division of Insurance.

5 For more information on pre-need plans, see app. II.
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 65 GAO-12-65 Death Services 

• After the initial deposit of the funds into a trust—a minimum of 75 

percent in Colorado—according to the state regulator who responded 

to our survey, only administrative fees can be withdrawn by a trustee.

• If a consumer cancels a contract, penalties may apply and the amount 

returned to the consumer may depend on when the cancellation is 

sought or the terms of the contract.

• Interest earned on a pre-need trust is the property of the contract 

seller, according to a consumer guide published by the Colorado 

Division of Insurance.

Consumer protection accounts. Colorado does not maintain a 

consumer protection account for pre-need contracts.

Funds invested in pre-need trusts. According to the state regulator who 

responded to our 2011 survey on the regulation of pre-need sales, 

Colorado does not track the amount of money invested in pre-need funds.

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey on the regulation of pre-need plans, 

the Colorado Division of Insurance has taken four disciplinary actions 

against sellers of pre-need plans since 2008, reporting that the most 

prevalent violations included (1) unauthorized sellers, (2) failure to place 

funds into a trust, and (3) the use of pre-need contract forms that did not 

comply with law.

Incidents related to pre-need contracts have occurred since 2003 in 

Colorado.

• In one incident, a pre-need seller misled consumers and eluded 

Colorado’s trusting requirements by offering consumers a pre-need 

plan that included two separate contracts—one for future services and 

another for the immediate purchase of goods. The seller trusted funds 

received for the future services contract but not for the goods contract. 

This issue was uncovered as a result of investigation by the Colorado 

Division of Insurance after two consumer complaints were filed with 

the division in 2008. The pre-need seller agreed to pay a fine for 

violations identified as a result of the investigation. Further, the seller 

agreed to trust 75 percent of the total sales of both contracts; 

requiring the seller to increase the amount of money trusted by about 

$1.5 million. According to officials representing a state industry 

association, although no consumers had been harmed in this 
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 66 GAO-12-65 Death Services 

situation, it was the largest amount of money involved in a pre-need 

incident in Colorado.

• In 2008, the Colorado Division of Insurance found that another seller 

did not properly trust funds from 23 pre-need contracts. The seller’s 

license was suspended and the seller was ordered to trust the funds 

appropriately and pay a fine.

• In another case, a funeral home owner was selling pre-need contracts 

and not trusting any of the funds, even though the individual’s license 

had been revoked. The Colorado Division of Insurance reported in 

2006 that this incident was uncovered as a result of numerous 

consumer complaints received by the division. According to officials 

representing a state industry association, consumers lost all of their 

funds in this case, totaling about $500,000. The funeral home owner 

was fined.

According to officials representing the Colorado Division of Insurance, the 

division is limited in the amount of authority it has to take punitive actions. 

The division’s administrative sanctions include a $1,000 fine per incident 

and the suspension or removal of a practitioner’s license. However, 

officials stated that they can refer violators to other agencies, such as the 

local district attorney for criminal prosecution.

A person who sells caskets, urns, or other funeral goods but does not 

provide funeral services is exempt from any requirements in the Colorado 

Mortuary Science Code.

State regulatory officials reported various changes to state laws and 

regulations regarding the death care industry since 2003. As reported by 

Colorado state regulators who responded to our 2011 surveys, changes 

included those that clarified legislation or regulation, enhanced consumer 

protections, changed the state’s regulatory organization, and imposed 

stricter licensing requirements. Respondents stated that they believe 

these changes either slightly or significantly strengthened their regulatory 

program. Specific examples of these changes are listed below.

Third Party Sellers of 

Funeral Goods

Legislative Changes 

and Rationale
Appendix III: Colorado’s Regulation of the 

Death Care Industry 

Page 67 GAO-12-65 Death Services 

• Pursuant to legislation passed in 2009, funeral homes and 

crematories are now required to be registered with the state.6

According to state regulators, this change came about as a result of 

lobbying efforts from the death care industry. Officials from a state 

association stated that the association sought the regulation of the 

industry because although it believed that many reputable people 

operate the industry, a few bad individuals can give the entire industry 

a poor reputation.

• Legislation passed in 2010 authorizes the Colorado Department of 

Insurance to use independent contractors to review the contracts from 

all sellers once every 5 years. According to an official from the 

department, a 2009 sunset review of legislation recommended 

requiring these examinations of pre-need contracts because of some 

improprieties of pre-need sellers that had taken place at the time. This 

official further stated that other than this new requirement, the state 

statute regarding pre-need has remained largely unchanged since the 

original 1995 legislation.

• In April 2011, a law was passed to ensure that alternative methods of 

cremations, such as alkaline hydrolysis, also fall under the cremation 

regulations.7

 

6 According to officials representing the Office of Funeral Home and Crematory 

Registration, under current law, one registered facility where bodies are prepared could be 

registered, but services could be performed at various facilities that do not have to be 

registered. Officials stated that there is a proposed bill that if enacted would ensure that all 

facilities are required to be registered individually.

7 According to officials from the Cremation Association of North America, alkaline 

hydrolysis is a water-based chemical process that is used to reduce a body to residue.
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 68 GAO-12-65 Death Services 

In Illinois, two state entities directly regulate the death care industry. 

Some regulatory responsibilities may transition between the two entities 

under legislative changes that are being made.

• The Illinois Department of Financial and Professional Regulation has 

regulatory responsibility for funeral directors, embalmers, and 

cemetery operators. The department has eight total staff and three 

investigators. Depending upon how the recently enacted Cemetery 

Oversight Act is ultimately implemented, additional staff may be 

added to help with the oversight of cemetery operators. Staff have 

responsibilities other than dealing with death care-related matters. In 

addition, two boards within the also assist with regulation. The Funeral 

Directors and Embalmers Licensing and Disciplinary Board provides 

advice and recommendations to the department staff upon request 

regarding rulemaking and disciplinary decisions. The board is made 

up of seven members appointed by the Secretary—this should include 

six licensed funeral directors and embalmers, and one public member. 

The Cemetery Oversight Board consists of the Secretary of the Illinois 

Department of Financial and Professional Regulation, who serves as 

chairperson, and eight members appointed by the Secretary; the eight 

members must include five members who represent segments of the 

cemetery industry, two members who represent consumer interests, 

and one member who represents the interests of the general public.

• The Illinois Office of the Comptroller regulates sales of pre-need plans 

and crematory operators. The office is authorized 10 staff positions 

and 10 field auditor positions.

According to the state regulator who responded to our survey on the third 

party sellers of funeral goods, there are no rules or regulations specific to 

third party sellers of funeral goods in Illinois.

Licensing requirements. Funeral homes are not regulated, but funeral 

directors and embalmers are required to be licensed to operate in the 

state. This was also the case in 2003 when we surveyed the Illinois state 

regulator. Illinois offers a joint license for funeral directors and 

Appendix IV: Illinois’s Regulation of the 

Death Care Industry

Regulatory Structure

Requirements and 

Enforcement 

Mechanisms

Funeral Homes, Funeral 

Directors, and Embalmers
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 69 GAO-12-65 Death Services 

embalmers. Prospective licensees are required to, among other things, 

(1) pay an application fee, (2) be at least 18 years of age, (3) complete an 

internship of at least 1 year under a licensed funeral director or 

embalmer, (4) pass the requisite exam, (5) complete 30 semester hours 

of college credit, and (6) have an associate’s or baccalaureate degree in 

mortuary science from an approved program of mortuary science or an 

equivalent associate’s degree. Funeral directors and embalmers must 

renew their joint license every 2 years as well as complete 24 hours of 

continuing education within a 24-month period. In June 2011, Illinois 

Department of Financial and Professional Regulation officials reported 

that there were 2,794 funeral directors and embalmers licensed in 

Illinois.1

Inspection and audit requirements. The Illinois Department of Financial 

and Professional Regulation has the authority to conduct inspections and 

audits. According to department officials, the department has audited 

funeral homes in the past but has not done so recently because of 

resource constraints. During these prior audits, officials stated that they 

would contact staff at a sample of funeral homes and ask them to 

produce certain information, such as continuing education records, and in 

some cases, officials visited funeral homes in person.

Consumer complaints and violations. Consumer complaints regarding 

funeral homes and funeral directors are collected by various entities in 

Illinois.

• According to the 2009 Cemetery Oversight Task Force report, the 

Illinois Attorney General receives about 70 complaints each year for 

cemeteries, funeral homes, and monument companies.2 According to 

the Attorney General, complaints against funeral homes were often 

based on the failure of the funeral homes to provide promised 

services, the quality of the products or services, or confusion about 

the cost of services.

 

1 In addition to the joint licensees, officials reported that there were 142 licensed interns 

and 89 funeral director licensees—the latter of which were issued prior to the state 

offering the joint license.

