Performance audit, State Board of Funeral Directors and Embalmers

              A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
State Board of Funeral
Directors and Embalmers
Performance Audit Division
MAY• 2003
REPORT NO. 03 – 04
Performance Audit
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five
senators and five representatives. Her mission is to provide independent and impartial information and specific
recommendations to improve the operations of state and local government entities. To this end, she provides financial
audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and
conducts performance audits of school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Senator Robert Blendu, Chair Representative John Huppenthal, Vice Chair
Senator Gabrielle Giffords Representative Tom Boone
Senator Peter Rios Representative Ken Clark
Senator Thayer Verschoor Representative Ted Downing
Senator Jim Weiers Representative Steve Yarbrough
Senator Ken Bennet (ex-officio) Representative Jake Flake (ex-officio)
Audit Staff
Lisa Eddy, Manager and Contact Person
Cathleen Akers, Team leader
Michael Nickelsburg
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553 -0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
May 1, 2003
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Rodolfo R. Thomas, Executive Director
State Board of Funeral Directors and Embalmers
Transmitted herewith is a report of the Auditor General, A Performance Audit and Sunset Review
of the Arizona State Board of Funeral Directors and Embalmers. This report is in response to a
May 14, 2002, resolution of the Joint Legislative Audit Committee. The performance audit was
conducted as part of the Sunset review process prescribed in A.R.S. §41-2951 et seq. I am also
transmitting with this report a copy of the Report Highlights for this audit to provide a quick
summary for your convenience.
As outlined in its response, the State Board of Funeral Directors and Embalmers agrees with all of
the findings and plans to implement all of the recommendations directed to it.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on May 2, 2003.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Services:
The Board of Funeral Directors and Embalmers is responsible for enforcing Arizona’s funeral laws.
The Board has the following responsibilities:
􀁺􇩌 Licensing—Licenses all funeral practitioners, establishments, and crematories. As of
February 4, 2003, the Board had 1,401 active licenses.
􀁺􇩉 Inspections—Inspects all funeral establishments and crematories to ensure compliance
with state requirements. The Board reports that it com-pleted
180 establishment inspections during fiscal
year 2002.
􀁺􇩃 Complaints—Receives and investigates complaints
and can take disciplinary action against licensees.
The Board received 12 complaints in fiscal year 2002
and resolved 9.
􀁺􇩐 Public information—Provides information to the public
through telephone assistance, its Web site, and a
consumer brochure distributed at funeral establish-ments.
Personnel:
The Board consists of seven governor-appointed members
who serve 4-year terms:
􀁺􇩆 Four of the members are licensed funeral directors or
embalmers.
􀁺􇩔 Three must be members of the public. One of these
three must own or manage a business that has no
pecuniary or proprietary interest in a funeral establish-ment
or crematory, or in the sale of funeral goods and
services.
In fiscal year 2003, the Board is authorized to have four full-time
equivalent (FTE) positions:
􀁺􇩅 Executive director, who is responsible for operations
􀁺􇩄 Deputy director, who conducts investigations
􀁺􇩃 Compliance administrator, who inspects funeral establishments and crematories
􀁺􇩁 Administrative assistant, who processes license applications and renewals
PROGRAM FACT SHEET
Arizona State Board of Funeral Directors and Embalmers
Office of the Auditor General
Revenue:1
$327,600 (fiscal year 2003 estimated)
$327,700
$323,523
$382,774
$290,000
$300,000
$310,000
$320,000
$330,000
$340,000
$350,000
$360,000
$370,000
$380,000
$390,000
2003 2002 2001
1 The Board remits all civil penalties and 10 percent of
licenses, other fines and forfeits, service charges, and
certain other revenues to the State General Fund, and
deposits the remainder into the Board of Funeral
Directors and Embalmers Fund.
•
Facilities and Equipment:
The Board leases space in the state-owned building at 1400 West Washington Avenue in
Phoenix. Its equipment includes typical office equipment such as furniture, computers, and print-ers.
Mission:
“To maintain and enforce a set of standards that provides protection for the health, safety, and
welfare of Arizona citizens by educating the consumer and by actively and impartially regulating
those licensed to provide funeral goods and services.”
Board goals:
The Board has established three goals:
1. To ensure that all licenses are only granted and renewed to competent individuals with
high standards of professional and ethical conduct.
2. To ensure and enforce that information is made available to both the consumer and the
licensee that educates them to the standards of practice relating to providing funeral
goods and services.
3. To actively and impartially investigate allegations and complaints and provide enforce-ment
to protect the public from incompetent services and unprofessional, unethical,
and illegal conduct.
Adequacy of performance measures:
While the Board’s goals reasonably align with its mission, the 13 performance measures that the
Board uses could better reflect the goals. For example:
􀁺􇩔 To measure its first goal’s effectiveness the Board reports the number of licenses
issued and denied, which are both output measures. However, an outcome measure,
such as the percentage of licensees that the Board disciplines, would better address
whether the Board was meeting its goal of licensing only competent individuals who act
ethically and professionally.
􀁺􇩆 For the second goal, the Board uses a measure of the percentage of consumers who
receive the Board’s brochure. However, the Board cannot accurately measure this out-come.
A more feasible outcome measure might be the percentage of funeral establish-ments
that have violations involving consumer-disclosure requirements.
