DEATH SERVICES State Regulation of the Death Care Industry Varies and Officials Have Mixed Views on Need for Further Federal Involvement
Published: 2011-12-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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 governments 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.
section_title: What GAO Found
paragraphs: 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.
The FTC provided technical comments, which GAO incorporated where appropriate.

section_title: Letter
paragraphs: 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. 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. 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  2011—would, if enacted, expand the FTC’s role in protecting consumers  in arranging death care transactions, including services at cemeteries.
The death care industry encompasses (1) funeral homes, (2) cemeteries,  (3) crematories, (4) pre-need plans, and (5) third party sales of funeral  goods. 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. 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.
Third party sellers of funeral goods includes retailers of caskets, urns, monuments, that  are not affiliated with a funeral home or cemetery. changed, and what more, if anything, is needed. 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. 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. We received a response rate of 78 to  84 percent for each of our surveys. 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  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. 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.
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.
subsections: section_title: Background
subsections: section_title: Regulatory Roles
paragraphs: 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.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   Among other  responsibilities regarding the industry are handled at the state level. 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.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.
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) 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  FTC implemented the Funeral Rule Offenders Program as a nonlitigation  alternative to civil penalty actions for Rule violations. 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.
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.
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. 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.
section_title: Consumer Costs and Industry Trends
paragraphs: 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. 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 2009.1,752,000 (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.
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  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. 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.
section_title: Federal and State Regulation of the Death Care Industry and the Extent to Which It Has Changed Vary
subsections: section_title: Federal Regulatory Structure Largely Unchanged
paragraphs: 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. 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.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.
The FTC reported an overall compliance rate of about 85   Arizona was the only state that reported that some  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. 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.
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. 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.
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. 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  those related to unprofessional conduct, FTC Funeral Rule violations,  reporting deficiencies, and service issues. 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.
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. 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.
Common complaints reported in our case study states  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.
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.
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” and
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.”
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.
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.
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. 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. 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.
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. 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. 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.
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.
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 required and
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.
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.
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  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. 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.
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. 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.
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.
subsections: section_title: Sales of Pre-Need Plans
paragraphs: 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.  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. State regulators reported that the types of pre- need 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.
One state regulator who responded to this question checked “No response.” 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 pre- need 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 pre- need 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. 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. 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.
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 pre- need 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.
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
5 reported that a specified percentage or amount of trust funds dollars
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.
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 pre- need 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  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. 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.
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   Further, of the 12 state regulators  were prohibited or were restricted. 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.
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.
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. 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. 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. 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.
section_title: In Both 2003 and 2011 States Reported Varied Regulatory Requirements, with Specific Rules or Regulations Most Consistently Reported for Funeral Homes
paragraphs: 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.
For  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.
The extent to which state regulators reported that their state required  licenses also varied by industry segment between 2003 and 2011. For  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.
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  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.
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.
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. 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).
An Oregon law passed in 2009 requires the licensure of death care  consultants and the adoption of rules promoting environmentally  sound death care practices. 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.
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.
section_title: Views on Increasing Federal and State Regulation Varied
subsections: section_title: Views on Federal Regulation
paragraphs: 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.
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.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   Other reasons  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. 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, 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.
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  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.
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.
section_title: Views on State Regulation
paragraphs: 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.
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.
section_title: Agency Comments and Third-Party Views
paragraphs: 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.
section_title: Appendix I: Survey Methodology
paragraphs: 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.
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. 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. 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.
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).
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  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.
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. 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. While the overall  response rate was relatively high, not all states that completed the  surveys provided responses to all the appropriate questions.
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.
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, 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.
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. 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.
section_title: Appendix II: Pre-Need Plans, Consumer Education and Protection, and Allegations of Fraud and Mismanagement
subsections: section_title: Pre-Need Contracts for Funeral and Cemetery Arrangements
paragraphs: 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. 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.
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. 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. 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  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-on- death 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. 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.
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.
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  to provide states with things to consider when developing requirements.  Furthermore, the National Association of Insurance Commissioners  published model regulations for advertising life insurance and life  insurance disclosures that also mention disclosure requirements for pre- need insurance. In addition, the association published a model regulation  that discusses minimum standards for establishing reserve liability and  nonforfeiture values.insurance is not well defined and recognizes that what constitutes pre- need 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  GAO-12-91SP  However, this model regulation states that pre-need  .
section_title: Complete Data on Consumer Funds Invested in Pre-Need Contracts Are Not Available
paragraphs: 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  death care industry consulting company, the estimated total dollars in pre- need accounts may have been nearly $35 billion in 2009.
section_title: Federal and State Consumer Guides Help Educate and Protect Consumers
paragraphs: “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.” “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.” “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.” “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.” “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 pre- need 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  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 disclose if they will receive a commission on the sale of an insurance 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. “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.
section_title: Allegations of Fraud and Mismanagement of Pre-Need Funds
paragraphs: 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.
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. 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.
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  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.  The funeral directors alleged that they lost more than $140 million, and  that some funeral homes could go bankrupt because they have been  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. 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.
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  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 pre- need funeral consumer protection account was originally established  in 2008.