2 In 2008, the Illinois Attorney General received a total of 33,335 consumer complaints.
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 70 GAO-12-65 Death Services 

• An official from one industry association stated that it receives about 

one to two complaints each week. According to this association, it will 

attempt to resolve the matter if it involves one of its members, and 

about 75 percent of the time the association is able to do so. Most 

complaints the association receives are related to a consumer who is 

unhappy with a service received from a funeral director, but on 

occasion the association will also get complaints in which consumers 

claim that they paid for something but did not receive it.

• Another industry association reported that from January 2002 to June 

2011 it had received 305 complaints or inquiries regarding the 

industry. Complaints consisted of concerns about maintenance, 

contractual obligations, customer service, business conduct, and 

general questions. According to officials, the association will intervene 

on behalf of the consumer regarding complaints against the industry 

and attempt to resolve these issues.

From January 2011 to June 2011, the Illinois Department of Financial and 

Professional Regulation took disciplinary actions against 11 different 

funeral directors or embalmers. Specifically, the department took action 

on 4 of these licensees because they defaulted on an educational loan or 

did not pay their state taxes, issued cease and desist orders against two 

funeral directors who were unlicensed, and reprimanded and fined 

another for failure to implement sufficient protocols to prevent 

misidentification of cremated human remains. For the remaining 4, the 

Illinois Department of Financial and Professional Regulation either placed 

them on probation or revoked their licenses for actions that included 

violation of regulations, unprofessional conduct, or untrustworthiness.

Licensing requirements. Licensing requirements for cemetery operators 

have changed since we surveyed state regulators in 2003. According to 

officials representing the Illinois Office of Financial and Professional 

Regulation, in 2003, cemetery operators had to be audited if their 

cemetery had a care fund of more than $250,000, and licensed if they 

were selling pre-need plans and were not exempt.3

 

3 According to the state regulator who responded to our survey in 2003, the types of 

cemeteries that were exempt from regulation at the time included fraternal, municipal, 

state, federal, religious, and family cemeteries. Regardless of whether a cemetery 

maintains a care fund or sells pre-need plans, every cemetery is required to register with 

the Illinois Office of the Comptroller.

This requirement 

Cemeteries and Cemetery 

Operators
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 71 GAO-12-65 Death Services 

remained the same until passage of the Cemetery Oversight Act in 2010, 

which requires cemetery operators and customer service personnel to be 

licensed to operate in the state. However, according to officials from the 

Illinois Department of Financial and Professional Regulation, since rules 

implementing applicable provisions of the act have not been approved as 

of November 2011 and because trailer bills are being discussed that 

would change the act, not all requirements under the act have been 

implemented. As presently enacted, the act exempts or partially exempts 

some cemeteries from its requirements.

• Cemetery operators of family burial grounds; cemetery operators that 

have not engaged in any interments, inurnments, or entombments in 

the last 10 years and do not accept or maintain care funds; and 

cemeteries that are smaller than 2 acres and that do not accept or 

maintain care funds are fully exempt from requirements of the act.

• Cemetery operators of public cemeteries, religious cemeteries, and 

cemeteries with 25 or fewer interments, inurnments, or entombments 

in the prior 2 years that do not accept or maintain care funds may 

apply for partial exemption from requirements of the act.4

Under the act, to become a cemetery operator (referred to as a cemetery 

authority in the act), prospective licensees must, among other things, 

(1) pay an application fee, (2) establish that he or she is of good moral 

character, and (3) provide evidence that the applicant has financial 

resources to comply with maintenance and record-keeping provisions of 

the act. Prospective licensees for positions of cemetery manager or 

customer service employee at a licensed cemetery must, among other 

things, (1) pay an application fee, (2) be at least 18 years of age, 

(3) complete a high school education or an equivalent, and (4) pass the 

requisite exam. The act further provides that license expiration, renewal, 

and other requirements, which have yet to be implemented. According to 

an official from the Illinois Department of Financial and Professional 

Regulation, Illinois does not have current data on the number of 

cemeteries that operate in the state, but will as a result of the Cemetery 

Oversight Act.

 

4 Operators of partially exempt cemeteries are not required to be licensed, but must meet 

other requirements such as filing and maintaining a map of the cemetery; entering the 

number of interments, inurnments, or entombments into the department’s database; and 

adhering to the consumer bill of rights.
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 72 GAO-12-65 Death Services 

Inspection and audit requirements. The Illinois Department of Financial 

and Professional Regulation has the authority to conduct inspections and 

audits. In addition, the Cemetery Oversight Act requires that all 

cemeteries subject to the act submit an annual report to the department, 

subject to any rules of the department specifying the contents of the 

required reports.

Under the Cemetery Oversight Act, cemeteries are required to keep 

various records.

• Cemeteries are required to record burials and cremations in the 

Illinois Department of Financial and Professional Regulation’s 

Cemetery Oversight Database. From December 2010 to June 2011, 

1,037 cemeteries entered 23,290 burials into the database. The 

Illinois Department of Financial and Professional Regulation estimates 

that this is about 75 percent of all required burial entries. According to 

one industry association, although some cemetery operators of 

smaller cemeteries were initially concerned that the database would 

be burdensome, once it was implemented, many operators reported 

the usefulness of having digital records as a result of the new 

database.

• Cemetery operators are required to maintain a cemetery map, 

detailing items such as the location of all plots.

• Cemeteries are required to provide consumers with a price list for all

cemetery products offered for sale.

Consumer complaints and violations. Consumer complaints regarding 

cemeteries or cemetery operators are collected by various entities in 

Illinois.

• As stated previously, the Illinois Attorney General receives about 70 

complaints each year regarding cemeteries, funeral homes, and 

monument companies. The most frequent complaints they receive 

calls about are regarding cemetery maintenance—such as the upkeep 

of gravesites—and issues with respect to pre-need contracts.

• According to officials representing the Illinois Department of Financial 

and Professional Regulation, the department’s consumer hotline has 

been in effect since March 2010, and they have received just over 175 

calls as of December 2010, but more than half of the calls were not 

complaints. Of the calls received, 84 were complaints—about 50 of 

which were related to maintenance and about 30 were related to 
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 73 GAO-12-65 Death Services 

memorial or marker issues. According to the state regulator who 

responded to our 2011 survey on the regulation of cemeteries, the 

complaint hot-lines are one of the state’s most effective consumer 

protections.

• As stated previously, an Illinois industry association reported that from 

January 2002 to June 2011 it had received 305 complaints or inquiries 

regarding cemeteries and funeral homes. Complaints consisted of 

concerns about maintenance, contractual obligations, customer 

service, business conduct, and general questions.

Licensing requirements. Crematory operators are required to be 

licensed to operate in the state. Prospective licensees are required to, 

among other things, (1) pay an application fee and (2) obtain a 

certification from an approved training program for all employees who will 

operate the cremation unit. There are no requirements for crematory 

operators to renew their licenses. In June 2011, the Illinois Office of the 

Comptroller reported that there were 102 licensed crematory operators.

Inspections and audit requirements. The Illinois Office of the 

Comptroller has the authority to conduct inspections and audits.5 In 

addition, each crematory operator is required to file an annual report with 

the Illinois Office of the Comptroller.6

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey, no consumer complaints regarding 

crematories were received in 2008, 2009, and 2010 and no violations 

against crematories or crematory operators were reported since 2008.

The report must, among other 

things, provide the total number of cremations performed at the crematory 

in the prior year and include an attestation by the licensee that all 

applicable permits and certifications are valid.

 

5 Effective March 12, 2012, the Department of Financial and Professional Regulation is 

the authority responsible for conducting such inspections.

6 Effective March 12, 2012, such annual reports are to be filed with the Department of 

Financial and Professional Regulation.

Crematories and 

Crematory Operators
Appendix IV: Illinois’s Regulation of the Death 

Care Industry

Page 74 GAO-12-65 Death Services 

Cremation rate. According to the Cremation Association of North 

America, Illinois had a 34 percent cremation rate in 2009.7

Licensing requirements. Sellers of pre-need plans are required to be 

licensed to operate in the state. Prospective licensees are required to, 

among other things, (1) pay an application fee and (2) provide a detailed 

statement of their assets and liabilities. Further, according to the state 

regulator who responded to our survey, a licensee must be associated 

with a licensed funeral home or cemetery. There are no requirements that 

pre-need sellers renew their licenses. As of June 2011, the Illinois Office 

of the Comptroller reported that there were 1,042 pre-need sellers 

licensed in the state.

Inspection and audit requirements. The Illinois Office of the 

Comptroller has the authority to conduct inspections and audits and 

examine any books or records related to a pre-need licensee. According 

to officials representing the Illinois Office of the Comptroller, they try to 

audit pre-need sellers every 4 to 5 years. Given limited resources, 

officials stated that they try to focus on those businesses with the largest 

amount of money invested in pre-need. In addition, licensees must file an 

annual report with the Illinois Office of the Comptroller. According to 

officials representing the office, they review these annual reports, 

examining the financial information in the reports to ensure that funds 

have been properly trusted and there is no abnormal fluctuation from 

beginning to end of year data.