􀁺􇩔 The third goal’s focus on providing fair and impartial investigations is difficult to meas-ure.
By rewording this goal to focus it on providing investigations in a timely manner, it
would better reflect the efficiency measure that the Board already reports under the
third goal.
State of Arizona
The Office of the Auditor General has conducted a performance audit and Sunset
review of the Arizona State Board of Funeral Directors and Embalmers pursuant to a
May 14, 2002, resolution of the Joint Legislative Audit Committee. This audit was
conducted as part of the Sunset review process prescribed in Arizona Revised
Statutes (A.R.S.) §41-2951 et seq.
The Legislature established the Board in 1945. The Board regulates the funeral
industry in order to protect the public from deceptive funeral business practices. The
Board has four main areas of responsibility:
􀁺􇩌 Licensing funeral industry workers and establishments;
􀁺􇩉 Inspecting establishments to ensure their compliance with state requirements;
􀁺􇩉 Investigating and adjudicating complaints; and
􀁺􇩐 Providing the public with the information necessary to make informed choices
regarding funeral transactions.
Board should improve inspections to better protect and
inform public (see pages 7 through 12)
The Board’s inspection process needs several improvements. Inspections are an
important way for the Board to protect consumers from deceptive business practices
and monitor funeral establishments’ compliance with state laws. The Board inspects
nearly all establishments at least once a year, exceeding its statutory requirement to
inspect establishments once every 5 years. However, inspections are not carried out
consistently, and no system is in place to indicate clearly whether funeral establish-ments
successfully passed their inspections. Procedures are similarly lacking for fol-lowing
up to ensure corrective action and for monitoring inspection results over time.
Finally, the Board does not currently make inspection results available to the public,
although this information would be helpful to consumers making funeral arrange-ments.
The Board should improve its inspection program by adopting rules and pro-cedures
for conducting inspections and follow-up efforts, establishing an inspection
Office of the Auditor General
SUMMARY
page i
rating system, creating a system to track inspections results, and sharing inspection
results with consumers to help them make informed decisions.
Board should improve complaint handling and investiga-tions
(see pages 13 through 17)
Although the Board resolves complaints in a timely manner, staff practices keep
some complaints from being considered. When consumers have written letters of
complaint, board staff have often waited to open a complaint investigation until the
consumer resubmitted the complaint on the Board’s official form. In addition,
although statute requires the Board itself to resolve every complaint, auditors identi-fied
several complaints that staff did not forward to the Board. In one instance, the
funeral establishment took action to satisfy the complainant, and the complainant
withdrew the complaint, but staff did not forward the complaint to the Board. In two
other instances, someone other than the person who entered into the contract had
filed complaints against establishments that never reached the Board. In all of these
examples, board staff did not allow the Board to determine whether violations had
occurred and determine if a licensee should be disciplined. The Board should
change these practices.
Problems also exist with how board staff investigate complaints. Incomplete investi-gations
leave the Board with insufficient information to efficiently adjudicate com-plaints.
For example, staff do not identify all potential violations stemming from com-plaint
allegations, do not provide the Board with witnesses’ statements, and do not
determine whether investigation efforts supported allegations. As a result, the Board
spends significant time during its meetings conducting investigational work that it
employs staff to do. To help ensure staff investigations are complete, the Board
should develop more comprehensive procedures that outline all necessary elements
of investigations.
Other pertinent information (see pages 19 through 21)
During the audit, auditors reviewed information about Arizona’s cemetery regulation
and how it compares with some other states. The Board does not have any statutory
authority over cemeteries, but estimates that it annually receives 10 to 15 cemetery-related
complaints, which the Board refers to the Arizona Department of Real Estate
(Department). The Department is the only state agency that has statutory authority
over the cemetery business; however, it only regulates some aspects such as requir-ing
cemeteries to maintain trust funds to perpetually care for cemetery grounds. It
has limited statutory authority over many matters that involve consumer issues, such
State of Arizona
page ii
as contractual disputes over the quality or delivery of cemetery goods and services.
Department staff indicate they nevertheless often help resolve complaints.
There have been efforts across the United States to regulate cemetery business
practices in order to protect consumers. The Federal Trade Commission has con-sidered
whether to place cemeteries under federal regulation, but it has yet to intro-duce
any trade rules over cemetery business practices due to the relatively low num-ber
of complaints. Some other states, which structure cemetery regulation differently,
have expanded cemetery regulation to address cemetery goods and services. For
example, Maryland and Virginia require cemeteries to provide price lists of cemetery
goods and services to consumers who simply inquire about cemetery arrangements.
Sunset factors (see pages 23 through 28)
Arizona’s Sunset Law requires a review of the Board’s activities under a set of spe-cific
factors, including the need for statutory changes. Auditors identified one area in
which the Legislature may wish to consider a statutory change: modifying the
requirement that each licensed funeral establishment must have its own embalming
preparation room. The requirement, which dates to the Board’s establishment in
1945, creates a costly barrier for new establishments and restricts market competi-tion.
Further, the requirement that every establishment maintain an embalming prepa-ration
room appears outdated in light of the current industry practice of using cen-tralized
embalming facilities.
At least eight other states are more flexible and do not require every establishment to
have an embalming preparation room. Relaxing this requirement in Arizona could
help decrease barriers for new establishments to enter the market. This could in turn
decrease costs for consumers.