In 2010, legislation passed in the state of Illinois amended its pre- need 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  required to be entrusted with an independent trustee that is a  corporate fiduciary.
section_title: Appendix III: Colorado’s Regulation of the Death Care Industry
subsections: section_title: Regulatory Structure
paragraphs: 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.
section_title: Requirements and Enforcement Mechanisms
subsections: section_title: Funeral Homes, Funeral Directors, and Embalmers
paragraphs: 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. 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  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.
section_title: Cemeteries and Cemetery Operators
paragraphs: Cemeteries are not regulated at the state level. This was also the case in  2003 when we surveyed the Colorado state regulator of cemeteries.
section_title: Crematories and Crematory Operators
paragraphs: 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. 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  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.
section_title: Sales of Pre-Need Plans
paragraphs: 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  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.
Contract and trusting requirements. Various contract and trusting  requirements exist in the state of Colorado.
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.
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  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.
section_title: Third Party Sellers of Funeral Goods
paragraphs: 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.
section_title: Legislative Changes and Rationale
paragraphs: 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.
Pursuant to legislation passed in 2009, funeral homes and  crematories are now required to be registered with the state.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.
section_title: Appendix IV: Illinois’s Regulation of the Death Care Industry
subsections: section_title: Regulatory Structure
paragraphs: 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.
section_title: Requirements and Enforcement Mechanisms
subsections: section_title: Funeral Homes, Funeral Directors, and Embalmers
paragraphs: 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  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.
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.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.
According to
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.
section_title: Cemeteries and Cemetery Operators
paragraphs: 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. This requirement  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.
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.
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  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.
section_title: Crematories and Crematory Operators
paragraphs: 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. In  addition, each crematory operator is required to file an annual report with  the Illinois Office of the Comptroller. 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.
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.
Cremation rate. According to the Cremation Association of North  America, Illinois had a 34 percent cremation rate in 2009.
section_title: Sales of Pre-Need Plans
paragraphs: 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.
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.
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 pre- need 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  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  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.
section_title: Third Party Sellers of Funeral Goods
paragraphs: 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.
section_title: Legislative Changes and Rationale
paragraphs: 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  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,  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.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.
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.
section_title: Appendix V: Oregon’s Regulation of the Death Care Industry
subsections: section_title: Regulatory Structure
paragraphs: 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.
section_title: Requirements and Enforcement Mechanisms
subsections: section_title: Funeral Homes, Funeral Directors, and Embalmers
paragraphs: 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  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. 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.
section_title: Cemeteries and Cemetery Operators
paragraphs: 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. 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.
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.
According to an official representing the Oregon Mortuary and Cemetery Board, this  does not include cases opened against applicants for licensure and individuals licensed. 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 agreed- upon 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.
section_title: Crematories and Crematory Operators
paragraphs: 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  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. 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.
Cremation rate. According to the Cremation Association of North  America, Oregon had a 69 percent cremation rate in 2009.
section_title: Sales of Pre-Need Plans
paragraphs: 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. 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 pre- need 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  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. 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.
Contract and trusting requirements. Various contract and trusting  requirements exist in the state of Oregon.
According to state regulators, trust-funded and insurance-funded pre- need 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  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  $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.
section_title: Third Party Sellers of Funeral Goods
paragraphs: 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.
section_title: Legislative Changes and Rationale
paragraphs: 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.
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. 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.
section_title: Appendix VI: Tennessee’s Regulation of the Death Care Industry
subsections: section_title: Regulatory Structure
paragraphs: 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.
section_title: Requirements and Enforcement Mechanisms
subsections: section_title: Funeral Homes, Funeral Directors, and Embalmers
paragraphs: 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.
Funeral homes, funeral  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. 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.
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.
section_title: Cemeteries and Cemetery Operators
paragraphs: 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.
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.
section_title: Crematories and Crematory Operators
paragraphs: 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,  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.
section_title: Sales of Pre-Need Plans
paragraphs: 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 pre- need 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.
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  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.
section_title: Third Party Sellers of Funeral Goods
paragraphs: 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.
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  provided that the state may seek restitution on behalf of consumers and  other persons for ascertainable losses.
section_title: Legislative Changes and Rationale
paragraphs: 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.
section_title: Appendix VII: Wisconsin’s Regulation of the Death Care Industry
subsections: section_title: Regulatory Structure
paragraphs: 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.
section_title: Requirements and Enforcement Mechanisms
subsections: section_title: Funeral Homes, Funeral Directors, and Embalmers
paragraphs: 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.
Inspection and audit requirements. According to the state regulator  who responded to our 2011 survey, funeral homes are inspected if the  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.
section_title: Cemeteries and Cemetery Operators
paragraphs: 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.
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. In addition, cemeteries are required to provide price lists to  consumers.
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.
section_title: Crematories and Crematory Operators
paragraphs: 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  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.
section_title: Sales of Pre-Need Plans
paragraphs: 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.
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  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.
section_title: Third Party Sellers of Funeral Goods
paragraphs: Third party sales are subject to some degree of regulation, but sellers are  not required to be licensed to operate in the state.
section_title: Legislative Changes and Rationale
paragraphs: 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.
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: 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.