Contract and trusting requirements. Various contract and trusting 

requirements exist in the state of Illinois.8

• Insurance-funded and trust-funded pre-need contracts are permitted 

in Illinois. According to officials representing the Illinois Office of the 

Comptroller, funeral homes began to move from more trust-funded 

plans to more insurance-funded plans. They explained that from the 

consumer’s standpoint, consumers who purchase insurance-funded 

plans are more in control of their funds and such plans are less risky. 

 

7 These data are preliminary. As of September 2011, association officials stated that the 

data had not been finalized.

8 For more information on pre-need plans, see app. II.

Sales of Pre-Need Plans
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 75 GAO-12-65 Death Services 

According to the state regulator who responded to our 2011 survey, 

irrevocable, revocable, guaranteed, and nonguaranteed pre-need

contracts are all permitted in Illinois. However, pre-need cemetery 

plans must be sold on a guaranteed price basis.

• All pre-need contracts sold in Illinois must contain certain information 

and disclosures to assist consumers. Required information or 

disclosures include (1) a clear identification of the purchaser and the 

beneficiary, (2) a complete description of the goods and services 

purchased, and (3) the cancellation policy.

• Sellers are required to trust 85 percent of the purchase price of outer 

burial containers; 95 percent of the purchase price of funeral services, 

personal property, and merchandise; and 50 percent of all cemetery 

goods and service sales, except outer burial containers (of which 85 

percent must be trusted), with a corporate fiduciary.

• A trustee is generally allowed to withdraw a reasonable fee. In 

addition, a trustee is required to annually furnish to each purchaser a 

statement identifying (1) the receipts, disbursements, and inventory of 

the trust, including an explanation of any fees or expenses charged by 

the trustee; (2) an explanation of the purchaser’s right to a refund, if 

any; and (3) the primary regulator of the trust as a corporate fiduciary 

under state or federal law.

• With respect to a pre-need cemetery sale, if a seller changes trustees, 

the trustee must provide written notice of the change to the 

Comptroller no less than 28 days prior to the change in trustee.

• According to the state regulator who responded to our survey, 

consumers can transfer or cancel their contracts but penalties may 

apply. According to an Illinois Funeral Directors Association guide, 

unless a contract is made irrevocable, a consumer may cancel a preneed contract at any time. The penalties for canceling a pre-need 

contract will be different depending upon when the contract is 

canceled.

• According to officials from the Illinois Office of the Comptroller, if 

money is left over in a trust fund for guaranteed contracts, the money 

should go to the estate. However, if the contract is nonguaranteed,

there is no applicable requirement.

Consumer protection accounts. Illinois has two consumer protection 

accounts—one for pre-need cemetery plans and another for pre-need 
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 76 GAO-12-65 Death Services 

funeral plans. The cemetery account was created in 1986 and the funeral 

account in 2010. For each pre-need contract sold, sellers must contribute 

$5 to the respective account. Funds from these accounts are to be used 

for consumer restitution. According to officials representing the Illinois 

Office of the Comptroller, in June 2011, no claims have been made for 

the funds from the funeral account but the cemetery account was utilized 

in 2010, although prior to this use, the account had not been used in 

about 10 years.

Funds invested in pre-need trusts. As of June 2011, the Illinois Office 

of the Comptroller reported that there was over $300 million held in trusts 

for pre-need funeral plans, over $1.4 billion held in insurance for pre-need 

funeral plans, and over $71 million held in pre-need merchandise funds.

Consumer complaints and violations. Consumer complaints regarding 

pre-need sellers are collected by various entities in Illinois. According to 

the state regulator who responded to our 2011 survey on the regulation of 

pre-need plans, the state had received about 27 consumer complaints 

regarding pre-need plans in 2008, 46 in 2009, and 21 in 2010. Officials 

representing the Illinois Office of the Comptroller stated that the common 

types of complaints received included those related to contract disputes 

and refund delays. Further, these officials stated that a newer complaint 

that they are starting to receive is related to pre-need plans that are 

funded by extended life insurance policies, and that in these cases, 

consumers are paying a lower monthly payment for a limited time period 

at the end of which they are to pay the entire remaining balance. If 

consumers are unable to pay the remaining balance, they are required to 

continue to make payments but end up paying significantly more than 

their purchase is worth. Officials stated that they are looking into this 

issue to determine if there is any violation of the law.

According to the state regulator who responded to our 2011 survey on the 

regulation of pre-need plans, there were approximately 100 violations 

against licensees for pre-need sales since 2008. The top three most 

prevalent types of violations noted by the state regulator who responded 

to this issue were (1) improper entrustment of funds, (2) improper 

fiduciary oversight of funds or improper withdrawal, and (3) contract 

language failing to meet statutory requirements. Officials representing the 

Illinois Office of the Comptroller stated that they are very limited on the 

types of disciplinary actions that they can take against licensees. For 

example, to revoke or suspend a license, the process is slow and the 

proceedings are very costly. Officials compared this to other states where 
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 77 GAO-12-65 Death Services 

if a licensee doesn’t file the appropriate information, then the license is 

automatically suspended.

Officials noted that they believe that one of the benefits of the Cemetery 

Oversight Act is that between the Illinois Department of Financial and 

Professional Regulation and the Illinois Office of the Comptroller, the 

state will likely be able to take more actions. Illinois Office of the 

Comptroller officials also stated that they would like to have a licensee 

lookup system similar to the one the Illinois Department of Financial and 

Professional Regulation has for its funeral director and embalmer 

licensees—which is available for public use. The Illinois Office of the 

Comptroller is discussing doing this but needs to define terms, such as 

what is considered a significant issue.

According to the state regulator who responded to our 2011 survey on the 

regulation of pre-need plans, other than rules or regulations that generally 

apply to all businesses, Illinois does not have rules or regulations in place 

that specifically address third party sellers of funeral goods.

State regulatory officials reported various changes to state laws and 

regulations regarding the death care industry. As reported by the state 

regulators who responded to our 2011 surveys, changes included those 

that enhanced consumer protections, provided clarification of legislation 

or regulation, changed the state’s regulatory organization, and imposed 

stricter licensing requirements, and that these changes either slightly or 

significantly strengthened the state’s regulatory program. Specific 

examples of these changes include the passage of the Cemetery 

Oversight Act and amending the Illinois Funeral or Burial Funds Act.

• The Cemetery Oversight Act was passed in 2010 in response to a 

reported incident at an Illinois cemetery and to address task force 

recommendations, as indicated by officials from the Illinois 

Department of Financial and Professional Regulation. Workers at an 

Illinois cemetery were reported to have desecrated and vandalized 

graves in a scheme to resell burial plots to unsuspecting members of 

the public. As a result of these allegations, the Governor created the 

Cemetery Oversight Taskforce to review the incident and make 

recommendations. The task force concluded that among other things, 

the lack of regulatory oversight was a contributing factor to the 

criminal scheme that occurred at the cemetery. Recommendations 

made by the taskforce included the following: (1) consolidate the 

Third Party Sellers of 

Funeral Goods

Legislative Changes 

and Rationale
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 78 GAO-12-65 Death Services 

regulatory authority of funeral and burial practices to the Illinois 

Department of Financial and Professional Regulation, (2) consider the 

adoption of new legislation that provides for the licensure of cemetery 

managers and ensure that only qualified persons are authorized to 

own or operate a cemetery, and (3) consolidate and amend existing 

statutes. Among other things, the Cemetery Oversight Act requires 

certain cemetery operators to be licensed to operate in the state,9

requires that cemeteries conspicuously display the department’s 

consumer hotline number, requires cemeteries to file cemetery maps, 

and requires cemeteries to enter burials and cremations into a 

database developed by the Illinois Department of Financial and 

Professional Regulation.

According to officials from the Illinois Department of Financial and 

Professional Regulation, because of concerns about the costs to 

cemeteries in meeting requirements under the Cemetery Oversight Act, 

particularly smaller cemeteries, no rules have been issued as of 

November 2011. According to one Illinois industry association, the 

association supported the act despite knowing that there were concerns 

and more work would need to be done before the act was fully 

implemented. An official representing this association stated that, as a 

result of the incident at the Illinois cemetery, the political climate 

demanded that some legislation be passed. According to another industry 

association, laws were already in place, prior to the Cemetery Oversight 

Act that addressed conduct that occurred at this cemetery. The Illinois 

Department of Commerce and Economic Opportunity analyzed the 

potential impact of the Cemetery Oversight Act and agreed that the act 

would have a significant impact on approximately 119 small businesses.10

 

9 Specifically, it requires the operators and other specified parties at nonexempt 

cemeteries to be licensed to operate in the state.

According to officials from the Illinois Department of Financial and 

Professional Regulation, trailer bills have since been introduced to 

address the concerns related to the act.