Office of the Auditor General
page iii
State of Arizona
page iv
Office of the Auditor General
TABLE OF CONTENTS
continued
1
7
7
8
10
12
13
13
14
15
17
19
23
Introduction & Background
Finding 1: Board should improve inspections to better
protect and inform public
Inspections cover six areas concerning compliance
Improvements needed in inspection process
Board should make inspection results public
Recommendations
Finding 2: Board should improve complaint handling
and investigations
Complaint-handling and adjudication process
Some consumer concerns do not reach the Board
Investigations need improvement
Recommendations
Other Pertinent Information
Sunset Factors
Agency Response
page v
State of Arizona
TABLE OF CONTENTS
Tables:
1 Number of Licenses by Type
As of February 4, 2003
2 Statement of Revenues, Expenditures,
and Changes in Fund Balance
Years Ended or Ending June 30, 2001, 2002, and 2003
(Unaudited)
2
4
concluded
page vi
The Office of the Auditor General has conducted a performance audit and Sunset
review of the Arizona State Board of Funeral Directors and Embalmers (the Board)
pursuant to a May 14, 2002, resolution of the Joint Legislative Audit Committee. This
audit was conducted as part of the Sunset review process prescribed in Arizona
Revised Statutes (A.R.S.) §41-2951 et seq.
Regulation of the funeral industry
Both the State of Arizona and the federal government have rules that regulate the
funeral industry. This regulation exists for several reasons. After a loved one has died,
planning a funeral is often a difficult and emotional experience. Few consumers take
the opportunity to compare funeral packages offered by different funeral homes. In
addition, a funeral can be expensive, typically costing $8,000 or more. The Federal
Trade Commission (FTC) promulgated the Trade Regulation Rule for Funeral Industry
Practices (the Funeral Rule) in 1982 with the intent of better protecting funeral con-sumers
from deceptive and misleading business practices and requiring funeral
establishments to provide them with more information to help them make informed
decisions. Among the provisions of the Funeral Rule are requirements that funeral
establishments give consumers a price list of funeral goods and services, and that
establishments cannot embalm a body without prior approval from an authorized
person.
Arizona is the only state with an exemption from some federal funeral regulations. The
FTC granted Arizona a partial exemption because many of the State’s funeral con-sumer
protection laws and rules are equal to or stronger than the federal Funeral
Rule. For example, Arizona’s administrative rules regarding price disclosures for
funeral goods and services mirrors Funeral Rule provisions covering similar areas.
When Arizona’s requirements are as strong as or stronger than the Funeral Rule, the
Arizona provisions are the ones applied to the State’s funeral establishments.
However, Arizona’s funeral licensees are not exempt from some federal provisions
relating to misrepresentation and deceptive funeral practices because Arizona law is
not as strong as the federal Funeral Rule in these areas. For example, Arizona law
does not expressly require establishments to disclose that embalming is not
A typical funeral can
cost approximately
$8,000.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
Many of Arizona’s
funeral consumer pro-tection
laws are equal to
or stronger than the fed-eral
regulations.
required. In contrast, the Funeral Rule states that establishments must actively inform
consumers that embalming is not required. In such situations, the stricter Funeral Rule
applies; however, federal enforcement activities are limited, and Arizona’s Board can
enforce only Arizona statute and rule.
Board’s duties and responsibilities
The Legislature created the Board in 1945 to license funeral
industry workers and establishments. In carrying out the enforce-ment
of Arizona’s funeral laws, which do not include the regula-tion
of cemeteries (see Other Pertinent Information, pages 19
through 21), the Board has the following four main responsibili-ties:
􀁺􇩌 Licensing—The Board issues licenses to any individual
who advertises or engages in funeral directing, embalm-ing,
or cremation within the State, as well as all funeral
establishments and crematories. Qualifications for
licensees vary. For example, a licensed funeral director
must pass either the funeral service arts section (which
covers such areas as law, business, and psychology) of
the national board examination or the state-equivalent
examination, pass the funeral director state laws examina-tion,
be of good moral character, have held an active
license as an embalmer for at least 1 year, and have
assisted in the arranging of at least 25 funerals. As of
February 4, 2003, the Board had 1,177 active individual
licenses and 224 active establishment licenses.1 See
Table 1 for the number of licensees within each category.
The board staff process all applications and annual
renewals, collect fees, and conduct criminal history back-ground
checks on all applicants.
􀁺􇩉 Inspections—Board staff inspect funeral establishments and crematories to
ensure compliance with state requirements and also inspect all new establish-ments
prior to issuing a license. Statute requires the Board to inspect every
funeral establishment once every 5 years. The Board exceeds this requirement by
inspecting nearly all establishments at least once each year.
􀁺􇩃 Complaint Resolution—The Board investigates and adjudicates complaints
against licensees. The Board receives complaints from consumers and other
licensed funeral providers, but it may also initiate a complaint itself if a licensee’s
actions appear to be in violation of state laws or regulations. In fiscal year 2002,
1 These totals do not represent the number of individuals or establishments because a single person may hold up to four
licenses, and an establishment may have an endorsement to see prearranged funeral agreements.
State of Arizona
page 2
The Board inspects
nearly all establishments
at least once each year.
Source: Auditor General staff summary of information provided by board staff.