10 Specifically, the report stated that (1) fully regulated cemeteries will have a minimum 

additional cost of about $127 per burial; (2) partially exempt cemeteries will incur a 

minimum additional cost of about $34 per burial; (3) the industry believes that in some 

cases, it could cost as much as $10,000 per year to be in compliance with licensing, legal 

fees, fines, accounting fees, and additional staff; (4) the act will have a significant impact 

on approximately 119 small businesses; and (5) none of the small businesses affected 

gross more than $4 million per year.
Appendix IV: Illinois’s Regulation of the Death 

Care Industry 

Page 79 GAO-12-65 Death Services 

• The Illinois Funeral or Burial Funds Act was amended in 2010 in 

response to the concerns regarding an Illinois association’s 

management of pre-need funds (see more on this issue in app. II). 

The new law, among other things, (1) established a consumer 

protection fund for pre-need funeral contracts and (2) required that all 

pre-need sales be entrusted with a corporate fiduciary that is 

independent.

Although the state regulators reported that changes such as the 

Cemetery Oversight Act and the amendments to the Illinois Funeral or 

Burial Funds Act have strengthened Illinois’s regulatory program, some 

state association representatives in Illinois stated that they believe that 

these laws would not have prevented incidents similar to those that 

occurred at the Illinois cemetery or with the funeral association trust. 

State regulators state that there is no way to be sure if the changes to the 

laws would have prevented these kinds of incidents, but that there may 

have been the ability them earlier. Further, state regulators in Illinois 

stressed the importance of consumer education and whistleblower 

protections to help prevent and detect future problems.
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 80 GAO-12-65 Death Services 

In Oregon, two entities regulate the death care industry.

• The Oregon Mortuary and Cemetery Board is responsible for 

regulation of funeral homes, funeral directors, embalmers, cemeteries, 

crematories, and salespersons of trust-funded pre-need plans, among 

others. The board is made up of 11 members who are appointed by 

the Governor. Three members are required to be representatives of 

cemeteries, 2 members must be licensed funeral service practitioners, 

1 must be a licensed embalmer, 1 must be a representative of a 

crematory, and 4 must be public representatives. In addition, the 

Oregon Mortuary and Cemetery Board has 5.71 full-time equivalent 

staff, including one full-time inspector and one full-time investigator.

• The Division of Finance and Corporate Securities within the 

Department of Consumer and Business Services has regulatory 

responsibilities for pre-need trust accounts. The Department of 

Consumer and Business Services has a 0.8 full-time equivalent staff 

for registration, examination, and regulation of pre-need trusts and 

contracts.

There are no rules or regulations specific to third party sellers of funeral 

goods in Oregon.

Licensing requirements. Funeral homes, funeral directors, and 

embalmers must be licensed to operate in the state, which was also was 

the case in 2003, as reported by the Oregon state regulator responding to 

our survey. Funeral home applicants must, among other things, (1) pay a 

fee and (2) disclose that the home will be operated by licensed funeral 

service practitioner. Prospective funeral director and embalmer licensees 

are required to, among other things, (1) pay a fee, (2) pass an exam, and 

(3) have 1 year of prior experience. Embalmers licensees must have also 

graduated from an accredited program of funeral service education, and 

funeral service practitioners must generally have graduated from an 

appropriate associate’s degree program. Funeral home, funeral director, 

and embalmer licensees are required to renew their licenses every 2 

years. According to the state regulator responding to our 2011 survey on 

Appendix V: Oregon’s Regulation of the Death 

Care Industry

Regulatory Structure

Requirements and 

Enforcement 

Mechanisms

Funeral Homes, Funeral 

Directors, and Embalmers
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 81 GAO-12-65 Death Services 

the regulation of funeral homes, there were approximately 200 funeral 

homes operating in Oregon.

Inspection and audit requirements. The Oregon Mortuary and 

Cemetery Board is required to inspect funeral homes every 2 years, but 

may also conduct random inspections at other times. In conducting 

inspections, the board utilizes a standard funeral establishment inspection 

checklist. According to an official representing the board, items on the 

checklist include (1) sanitation of the facility, (2) whether the facility’s 

license is posted, (3) whether price lists are available and contain 

required disclosures and no misrepresentations and (4) the accuracy and 

completeness of arrangement records. According to officials representing 

the Oregon Mortuary and Cemetery Board, resources are not available to 

do many on-site inspections.

Consumer complaints and violations. According to the state regulator 

responding to our 2011 survey on the regulation of funeral homes, the 

state received approximately 60 complaints in 2008, 45 in 2009, and 43 in 

2010.

According to an official from the Oregon Mortuary and Cemetery Board, 

the typical complaints received regarding funeral homes involve 

(1) overcharging; (2) inappropriate conduct, such as being rude; 

(3) unlicensed activity; and (4) misrepresentation, such as telling 

consumers something is required when it is not or advertising that they 

have the lowest prices when they do not. As a result of complaints, 

applications, or inspections, an official from the Oregon Mortuary and 

Cemetery Board reported that the board had 105 cases opened against 

funeral homes over a 3-year period—2008, 2009, and 2010.1 Further, the 

state regulator who responded to this issue on our survey reported taking 

various enforcement actions since 2008, including 42 non-compliance 

actions, 8 fines, 4 probations, 4 revocations of licenses, and 41 civil or 

criminal prosecutions.2

 

1 This does not include cases opened against applicants for licensure and individuals 

licensed.

2 An official from the Oregon Mortuary and Cemetery Board clarified that the 41 civil or 

criminal prosecutions refers to civil actions and referrals for criminal prosecution.
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 82 GAO-12-65 Death Services 

Licensing requirements. In general, a person may not conduct the 

business of operating a cemetery without receiving a license—that is, a 

certificate of authority. In general, “operating cemeteries”—defined as 

cemeteries that (1) perform interments; (2) have fiduciary responsibilities 

for endowment care, general care or special care funds; or (3) have 

outstanding pre-need service contracts for unperformed services—must 

be licensed. Cemetery applicants must, among other things, pay a fee 

and pay biennial renewal fees. Exempt operating cemeteries—cemeteries 

with 10 or fewer interments annually—are not required to pay the biennial 

renewal fees but must maintain licensure and pay a principal fee when a

new manager is assigned. A nonoperating cemetery that is not a historic 

cemetery—any burial place that contains the remains of one or more 

persons who died prior to February 14, 1909—must be registered with the 

Oregon Mortuary and Cemetery Board but does not need to be licensed. 

According to an official representing the Oregon Mortuary and Cemetery 

Board, there were at least 454 operating cemeteries in Oregon.

Inspection and audit requirements. The Oregon Mortuary and 

Cemetery Board is required to inspect licensed cemeteries every 2 years, 

but may conduct random inspections at other times as well.3

Consumer complaints and violations. Consumer complaints regarding 

cemeteries and cemetery operators are collected by various entities in 

Oregon. According to the state regulator who responded to our 2011 

survey, the state received approximately 23 complaints against 

cemeteries in 2008, 15 in 2009, and 15 in 2010.

In 

conducting inspections, the board utilizes a standard cemetery inspection 

checklist. According to an official representing the board, items on the 

checklist include whether a cemetery map, cemetery rules, and required 

records of internment and ownership exist. According to officials 

representing the Oregon Mortuary and Cemetery Board, resources are 

not available to do many on-site inspections. In addition, licensed 

cemeteries are required to keep a detailed, accurate, and permanent 

record of all transactions that are performed for the care and preparation 

and final disposition, including all remains interred or cremated and the 

name of the purchaser, among other information.

4

 

3 The board may not subject an exempt operating cemetery to random inspections.

According to an official 

4 According to an official representing the Oregon Mortuary and Cemetery Board, this 

does not include cases opened against applicants for licensure and individuals licensed.

Cemeteries and Cemetery 

Operators
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 83 GAO-12-65 Death Services 

representing the Oregon Mortuary and Cemetery Board, the typical 

complaints received against cemeteries include failure to maintain 

grounds; operating without a license; failure to follow through with agreedupon arrangements, such as markers not being installed in a timely 

matter; double selling a grave; inaccurate record keeping; and failing to 

properly supervise pre-need salespersons. Further, the state regulator 

who responded to this issue on our survey reported taking various 

enforcement actions since 2008, including 7 non-compliance actions, 2 

fines, and 20 civil or criminal prosecutions. According to guidelines from

the Oregon State Mortuary and Cemetery Board, with the exception of 

egregious or continuing violations, deficiencies noted during routine 

inspections rarely lead to formal disciplinary action.

Licensing requirements. A person may not conduct the business of 

operating a crematory without receiving a license—that is, a certificate of 

authority. In 2003, the Oregon state regulator who responded to our 

survey provided that crematories were required to be licensed to operate 

in the state, but that crematory operators were not required to be 

licensed. Crematory applicants must, among other things, pay a fee. 

Certificates of authority require renewal every 2 years. According to the 

state regulator who responded to our 2011 survey on the regulation of 

crematories, there were approximately 65 crematories operating in 

Oregon.

Inspections and audit requirements. The Oregon Mortuary and 

Cemetery Board is required to inspect crematories every 2 years, but may 

conduct random inspections at other times as well. In conducting 

inspections, the board has a standard crematory inspection checklist. 

Items on the checklist include (1) whether the crematory license is posted 

and (2) whether documentation of permanent records of all transactions 

performed for final disposition exists. According to officials representing 

the Oregon Mortuary and Cemetery Board, resources are not available to 

do many on-site inspections.

Consumer complaints and violations. Consumer complaints regarding 

crematories and crematory operators are collected by various entities in 

Oregon. According to the state regulator who responded to our 2011 

survey on the regulation of crematories, the state received approximately 

five complaints in 2008, two in 2009, and two in 2010. An official 

representing the board told us that the most frequent complaints received 

against crematories included failure to provide the family with the 

deceased’s personal items and cremating without required identification 

Crematories and 

Crematory Operators
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 84 GAO-12-65 Death Services 

tags. Officials also stated that with the increase in the cremation rate over 

time, there has been an increase in complaints against crematories. As a 

result of complaints, applications, or inspections, officials representing the 

Oregon Mortuary and Cemetery Board reported that they had 16 cases 

opened against crematories over a 3-year period—2008, 2009, and 

2010.5 Further, the state regulator who responded to this issue on our 

survey reported taking various enforcement actions since 2008, including 

two non-compliance actions, five fines, and five civil or criminal 

prosecutions.6

Cremation rate. According to the Cremation Association of North 

America, Oregon had a 69 percent cremation rate in 2009.7

Licensing requirements. An entity wanting to sell pre-need trusts must 

be certified by the Department of Consumer and Business Services 

(certified providers) and a salesperson employed by a certified provider 

must be registered with the Oregon Mortuary and Cemetery Board either 

as a pre-need salesperson or, among other things, licensed as a funeral 

service practitioner or embalmer. Individual sellers of insurance-funded 

pre-need plans must be insurance agents or providers, and are regulated 

by the Insurance Division of the Department of Consumer and Business 

Services.8

 

5 This does not include cases opened against applicants and individuals licensed.

A master trustee—an entity that is not a certified provider but 

that has fiduciary responsibility for the uniform administration of funds 

delivered to it by a certified provider for the benefit of purchasers of preneed contracts—must also be registered with the Department of 

Consumer and Business Services. Pre-need salespersons are required to 

renew their registration with the Oregon Mortuary and Cemetery Board 

every 2 years. Submission of required annual reports and fee payments 

constitutes renewal of a certified provider’s and master trustee’s 

registration. According to the state regulator who responded to our 2011 

6 An official from the Oregon Mortuary and Cemetery Board clarified that the five civil or 

criminal prosecutions refers to civil penalty actions and referrals for criminal prosecutions.

7 These data are preliminary. As of September 2011, association officials stated that the 

data had not been finalized.

8 In Oregon, the sale of existing graves, crypts or niches does not constitute pre-need 

sales. Further, third party sellers of pre-need are exempt from licensing requirements, 

according to the state regulator who responded to our 2011 survey on pre-need sales.

Sales of Pre-Need Plans
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 85 GAO-12-65 Death Services 

survey on pre-need plans, there were approximately 905 salespersons 

and 223 companies (entities) licensed and operating in Oregon.

Inspection and audit requirements. The Department of Consumer and 

Business Services has the authority to audit the records of a certified 

provider or a master trustee.9

Contract and trusting requirements. Various contract and trusting 

requirements exist in the state of Oregon.

In addition, certified providers and master 

trustees are required to file an annual report with the Department of 

Consumer and Business Services. According to department officials, they 

review these reports to identify the types of investments each master 

trustee is using and to ensure that certified providers have properly 

trusted funds they have received from consumers.

10

• According to state regulators, trust-funded and insurance-funded preneed plans are permitted in Oregon. According to the state regulator 

who responded to our 2011 survey, irrevocable, revocable, 

guaranteed, and nonguaranteed pre-need contracts are all permitted 

in the state but are not required.

• Each pre-need contract sold must contain certain information and 

disclosures. Required information or disclosures include (1) the 

purchaser, (2) a complete description of the goods and services 

purchased, (3) the master trustee or depository that will be holding the 

funds, and (4) identification of whether the contract is guaranteed or 

nonguaranteed. If the contract is guaranteed, the purchaser must 

disclose that they are allowed to retain 10 percent of the contract 

sales price. In addition, pre-need sellers are required to number each 

contract in consecutive order so they can be individually tracked.

• According to officials from the Department of Consumer and Business 

Services, certified providers must deposit pre-need funds with one of 

 

9 According to an official representing the Oregon Mortuary and Cemetery Board, for preneed salespersons who are also licensed by the board, board inspectors review pre-need 

documents to ensure that only registered salespersons or licensed individuals are selling 

trust-funded pre-need plans at funeral homes and cemeteries. Questions of possible 

trusting violations are referred by the Oregon Mortuary and Cemetery Board to the 

Department of Consumer and Business Services.

10 For more information on pre-need plans, see app. II.
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 86 GAO-12-65 Death Services 

the state’s seven master trustees or in a depository (financial 

institution or trust company). Pre-need trust funds that are placed in a 

depository may only be invested in one of the following: (1) certificates 

of deposit; (2) U.S. Treasuries; (3) issues of U.S. government 

agencies; (4) guaranteed investment contracts; or (5) banker’s 

acceptance or corporate bonds rated A or better, as specified in 

statute. Further, officials state that there are no limitations on the 

investment of pre-need trust funds placed with a master trustee.

• For guaranteed pre-need contracts, 90 percent of the amounts 

received for the costs of funeral and cemetery goods and services 

must be trusted. For nonguaranteed contracts, 100 percent of the 

costs of funeral and cemetery goods and services must be trusted. If 

a cemetery is not a certified provider, it must have a surety bond and 

must trust at least 66-2/3 percent of the costs of cemetery goods, 

such as vaults and markers that will be installed in an endowment 

care cemetery.

• Master trustees may pay certain fees and expenses from the earnings 

of the trust, limited to 2 percent of the value of the trust per year and 

subject to other conditions established in statute.

• According to officials from the Department of Consumer and Business 

Services, irrevocable trust-funded pre-need plans cannot be 

converted to insurance-funded pre-need plans.

• A consumer may cancel a revocable contract at any time and is 

entitled to receive the principal invested, plus any interest that has 

accrued, less any amount for service performed or merchandise 

delivered.

Consumer protection accounts. Oregon has a funeral and cemetery 

consumer protection account, which is funded from a $5 fee assessed for 

each pre-need contract sold. The purpose of the fund is to provide 

purchasers who have suffered pecuniary loss arising out of pre-need 

contracts with an opportunity for restitution if the provider does not have 

the assets or means to meet these obligations. According to officials 

representing the Department of Consumer and Business Services, the 

account was recently utilized after a small cemetery never properly 

trusted its funds. This was discovered when the cemetery was sold to a 

new owner. In November 2011, officials from the Department of 

Consumer and Business Services stated that to date, the fund has been 

used to compensate more than 160 of these purchasers for a total of over 
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 87 GAO-12-65 Death Services 

$248,000. Further, officials stated that prior to these recent payouts, the 

account had just over $1.1 million in it in 2010—the maximum amount in 

the account since 2003.

Funds invested in pre-need trusts. Officials from the Department of 

Consumer and Business Services reported in November 2011 that there 

was approximately $108 million in pre-need funds invested through 

master trustees and depositories in Oregon in 2010. According to state 

regulators, some pre-need trust accounts have lost interest income 

because of the economy, but no trusts have lost principal.

Consumer complaints and violations. Consumer complaints regarding 

pre-need contracts are collected by various entities in Oregon. As a result 

of complaints or inspections, officials representing the Oregon Mortuary 

and Cemetery Board reported that they had 14 cases opened related to 

pre-need sales complaints against providers certified by the Department 

of Consumer and Business Services or against individual board licensees 

selling pre-need arrangements over a 3-year period—2008, 2009, and 

2010. Further, officials from the Department of Consumer and Business 

Services reported in November 2011, that they identified approximately 

171 violations since 2008, with the top three types of violations as follows: 

(1) contract funds not being trusted, (2) merchandise being listed as 

delivered when it was not, and (3) misrepresentation of a guaranteed 

versus a nonguaranteed contract.

According to state regulators we surveyed in 2003 and 2011, other than 

rules or regulations that generally apply to all businesses, Oregon does 

not have rules or regulations in place that specifically address third party 

sellers of funeral goods.

State regulatory officials we surveyed reported various changes to state 

laws and regulations regarding the death care industry. As reported by 

Oregon state regulators who responded to our 2011 surveys, changes 

included those that clarified legislation or regulation, enhanced consumer 

protections, and imposed stricter licensing requirement, and these 

changes either slightly or moderately strengthened the state’s regulatory 

program. Respondents reported that these changes were a result of 

lobbying efforts of the death care industry and proposals from state 

regulatory agencies. Specific examples of these changes include 

provisions of laws passed in 2007 and 2009.