Table 1 Number of Licenses by Type
As of February 4, 2003
License Type Number
Establishments
Funeral establishment 158
Endorsement to sell prearranged
funeral arrangements 24
Crematory 42
Total Establishment Licenses 224
Individuals
Funeral Director 470
Funeral Director at multiple
establishments 18
Embalmer 502
Embalmer Assistant 27
Intern 21
Prearranged Funeral Salesperson 28
Cremationist 111
Total Individual Licenses 1,177
the Board resolved nine complaints, of which four were dismissed, one resulted
in a letter of concern, and four resulted in discipline.
􀁺􇩐 Public Information—The Board provides information to the public in three ways.
First, the Board has a brochure that all funeral establishments are required to
give to consumers. The brochure contains information such as some of the legal
requirements concerning funerals, embalming and cremation requirements,
prearranged funeral plans, and how to file a complaint. Second, the Board
recently established a Web site, which includes a copy of its brochure, applica-tions
for licenses, and links to its statutes and rules. Third, the Board takes calls
from consumers, providing them with information about whether a facility cur-rently
has a valid license and with its complaint history. Finally, according to
board staff, board representatives have spoken to a number of civic organiza-tions
about topics related to funeral arrangements.
Staffing and Budget
The Board consists of seven Governor-appointed members who serve 4-year terms.
Four of the members are licensed funeral directors or embalmers, and the other three
must be members of the public. For fiscal year 2003, the Board is authorized four full-time
equivalent (FTE) positions. The staff includes an executive director responsible
for operations, a deputy director who conducts investigations, a compliance admin-istrator
who inspects funeral establishments and crematories, and an administrative
assistant who processes license applications and renewals.
As illustrated in Table 2 on page 4, the Board estimates revenues of approximately
$328,000 for fiscal year 2003 and expenditures of more than $263,000. The Board’s
revenue is principally derived from licensing fees. The Board remits all civil penalties
and 10 percent of licenses, fees, other fines and forfeits, charges for services, and
certain other revenues to the State General Fund, and deposits the remainder into
the Board of Funeral Directors and Embalmers Fund.
Scope and Methodology
Audit work focused on the adequacy of the Board’s inspection program and com-plaint
processes. This performance audit and Sunset review includes two findings
and associated recommendations:
􀁺􇩔 To better protect the public, the Board should establish procedures for con-ducting
inspections of funeral establishments, implement a compliance rating
system, and make inspection results available to the public (see Finding 1,
pages 7 through 12).
Office of the Auditor General
page 3
Funeral establishments
must provide con-sumers
with the Board’s
brochure about making
funeral arrangements.
􀁺􇩔 The Board should ensure that staff follow written policies to guide initial com-plaint
handling and further develop its complaint investigation procedures to
guide staff in preparing comprehensive investigations for the Board’s review
(see Finding 2, pages 13 through 17).
􀁺􇩔 This report also contains Other Pertinent Information regarding the regulation of
Arizona cemeteries (see pages 19 through 21).
State of Arizona
page 4
2001 2002 2003
(Actual) (Actual) (Estimated)
Revenues:
Licenses $284,215 $349,170 1 $282,200
Interest 16,663 10,459 11,000
Fines, forfeits, and penalties 1,370 2,905 13,100
Charges for services 7,360 5,310 4,500
Other 13,915 14,930 16,900
Total revenues 323,523 382,774 327,700
Expenditures 2
Personal services and employee-related 165,296 167,234 180,200
Professional and outside services 36,509 37,544 41,500
Travel 4,018 6,731 9,700
Other operating 25,181 18,986 31,500
Equipment 5,888 445 500
Total expenditures 236,892 230,940 263,400
Excess of revenues over (under) expenditures 86,631 151,834 64,300
Other financial sources (uses):
Net operating transfers in (out) (1,104)
Remittances to the State General Fund 3 (30,966) (37,412) (30,300)
Total other financing uses (32,070) (37,412) (30,300)
Excess of revenues over (under) expenditures and
other financing uses 54,561 114,422 34,000
Fund balance, beginning of year 175,422 229,983 344,405
Fund balance, end of year $229,983 $344,405 $378,405
1 In 2002, a significant increase in licensing activity caused a corresponding increase in licensing revenue. The increased
activity was caused primarily by a change in the licensing structure. For example, the Legislature eliminated the
Apprentice Embalmer license and established a Cremationist license.
2 Includes the prior year’s administrative adjustments.
3 As a 90/10 agency, the Board remits to the State General Fund all civil penalties and 10 percent of licenses, other fines
and forfeits, charges for services, and certain other revenues.
Source: Auditor General staff analysis of the Arizona Financial Information System’s Revenues and Expenditures by Fund,
Program, Organization, and Object and Trial Balance by Fund reports for the years ended June 30, 2001 and
2002; and financial information provided by the Board for the year ending June 30, 2003.
Table 2 Statement of Revenues, Expenditures, and Changes in Fund Balance
Years Ended or Ending June 30, 2001, 2002, and 2003
(Unaudited)
Office of the Auditor General
page 5
In addition, within the Sunset Factors (see pages 23 through 28), the report recom-mends
that the Legislature modify funeral establishment requirements for licensing.