Third Party Sellers of 

Funeral Goods

Legislative Changes 

and Rationale
Appendix V: Oregon’s Regulation of the Death 

Care Industry 

Page 88 GAO-12-65 Death Services 

• A bill passed in 2007, gave the Department of Consumer and 

Business Services authority to (1) issue emergency orders to restrict 

or suspend certain certificates or registrations or to order certified 

providers or master trustees to cease and desist from specified 

conduct, and (2) to appoint a successor certified provider for a 

cemetery or funeral home if, among other reasons, it is appropriate to 

protect the interests of the purchasers and beneficiaries of pre-need 

contracts.

• An Oregon law passed in 2009 (1) required the licensure of death 

care consultants, (2) provided for the establishment of rules promoting 

environmentally sound death care practices, and (3) expanded the 

definition of cemetery. A death care consultant is defined as an 

individual who offers, for payment, consultations directly relating to the 

performance of funeral or final disposition services. Prospective death 

care consultant licensees are required to, among other things, pay a 

fee and pass an exam. Death care consultants must renew their 

licenses every 2 years. According to state regulators, the statutory 

changes regarding the environmentally sound death care practices 

will help position the state for future technological changes in the 

industry, such as alternatives methods of final disposition.11

 

11 Alternative methods of final disposition may include such practices as alkaline 

hydrolysis, where a water-based chemical process is used to rapidly reduce a body to 

residue.

In 

addition, with the passage of this law, the definition of a cemetery was 

expanded to include a scattering garden or other designated area 

above or below ground where a person may pay to establish a 

memorial of cremated remains and a cenotaph where the primary 

purpose is to provide an area where a person may pay to establish a 

memorial to honor a person whose remains may be interred 

elsewhere or whose remains cannot be recovered.
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 89 GAO-12-65 Death Services 

In Tennessee, two entities within the Department of Commerce and 

Insurance regulate the death care industry.

• The Tennessee State Board of Funeral Directors and Embalmers 

regulates funeral homes, funeral directors, embalmers, and 

crematories. The board has seven members who are appointed by 

the Governor—six of these members are required to be licensed 

funeral directors and the other member must not be affiliated with the 

funeral business. In addition, the board has three field representatives 

who inspect funeral home and crematory establishments, two 

administrative staff, one litigator, and one staff attorney shared with 

Burial Services.

• Burial Services regulates cemeteries and pre-need sales. Burial 

Services has four auditors who examine cemeteries and pre-need 

sellers, two administrative staff, and one staff attorney it shares with 

the Board of Funeral Directors and Embalmers.

There are no rules or regulations specific to third party sellers of funeral 

goods in Tennessee.

Licensing requirements. Funeral homes, funeral directors, and 

embalmers are required to be licensed to operate in the state, which was 

also was the case in 2003 as reported by the Tennessee state regulator 

who responded to our survey. Funeral home applicants must, among 

other things, pay an application fee and provide a list of all employees. 

Prospective funeral director and embalmer licensees must, among other 

things, (1) pay an application fee, (2) pass an exam, (3) complete a 

specified number of hours in a funeral service or mortuary sciences 

program, and (4) complete an apprenticeship.1

 

1 Specifically, funeral directors are required to complete 30 semester hours in funeral 

service education and a 2-year apprenticeship. Embalmers are required to complete 60 

semester hours in a mortuary science program and a 1-year apprenticeship.

Funeral homes, funeral 

Appendix VI: Tennessee’s Regulation of the 

Death Care Industry

Regulatory Structure

Requirements and 

Enforcement 

Mechanisms

Funeral Homes, Funeral 

Directors, and Embalmers
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 90 GAO-12-65 Death Services 

directors, and embalmers are required to renew their licenses every 2 

years. In addition, each funeral director and embalmer licensee is 

required to complete 10 hours of continuing education during each 

licensing period. According to officials representing the Tennessee 

Department of Commerce and Insurance, there were 562 establishments 

operating in Tennessee—which includes funeral homes, crematories, and 

embalming services.

Inspection and audit requirements. The Board of Funeral Directors and 

Embalmers is required to inspect funeral homes once a year. Board 

inspectors use a standard report form in conducting inspections, and 

inspect for cleanliness, documentation of licensing records, and Funeral 

Rule compliance, among other things. In addition, according to officials 

representing the Tennessee Department of Commerce and Insurance, 

inspectors have compared the price lists to invoices for a select number 

of sales to ensure that the funeral home is charging according to its price 

lists.2

Consumer complaints and violations. According to officials 

representing the Tennessee Department of Commerce and Insurance, 

they received 21 complaints regarding the death care industry in 2008, 30 

in 2009, and 54 in 2010, but they did not break this information down by 

industry segment. According to officials, the most common violations they 

encounter during inspections are (1) overcharging, (2) improper wording, 

or (3) direct cremation sales that were also charged basic service fees. 

Officials further stated that since 2008, they have taken 210 disciplinary 

actions against the segments they regulate.

Officials stated that this type of comparison is not done during FTC 

sweeps, but told us that these types of inspections can help to uncover 

problems.

Licensing requirements. Cemeteries are required to register to operate 

in the state unless they are otherwise exempt. The following cemeteries 

are exempt: (1) cemeteries owned by municipalities; (2) cemeteries 

owned by churches, associations of churches, or church governing 

bodies; (3) cemeteries owned by religious organizations; (4) family burial 

grounds; and (5) cemeteries owned by general welfare corporations. 

 

2 Officials stated that funeral homes may change their price lists but are required to keep 

records of prior price lists for a period of 1 year after its last use so that they can 

accurately compare price lists with sales made.

Cemeteries and Cemetery 

Operators
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 91 GAO-12-65 Death Services 

Cemetery applicants are required, among other things, to (1) pay a filing 

fee and (2) show proof of a cemetery map showing all interment sites. 

Cemeteries are required to renew their licenses every year. Officials 

representing the Department of Commerce and Insurance told us that 

Tennessee tried to pattern many of its cemetery rules after the FTC’s 

Funeral Rule in an effort to level the playing field for the funeral home and 

cemetery segments of the death care industry.

Inspection and audit requirements. The Commissioner of the 

Department of Commerce and Insurance is responsible for auditing 

cemetery records at least once every 2 years. In addition, cemeteries are 

required to keep record of (1) every burial that shows the date, name, and 

location and (2) every interment site or right sold. All cemeteries that 

apply for a new registration after 2007 must develop and maintain a 

cemetery map that shows the location of sites for interment.

Consumer complaints and violations. According to officials 

representing the Tennessee Department of Commerce and Insurance, 

they received 21 complaints regarding the death care industry in 2008, 30 

in 2009, and 54 in 2010, but they did not break this information down by 

industry segment.

Licensing requirements. A crematory may not operate until it has been 

issued a license as a funeral establishment. This was also the case in 

2003, as reported by the state regulator who responded to our survey. 

Crematory operators do not have to be licensed, but according to officials 

representing the Tennessee Department of Commerce and Insurance, 

crematories must employ at least one full-time licensed funeral director 

who manages the crematory. Crematory applicants are required to, 

among other things, pay an application fee and provide a list of all 

employees. Crematories are required to renew their licenses every 2 

years. According to officials representing the Tennessee Department of 

Commerce and Insurance, there were 43 crematories operating in 

Tennessee.

Inspections and audit requirements. The Board of Funeral Directors 

and Embalmers is required to inspect crematories once a year. Board 

inspectors use a standard report form in conducting their inspections. The 

form includes items such as whether cremation records are acceptable. 

Consumer complaints and violations. According to officials 

representing the Tennessee Department of Commerce and Insurance, 

Crematories and 

Crematory Operators
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 92 GAO-12-65 Death Services 

they received 21 complaints regarding the death care industry in 2008, 30 

in 2009, and 54 in 2010, but they did not break this information down by 

industry segment. Officials told us that the most common violations they 

see during inspections are (1) overcharging, (2) improper wording, or 

(3) direct cremation sales that were also charged basic service fees. 

Officials further stated that since 2008, they have taken 210 disciplinary 

actions against the segments they regulate.

Cremation rate. According to the Cremation Association of North 

America, Tennessee had a 23 percent cremation rate in 2009.3

Licensing requirements. Sellers of pre-need plans are required to be 

registered to operate in the state. To register, sellers must complete an 

application and pay a fee. Pre-need sellers are required to renew their 

registration every 2 years. According to officials representing the 

Tennessee Department of Commerce and Insurance, there were 495 preneed sellers operating in Tennessee.