This audit used a variety of methods to study the issues addressed in this report,
including the following:
􀁺􇩔 To assess the Board’s inspection process, auditors observed seven compliance
inspections, interviewed board staff who conduct inspections, and reviewed the
Board’s inspection forms and reports. Auditors interviewed staff at the funeral
boards in four states to gain more information about their funeral establishment
inspection processes.1 In addition, auditors reviewed Web sites of five Arizona
county and state agencies to determine the availability of inspection data on
their Web sites.2
􀁺􇩔 To evaluate the Board’s complaint-handling and investigation efforts, auditors
interviewed staff, reviewed staff correspondence files related to complaints, and
reviewed statutes, rules, and board policies and procedures. Auditors observed
five board meetings and reviewed 13 complaint investigation packets that board
staff prepared for these meetings. Auditors also examined the Council of State
Governments’ guidelines for effective investigations by regulatory agencies.
􀁺􇩉 In order to obtain information on cemetery regulation in Arizona, auditors inter-viewed
staff at the Arizona Department of Real Estate and a representative of the
Federal Trade Commission. Auditors also reviewed information regarding the
Federal Trade Commission’s consideration of expanding federal regulation to
include cemetery trade, and consulted Arizona’s and other states’ statutes and
rules regarding cemetery regulation.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to members of the Board of
Funeral Directors and Embalmers, the executive director, and staff for their coopera-tion
and assistance throughout the audit.
1 Auditors interviewed funeral service regulatory board staff in Maryland, North Carolina, Texas, and West Virginia. Auditors
selected these states from a review of other states’ statutes that indicated the existence of funeral establishment inspec-tion
programs. These states included Alabama, Arkansas, Delaware, Florida, Iowa, Maryland, Minnesota, Nebraska, New
Hampshire, New Jersey, New Mexico, North Carolina, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas,
Utah, Washington, West Virginia, and Wisconsin.
2 Auditors were aware of inspection programs in the following agencies and reviewed their Web sites for the posting of
inspection results: the Arizona Department of Health Services’ Assurance Licensure Service (Office of Long Term Care),
the Arizona Department of Weights and Measures, the Maricopa County Environmental Services Department, the Pima
County Health Department, and the Mohave County Department of Health and Social Services.
State of Arizona
page 6
Board should improve inspections to better pro-tect
and inform public
Inspecting funeral establishments is an important way for the Board to protect con-sumers
from deceptive business practices and to ensure worker safety. Although the
Board does not have adequate records that auditors could verify, the Board believes
inspections have enhanced compliance. However, the current process could use
improvement in several respects. The Board lacks procedures for keeping inspec-tions
consistent, for indicating how well establishments are complying with require-ments,
and for following up when problems are found. The Board could better pro-tect
consumer interests and improve the inspection process by adopting rules and
procedures for conducting inspections, establishing an inspection rating system,
making the inspection follow-up process more consistent, and making inspection
results available so that consumers can make informed decisions.
Inspections cover six areas concerning compliance
Arizona statute requires the Board to inspect every funeral establishment once every
5 years. The Board instituted a more systematic inspection program in 1999 and it
now inspects nearly all establishments at least once a year. The Board’s inspector
uses a six-page checklist to guide the inspection of six main areas:
􀁺􇩇 General information on the establishment and all licensees who work there—
The inspector should verify the names of all licensed personnel and check that
establishments properly display all licenses.
􀁺􇩔 The display of funeral goods—This includes ensuring that there is nothing
deceptive or misleading about casket display and pricing. For example, inspec-tors
should check that establishments appropriately display the individual cas-ket
prices.
Office of the Auditor General
page 7
FINDING 1
􀁺􇩅 Establishment policies on obtaining permission to embalm—The inspector
should confirm, for example, that funeral establishments disclose to consumers
that embalming is not required for direct burials or cremations.
􀁺􇩇 General price list—The inspector should review an establishment’s general price
list of funeral goods and services to ensure that it contains state-required items,
including an itemization of charges for caskets or alternative containers, the
price of embalming services, and charges for hearse or limousine use.
􀁺􇩐 Prearranged funeral sales—This should include ensuring that an establish-ment’s
prearranged funeral trust agreement includes the required consumer
disclosure about where money will be deposited in trust.
􀁺􇩅 Embalming preparation room—The inspector should check that the appropriate
equipment is present and the room is maintained in a sanitary manner.
Improvements needed in inspection process
Auditors found three main problems with the Board’s current inspection and follow-up
process. First, the Board’s current checklist is not sufficient to ensure that inspec-tions
consistently cover everything they should. Second, the Board has no system to
consistently convey these inspection results. Third, the Board does not have ade-quate
rules and procedures for following up on inspections and tracking results over
time. The Board needs to make improvements in all three areas.
Shortcomings of inspections indicate need for improved proce-dures—
Although the Board’s inspector uses a checklist when conducting inspec-tions,
the Board has never adopted any guidelines for employing the checklist to
ensure the consistency of inspections from one establishment to another. This lack
of instruction can lead to instances where the inspector may miss problems that
directly affect consumers. Auditors accompanied the Board’s inspector on seven
inspections and identified the following improvements to address inconsistencies:
􀁺􇩃 Closer visual examination needed—The inspector should visually inspect dis-plays
and facilities to ensure compliance. However, at one funeral establishment
the inspector did not examine the casket price display to verify the required indi-vidual
price listing. Rather, the inspector relied on the funeral director’s word that
the display was in compliance. Auditors observed that the price shown inap-propriately
packaged other funeral goods and services with the casket price,
instead of listing the price of the casket as an individual item.
􀁺􇩄 Documentation should be obtained—The inspector should obtain policies, pro-cedures,
and forms that prove that establishments require their staff to make
State of Arizona
page 8
The Board has no
guidelines for using the
inspection checklist.
proper disclosures, and obtain authorization from appropriate people as the law
requires. During all seven inspections, auditors observed that the inspector did
not actually obtain copies of any establishment’s policies or procedures on how
staff obtain authorization to embalm from the appropriate authorizing agent.
Instead, the inspector relied on the funeral director’s word that the funeral estab-lishment
secures permission to embalm.
􀁺􇩆 File review guidelines needed—The inspector should also review a small num-ber
of files to ensure that establishments followed certain mandatory procedures
such as obtaining appropriate authorizations for funeral services and having a
licensed funeral director sign each contract. Inspectors should have a clear
understanding of what documents to examine in the establishment’s client files
when reviewing these records. The inspector’s checklist does not provide guid-ance
for reviewing files or designated space to record the review’s results.
Further, auditors observed two inspections during which the inspector did not
review files.
Since the completion of audit work, board staff have started revising the inspection
checklist. For example, the checklist now includes a section that addresses review-ing
establishment case files, thus giving more guidance to the inspector about what
documents to review. Staff have also begun developing a broader set of inspection
guidelines that provide more explicit instruction for completing an inspection.
System needed to determine compliance and convey inspection
results—The Board has not developed a standard to determine whether an estab-lishment
passes an inspection. The Board should adopt an administrative rule to
define inspection standards and identify violations that cause noncompliance as part
of its statutory obligation to establish rules about inspections. Because some viola-tions
have a greater impact on consumers or the workers’ safety, the Board should
assign greater weight to more serious violations in determining whether an estab-lishment
passes inspection.
Once these standards are set, the Board should implement a compliance rating sys-tem
for funeral establishments and adopt this system in administrative rule. Any rat-ing
system the Board develops should be easy for consumers to understand, and it
should allow consumers to compare results among establishments. This system
should clearly indicate whether a violation could affect consumers, such as decep-tive
merchandise displays, or whether a violation concerns worker safety, such as an
unsanitary embalming preparation room. In developing this rating system the Board
could draw from systems used by other agencies. One option is a simple pass-or-fail
grade that merely differentiates between establishments that are either in compli-ance
or not. For example, the Maryland Board of Morticians has a simple yes/no
Office of the Auditor General
page 9
Current inspections are
inconsistent and may
miss problems that
directly affect con-sumers.
A compliance rating
system should allow
consumers to compare
results among establish-ments.
determination at the end of its inspection report. Another option is to adopt a grad-ing
system that indicates levels of compliance, similar to what some county health
departments use when inspecting restaurants.
Follow-up procedures are insufficient—The Board also needs to improve
efforts to monitor noncompliant establishments. The Board has no written guidelines
regarding inspection follow-up procedures and does not compile or track inspection
results. As a first step, the Board should establish time frames for establishments to
correct violations noted during an inspection. The Board should incorporate these
time frames into administrative rule so that establishments know what is required of
them to be in compliance. The rule regarding time frames should also describe
potential actions the Board may take if an establishment failed to correct violations in
a timely manner.
Besides establishing time frames for corrective action, the Board should establish
internal written procedures for inspection follow-up efforts and develop an inspection
tracking system. Procedures should, for example, specify when a follow-up inspec-tion
is required, or when an establishment can simply submit photographs or other
documents to prove the correction of violations identified during an inspection. An
inspection tracking system would allow inspectors to review previous inspections
before conducting a new inspection and monitor the inspection history of each
establishment. It would also allow the Board to track and check the status of correc-tions
to violations. Such a tracking system could also help facilitate sharing inspec-tion
results with the public. During the audit’s course, board staff started developing
follow-up procedures for the Board to consider adopting. Additionally, staff have
designed and piloted a computerized database to track inspections.
Board should make inspection results public
After establishing the compliance rating system, the Board should make this infor-mation
available to the public. Although the Board has been working on a format to
communicate these results, it does not yet have anything in place. Completing these
efforts is important. By sharing inspection results with the public, the Board could fur-ther
help consumers in making informed decisions about funeral arrangements.
Depending on the extent of the resources it has available, the Board could choose
one or more of the following approaches:
􀁺􇩐 Provide information over the phone—At a minimum, the Board should develop
and implement a policy that requires staff to provide inspection results to con-sumers
over the phone. Board staff currently provide callers with information
about whether an establishment has a valid license and its complaint history, but
State of Arizona
page 10
Knowledge of inspec-tion
results could help
consumers make more
informed decisions in
selecting a funeral
establishment.
do not share inspection results. In contrast, West Virginia’s Board of Funeral
Service Examiners makes inspection information available to those who call the
Board’s office.
􀁺􇩕 Use the Board’s Web site—The Board uses its Web site to make its brochure
available and also incorporates other information such as its statutes and rules.
It could also make inspection information available, as several Arizona state and
county agencies do for other types of establishments. For example, the
Department of Health Services’ Office of Long Term Care makes nursing home
inspection information available through the Department’s Web site.
􀁺􇩒 Require establishments to post inspection results—The posted notice could
simply state the establishment’s rating from the last inspection, or it could con-sist
of the entire inspection report. For example, Maryland’s Board of Morticians
currently requires funeral establishments to publicly display a letter from the
Board showing that the funeral establishment passed the inspection. Requiring
the posting of inspection results would require the Legislature to change statute.