Inspection and audit requirements. According to an official 

representing the Department of Commerce and Insurance, the 

Commissioner of the Department of Commerce and Insurance must 

conduct annual examinations of pre-need sellers to ensure that each 

seller will be able to perform its contract with the consumer. The 

commissioner may also investigate or examine the affairs of any pre-need 

seller whenever it is deemed appropriate. In addition, every pre-need 

seller is required to keep and maintain, at a minimum, accurate accounts, 

books, and records of all pre-need contracts and insurance policy 

transactions. A trustee is required to keep records of, among other things, 

the receipt of funds and all disbursements. Pre-need sellers and trustees 

are required to file an annual report with the commissioner that includes a 

summary of the information contained in the accounts, books, and 

records.

Contract and trusting requirements. Various contract and trusting 

requirements exist in the state of Tennessee.4

 

3 These data are preliminary. As of September 2011, association officials stated that the 

data had not been finalized.

4 For more information on pre-need plans, see app. II.

Sales of Pre-Need Plans
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 93 GAO-12-65 Death Services 

• Trust-funded, insurance-funded, revocable, irrevocable, guaranteed, 

and nonguaranteed pre-need funeral plan contracts are all permitted 

in Tennessee. 

• Prior to its use, each pre-need contract sold must contain certain 

information and disclosures. Required information or disclosures 

include (1) a statement as to whether the contract establishes a 

revocable trust account or an irrevocable trust account, (2) a complete 

disclosure of the pricing arrangement and of any contingent liabilities 

or costs of the buyer, and (3) a disclosure that the trustee will pay any 

balance remaining in the trust fund after payment for the funeral 

merchandise and services in accordance with the pre-need contract. 

Pre-need contracts must be filed with and approved by the 

Commissioner of the Department of Commerce and Insurance.

• Pre-need sellers are required to trust 100 percent of the sale of 

funeral goods and services and 120 percent of the cost of cemetery 

goods. A trustee is required to invest at least 50 percent of the 

moneys paid and placed in a pre-need funeral contract trust in the 

following: (1) demand deposits, (2) savings accounts, (3) certificates 

of deposits, or (4) other accounts issued by financial institutions.

• A trustee cannot withdraw the funds for any purpose other than 

payment for merchandise or service. However, the trustee can use 

income from the trust account to pay applicable taxes and reasonable 

expenses related to the administration of the trust.

• Funds deposited in trust under a pre-need funeral contract may, with 

the written permission of the consumer and written approval of the 

commissioner, be withdrawn by the trustee and used to purchase an 

insurance policy.

• Any funds left over in a trust after services are provided are required 

to be refunded to the purchaser, the purchaser’s estate or otherwise 

named beneficiary.

Consumer protection accounts. A cemetery consumer protection 

account and a pre-need funeral consumer protection account exist in 

Tennessee. According to officials representing the Tennessee 

Department of Commerce and Insurance, both accounts are funded 

through a $20 fee assessed on each pre-need contract. Officials 

explained that for both accounts, half of the funds that are collected are 

used to support the general operation and expenses for Burial Services 

and the other half of the funds are used to support any receivership action 
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 94 GAO-12-65 Death Services 

initiated by the commissioner against a pre-need seller or cemetery in 

accordance with applicable law. Officials further stated that neither 

account is used to directly reimburse a consumer whose seller or trustee 

lost the funds the consumer contributed to a pre-need plan. According to 

a Tennessee industry association, there should be a true consumer 

protection account where the funds are set aside for consumer restitution 

purposes only. 

Funds invested in pre-need trusts. Tennessee did not provide 

information on whether the state tracked the amount of funds invested in 

pre-need plans.

Consumer complaints and violations. According to officials 

representing the Tennessee Department of Commerce and Insurance, 

they received 21 complaints regarding the death care industry in 2008, 30 

in 2009, and 54 in 2010, but they did not break this information down by 

industry segment.

According to state regulators we surveyed in 2003 and 2011, other than 

rules or regulations that generally apply to all businesses, Tennessee 

does not have rules or regulations in place that specifically address third 

party sellers of funeral goods.5

Although there are no specific rules or regulations, third party sellers are 

subject to other state laws. In January 2010, a Tennessee court 

permanently enjoined the defendant from engaging in the sale of 

cemetery goods and services and revoked any licenses he possessed to 

engage in the cemetery goods and services business in the state 

because of his “persistent and knowing violations of the Tennessee 

Consumer Protection Act.” The defendant was an Internet seller of 

cemetery goods who had failed to deliver items sold to consumers. 

Although the exact number of consumers affected and the total dollar 

amount is unknown, the final judgment of the court indicates that 

consumers had made 126 complaints to various agencies. The final 

judgment also concluded that the defendant had made at least 3,600 

violations of the Tennessee Consumer Protection Act. The final judgment 

 

5 The state regulator who responded to our survey on third party sellers of funeral goods 

noted that third party sellers of pre-need plans were regulated.

Third Party Sellers of 

Funeral Goods
Appendix VI: Tennessee’s Regulation of the 

Death Care Industry 

Page 95 GAO-12-65 Death Services 

provided that the state may seek restitution on behalf of consumers and 

other persons for ascertainable losses.

Various changes to Tennessee’s state laws regarding the death care 

industry have been made since 2003. According to officials representing 

the Tennessee Department of Commerce and Insurance, Tennessee 

enacted major revisions of funeral, cemetery, and pre-need laws and 

regulations in 2007 and 2008. Officials stated that these rewrites were in 

reaction to a pre-need incident in their state, but that in rewriting their 

laws, they also tried to be pro-active and address any other issues that 

could arise. The pre-need incident case involved the looting of about 

$20 million from pre-need trusts in Tennessee (see more on this incident 

in app. II). Changes included

• requiring state or commissioner approval for a (1) change in trustee, 

(2) cemetery sale, and (3) pre-need contract; and

• creating a cemetery consumer protection account and a pre-need 

consumer protection account.

In addition, other changes have gone into effect in Tennessee since 

2003.

• All funeral establishments selling agreements, contracts, or plans for 

pre-need funeral services, including those that are funded through 

insurance, must be registered with the Commissioner of the 

Department of Commerce and Insurance and be subject to an annual 

audit.

• Cemeteries must maintain a cemetery map detailing the location of 

interment sites.

• Cemetery operators must make all reasonable efforts to notify known 

family or next of kin of a deceased individual if the operator has 

knowledge that the human remains of the deceased were placed in 

the wrong burial site.

Legislative Changes 

and Rationale
Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry 

Page 96 GAO-12-65 Death Services 

In Wisconsin, the Department of Regulation and Licensing regulates all 

segments of the death care industry. Within the department, there is a 

Funeral Directors Examining Board and a Cemetery Board that help 

regulate the funeral, cemetery, and the pre-need segments. The Funeral 

Directors Examining Board and the Cemetery Board both have six 

member positions, two of which are required to be consumer 

representatives. The department has 4 staff, in addition to 14 staff from 

the department’s enforcement office who work on death care issues. 

However, these staff have other responsibilities and are not solely 

dedicated to death care issues.

In Wisconsin, cemeteries are prohibited from being affiliated with funeral 

homes.

Licensing requirements. Funeral directors and embalmers are required 

to be licensed to operate in the state, which was also was the case in 

2003 as reported by the Wisconsin state regulator who responded to our 

survey. Funeral homes must obtain a permit to operate in the state. 

Prospective funeral director or embalmer licensees are required, among 

other things, to (1) pay an application fee, (2) complete 2 academic years 

of instruction in a recognized college or university, (3) complete 9 months 

or more of instruction in mortuary science, (4) complete a 1-year 

apprenticeship, and (5) pass an exam. Funeral directors and embalmers 

are required to renew their licenses every 2 years. Each licensee must 

complete 15 hours of approved continuing education during each 

licensing period. According to a state regulator, in November 2011 there 

were 514 funeral homes operating in Wisconsin.1

Inspection and audit requirements. According to the state regulator 

who responded to our 2011 survey, funeral homes are inspected if the 

 

1 Officials reported that the higher number of funeral homes reported in their survey 

responses likely included funeral homes that were no longer operating.

Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry

Regulatory Structure

Requirements and 

Enforcement 

Mechanisms

Funeral Homes, Funeral 

Directors, and Embalmers
Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry 

Page 97 GAO-12-65 Death Services 

state receives a complaint. According to an official representing a 

Wisconsin consumer association, the state does little to monitor the 

industry.

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey on the regulation of funeral homes, 

the state received approximately 81 consumer complaints in 2008, 72 in 

2009, and 48 in 2010. Based on data from the Department of Regulation 

and Licensing, complaints included those related to (1) licensing issues, 

such as unlicensed practices; (2) unprofessional conduct; and (3) pricing 

issues, such as being charged an incorrect amount. The state regulator 

also reported that there were 314 violations since 2008 and that the state 

issued various enforcement actions that included 13 letters of reprimand, 

2 fines, 7 probations, 3 relinquishments, 3 suspensions of licenses, and 2 

revocations of licenses. 