Since the audit’s completion, the Board updated its consumer brochure to inform
consumers that they can contact the Board for inspection results. The Board will dis-tribute
the updated brochures in 2 to 3 months once it exhausts its current stock.
Office of the Auditor General
page 11
Recommendations
1. The Board should improve inspection procedures to ensure that the inspection
process is consistent across establishments. The procedures should include
guidelines for appropriate methods to use in determining compliance with state
requirements, specifically:
a. When an inspector should make a visual examination of the premises;
b. When the inspector should obtain supporting documentation; and
c. How to conduct a file review.
2. The Board should adopt an administrative rule that defines a standard for
whether an establishment is in compliance at the end of an inspection.
3. The Board should implement a rating system that is understandable to con-sumers
and describes the violations of funeral establishments, and adopt this
system in administrative rule.
4. The Board should develop administrative rules and procedures that govern the
inspection follow-up process. These should include:
a. Time frames for correcting deficiencies;
b. The circumstances under which the Board may open a complaint against
an establishment in order to take disciplinary action as the result of an
inspection; and
c. Methods for verifying correction of violations.
5. The Board should implement a system for tracking the results of compliance
inspections.
6. The Board should develop and implement a policy that requires staff to make
inspection results available to the public via the telephone. If resources are avail-able,
the Board should also make results available on its Web site or at estab-lishments.
State of Arizona
page 12
Board should improve complaint handling and
investigations
Although the Board completes complaint investigations in a timely manner, current
procedures for processing and investigating complaints are not adequate in several
respects. The staff’s current procedures for handling complaints have caused sev-eral
complaints not to reach the Board for consideration. Further, the investigations
that staff have prepared for board consideration are incomplete and result in an inef-ficient
use of the Board’s time and resources. The Board should ensure that it
receives all complaints for consideration and should take steps to improve the inves-tigation
process.
According to the Board’s complaint log, 12 complaints were received in fiscal year
2002. The Board most commonly receives complaints of unprofessional services,
which involve allegations of a funeral establishment treating a funeral consumer
insensitively or not being responsive to a consumer’s particular needs or require-ments
concerning funeral arrangements. For example, a consumer may complain
that visitation preparations were insufficient. The Board also receives some com-plaints
about poor-quality embalming, which can impact the appearance of the
deceased.
Complaint-handling and adjudication process
According to statute, the Board is required to investigate all potential violations
received in writing. The Board has delegated complaint investigations to staff and
has developed procedures for written complaints that fall within the Board’s jurisdic-tion.
At a board meeting, the Board performs an initial review of a complaint to determine
whether there are grounds for disciplinary action. The Board may conclude at this
point that no violations occurred and dismiss the complaint. If the Board determines
Office of the Auditor General
page 13
FINDING 2
that discipline may be necessary, it may request an informal interview with the
licensee at a future board meeting or issue a notice of formal hearing. The Board
generally prefers informal interviews and has not held a formal hearing in recent
years. When conducting an informal interview, the Board considers the actions of,
and consequently may discipline, individual licensees as well as the licensed funeral
establishment or crematory that employs the individual licensee.
At the conclusion of an informal interview, the Board may dismiss a complaint, issue
a letter of concern to a licensee, or take any or all of the following disciplinary options:
􀁺􇩉 Issue a letter of censure or reprimand.
􀁺􇩉 Impose probationary terms, including temporary suspension for not more than
30 days, restrictions on the licensee’s right to practice, and restitution to the
complainant.
􀁺􇩉 Impose a civil penalty of not more than $1,000 for each violation by an individ-ual
and not more than $3,000 for each violation by an establishment.
􀁺􇩁 Assess the licensee for administrative costs and expenses associated with the
complaint investigation and informal interview.
The staff investigator takes an average of 81 days to investigate a complaint for the
Board’s initial review of the complaint and an average of 144 total days for the Board
to resolve complaints at an informal interview. These average time frames are within
the 180-day standard established in previous Auditor General regulatory board
reports. In fiscal year 2002, the Board resolved nine complaints about funeral estab-lishments.
The Board dismissed four of these complaints, issued a letter of concern
for one complaint, and imposed discipline on licensees in four complaints.
Some consumer concerns do not reach the Board
Although the Board resolves complaints in a timely manner, staff actions sometimes
limit the public’s access to the Board. Statute requires consumers to submit com-plaints
in writing, but when consumers have written letters of complaint, staff have
often waited to open an investigation until the consumer completes the Board’s offi-cial
complaint form. If a consumer calls the Board with a complaint or writes a letter
of complaint, staff send the complainant the Board’s complaint form to complete and
return. According to board staff, some consumers complete the form while others do
not, but staff do not track the number of complaint forms sent out to callers or letter
writers. Providing the Board’s complaint form to consumers who call is an appropri-ate
way for board staff to encourage consumers to submit a written complaint.
State of Arizona
page 14
The Board resolved nine
complaints in fiscal year
2002.
However, it is inappropriate for staff to wait before opening an investigation until a
consumer who has already written a letter resubmits the complaint on the Board’s
form. In these instances, the form can serve as an obstacle for some consumers to
have the Board hear their concerns. The Board should ensure that staff open com-plaint
investigations upon receiving complaints written either as letters or on the
Board’s form.