Licensing requirements. Cemeteries are not required to be licensed, but 

some cemetery operators are required to be registered or licensed to 

operate in the state. In 2003, as reported by the Wisconsin state regulator 

who responded to our survey, cemeteries were also not required to be 

licensed but cemetery operators had to be licensed. Specifically, a 

cemetery operator who (1) operates a cemetery that is 5 acres or more in 

size, (2) sells 20 or more cemetery lots or mausoleum spaces during a 

calendar year or (2) has $100,000 or more in trust fund accounts is 

required to be licensed. A cemetery operator that (1) operates a cemetery 

that is less than 5 acres in size, (2) sells fewer than 20 cemetery lots or 

mausoleum spaces during a calendar year, or (2) has less than $100,000 

in trust fund accounts for a cemetery is required to be registered. 

However, a cemetery operator of a cemetery organized, maintained, and 

operated by any of the following are exempt from registration or licensing 

requirements: a town; village; city; church; synagogue or mosque; 

religious, fraternal or benevolent society; or incorporated college of a 

religious order. Prospective cemetery operator applicants must pay an 

application fee for licensing or registration. Licensed or registered 

cemetery operators are required to renew their licenses every 2 years. 

According to the state regulator who responded to our 2011 survey on the 

regulation of cemeteries, there were approximately 480 cemeteries 

subject to regulation operating in Wisconsin. Officials representing the 

Wisconsin Department of Regulation and Licensing further stated that the 

total number of cemeteries in the state is not known, but that the ones 

that are required to be licensed perform about 60 to 70 percent of all 

services in the state.

Cemeteries and Cemetery 

Operators
Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry 

Page 98 GAO-12-65 Death Services 

Inspection and audit requirements. The Department of Regulation and 

Licensing has the authority to inspect or audit cemeteries and cemetery 

authority records, among others, and may do so randomly. According to 

the state regulator who responded to our 2011 survey, inspections are 

done when the applicant for licensing first applies and when the state 

receives a complaint. Licensed or registered cemetery operators are 

required to submit an annual report to the Department of Regulation and 

Licensing.2

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey on the regulation of cemeteries, the 

state received approximately 10 consumer complaints in 2008, 15 in 

2009, and 3 in 2010. Based on data from the Department of Regulation 

and Licensing, during this time complaints included those related to 

(1) price issues, such as overcharging; (2) maintenance concerns; and 

(3) monument issues, such as placing the incorrect date on a monument. 

Further, according to the state regulator who responded to our 2011 

survey, since 2008, there were approximately 56 violations and that the 

state took various enforcement actions, including one letter of reprimand, 

two assessments of investigative costs, one relinquishment of a license, 

and one revocation of a license.

In addition, cemeteries are required to provide price lists to 

consumers.

Licensing requirements. Crematory operators are required to register to 

operate in the state. There are no requirements that a crematory be 

registered or licensed. To apply for registration, crematory operators are 

required, among other things, to (1) pay an application fee and 

(2) provide, among other things, a description of the equipment that will 

be used. Crematory operators are required to renew their registrations 

every 2 years. According to the state regulator who responded to our 

2011 survey, there were approximately 98 crematories operating in the 

state.

Inspections and audit requirements. According to the state regulator 

who responded to our 2011 survey, inspections are done if there is a 

complaint filed with the Department of Regulation and Licensing. In 

 

2 Although not regulated, religious cemeteries may file annual certifications declaring that 

they have followed state statute.

Crematories and 

Crematory Operators
Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry 

Page 99 GAO-12-65 Death Services 

addition, a crematory operator is required to keep records of each 

cremation performed.

Consumer complaints and violations. According to the state regulator 

who responded to our 2011 survey on the regulation of crematories, the 

state received approximately one consumer complaint in 2008, none in 

2009, and three in 2010. Based on data from the department, complaints 

received from 2007 through March 2011 included those related to 

(1) environmental concerns, such as black smoke being emitted from the 

facility, and (2) not obtaining proper authorization for cremation. Further, 

according to the state regulator who responded to our survey, since 2008, 

there were approximately 16 violations, with the most common violation 

being related to fraud or deceptive practices.

Cremation rate. According to the Cremation Association of North 

America, Wisconsin had a 42 percent cremation rate in 2009.3

Licensing requirements. Sellers of pre-need plans are required to be 

licensed to operate in the state, which was also the case in 2003 as 

reported by the Wisconsin state regulator who responded to our survey. 

Sellers of pre-need plans must renew their licenses every 2 years.

Inspection and audit requirements. Pre-need sellers may be required 

to file an annual report, which is to include accounting of all amounts 

deposited and withdrawn from pre-need accounts. The Department of 

Regulation and Licensing is required to review such reports.

Contract and trusting requirements. Various contract and trusting 

requirements exist in the state of Wisconsin.4

• Trust-funded, insurance-funded, revocable, irrevocable, guaranteed, 

and nonguaranteed pre-need funeral plan contracts are all permitted 

in Wisconsin. According to officials representing the Wisconsin 

Department of Regulation and Licensing, insurance-funded plans are 

 

3 These data are preliminary. As of September 2011, association officials stated that the 

data had not been finalized.

4 For more information on pre-need plans, see app. II.

Sales of Pre-Need Plans
Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry 

Page 100 GAO-12-65 Death Services 

more common in the funeral segment and trust-funded plans are more 

common in the cemetery segment of the industry.

• Pre-need sellers are required to trust either an amount equal to at 

least 40 percent of each payment of principal that is received from the 

sale of cemetery merchandise under a pre-need sales contract into a 

pre-need trust fund, or the wholesale cost ratio for the cemetery 

merchandise multiplied by the amount of the payment of principal that 

is received, whichever is greater. For the pre-need sale of funeral 

goods and services, 100 percent of funds must be trusted with either 

a bank or trust company within the state whose deposits are insured 

by the Federal Deposit Insurance Corporation, deposited in a savings 

and loan association or savings bank within the state whose deposits 

are insured by the Federal Deposit Insurance Corporation, or invested 

in a credit union within the state whose savings are insured by the 

national board.

• For the pre-need sale of funeral goods or services, funds must remain 

in trust, including interest and dividends, if any, until the death of the 

potential decedent, unless they are released upon demand to the 

depositor (the purchaser of the pre-need goods or services) after 

written notice is provided to the beneficiary (the pre-need seller).

• A request by a cemetery authority to transfer funds to a different 

trustee must be approved by the Department of Regulation and 

Licensing.

Consumer protection accounts. According to the Wisconsin state 

regulator who responded to our survey, no consumer protection fund 

exists in Wisconsin.

Funds invested in pre-need trusts. According to the state regulator who 

responded to our survey, Wisconsin tracks the amount of money invested 

in pre-need plans. Wisconsin did not provide data on the amount of 

money currently invested in these plans.

Consumer complaints and violations. Officials representing the 

Department of Regulation and Licensing told us that they receive few 

complaints.

Third party sales are subject to some degree of regulation, but sellers are 

not required to be licensed to operate in the state.

Third Party Sellers of 

Funeral Goods
Appendix VII: Wisconsin’s Regulation of the 

Death Care Industry 

Page 101 GAO-12-65 Death Services 

The state regulatory official we surveyed reported various changes to 

state laws and regulations regarding the death care industry. As reported 

by the Wisconsin state regulator who responded to our 2011 surveys, 

changes included those that imposed stricter licensing requirements and 

enhanced consumer protections, and these changes moderately 

strengthened the state’s regulatory program. The state regulator who 

responded to our survey reported that these changes were a result of 

proposals from state agencies. Changes included the following bills that 

were passed.

• The Cemetery Registration & Consumer Protection Act, passed in 

2007, brought more cemeteries under regulation. According to 

officials representing the Wisconsin Department of Regulation and 

Licensing, under this act, about 1,200 to 1,500 cemeteries now fall 

under registration or licensing requirements. Officials compared this to 

1991, when only 5 cemeteries were required to be licensed. Officials 

also stated that the genesis for the legislative expansion was a 

general recognition by the state legislature that it was appropriate to 

have more oversight of cemeteries and that the effort to pass the law 

was spearheaded by a Wisconsin industry association.

• Assembly Bill 485, passed in 2006, required that except for 

performing funeral services, the business of a funeral director must be 

conducted in a funeral establishment that has been issued a permit by 

the examining board.

• Assembly Bill 75, passed in 2006, created the Crematory Authority 

Council and required that crematory authorities be registered.

• Assembly Bill 100, passed in 2005, created the Cemetery Board as an 

oversight mechanism for cemeteries.

Legislative Changes 

and Rationale
Appendix VIII: GAO Contact and Staff 

Acknowledgments

Page 102 GAO-12-65 Death Services 

William O. Jenkins, Jr., (202) 512-8777 or jenkinswo@gao.gov

In addition to the contact named above, John Mortin, Assistant Director; 

Tracey Cross; Dorian Dunbar; Stuart Kaufman; Thomas Lombardi; 

Jessica Orr; Minette Richardson; and Greg Wilmoth made significant 

contributions to this report.

Appendix VIII: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(440925)
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