In addition to requiring consumers to submit complaints on the Board’s complaint
form, board staff also do not forward all consumer complaints to the Board for dis-position.
Although statute requires the Board itself to decide if a complaint constitutes
a violation and may warrant discipline, auditors identified several complaints that staff
never forwarded to the Board to make such decisions. For example, in one instance,
the funeral establishment took action to satisfy a complainant, the complainant with-drew
the complaint, but staff did not forward the complaint to the Board. While the
complainant received compensation and was satisfied, this practice does not allow
the Board to determine whether a violation had occurred and take action to prevent
possible future violations. In two other instances, someone other than the person
who entered into the contract complained about establishments, and staff did not for-ward
the complaints to the Board. Regardless of who files a complaint, board staff
need to forward complaints to the Board so it can decide if a violation occurred and
determine if a licensee should be disciplined.
Investigations need improvement
In addition to ensuring that staff follow initial complaint-handling procedures, the
Board should require investigation staff to conduct complete investigations.
Currently, investigations are incomplete and do not provide sufficient information for
the Board to efficiently adjudicate complaints. For example, auditors reviewed 13
complaint investigations and found three cases in which staff did not identify all
potential violations. Consequently, the Board spends a significant amount of time
during its meetings gathering additional information and identifying additional poten-tial
violations that staff could have identified had the investigation been more thor-ough.
The example on page 16 illustrates the incompleteness of staff investigation
efforts.
To help ensure complete staff investigations, the Board should develop more com-prehensive
procedures and ensure that staff follow them. Specifically, the procedures
should require board staff to:
􀁺􇩓 Specify all potential violations stemming from allegations to provide the Board
with sufficient information to decide a case. If staff, rather than the Board, iden-tify
all laws potentially violated, the Board can more efficiently adjudicate com-plaints
and determine disciplinary actions.
Office of the Auditor General
page 15
Incomplete investiga-tions
leave the Board
with insufficient informa-tion
to efficiently adjudi-cate
complaints.
A complete investigation
should determine
whether complaint alle-gations
were substanti-ated.
􀁺􇩃 Clearly indicate whether the investigation supported complaint allegations.
Auditors reviewed 13 complaint information packets provided by staff and noted
that board staff do not indicate whether the investigation supported the com-plainant’s
allegations. Instead, staff prepare reports that summarize the com-plainant’s
concerns and the licensee’s response, but do not draw a conclusion
from the evidence provided.
􀁺􇩉 Interview and take statements from witnesses to include in the Board’s com-plaint
information packet. Although Board procedures require witnesses to be
interviewed, of the 13 complaint packets reviewed, only 1 included witness
statements taken by staff. Instead, staff usually depend on the willingness of wit-nesses
to write their own statements or attend a board meeting to address the
Board in person, believing it is better to have witnesses express themselves in
their own words. However, when witnesses write their own statements, they may
not address the case’s essential points as the investigator would. Further, if a
witness fails to write a statement and does not attend the hearing, the Board will
not have the witnesses’ information.
􀁺􇩏 Obtain the licensees’ complete documentation prior to the Board’s review of a
complaint. Board staff request funeral establishments to provide all documents
related to the complaint. However, according to board staff, not all establish-ments
comply with the request and, in particular, frequently fail to provide the
establishments’ case file notes that record consultations with family of the
State of Arizona
page 16
In one case, a consumer complained that two funeral establishments failed to communicate about
transporting a deceased person, which significantly worsened the condition of the body. Board staff
identified one potential violation of the rule regarding unprofessional services. However, the Board itself
identified an additional violation while taking testimony at a board meeting. The Board learned that the
funeral director in charge of one of the establishments was not on-site at the time of the complaint inci-dent
and had not appointed another licensed funeral director to serve on his behalf during his absence,
as required by statute. The Board determined that this funeral director failed to ensure an intern was
appropriately supervised. This intern underestimated the condition of the deceased and made the
arrangements to transport the body prior to embalming. In addition, board staff did not document
whether the investigation supported the complaint allegations, which hampered the Board’s ability to
efficiently decide the facts of the case. Further, because staff did not obtain a complete statement from
an important witness, details that this witness could have provided about making the transportation
arrangements were unavailable for the Board’s consideration.
Example:
deceased. Auditors’ review of the 13 complaint information packets noted that,
in 3 complaints directly related to the funeral establishment’s communications
with the complainants, the establishments’ case file notes were not included in
the Board’s information packet. If licensees fail to provide all pertinent records
requested by board staff during the investigation, staff should use the Board’s
statutory authority to subpoena these documents.
Since the audit’s completion, board staff issued a subpoena for records in one case
in which the licensee failed to provide case file notes. Additionally, staff now expressly
request case file notes in the form letter used to obtain complaint-related documen-tation
from the licensee. Staff have also drafted revised procedures that address the
use of subpoenas to obtain investigation records.
Recommendations
1. The Board should ensure that staff follow established procedures for complaint
handling. Specifically, staff should:
a. Open complaint investigations upon receiving complaints written either as
letters or on the Board’s complaint form; and
b. Ensure all written complaints are forwarded to the Board for final disposi-tion.
2. The Board should further develop its complaint investigation procedures to
instruct and guide staff in preparing complete investigations for the Board’s
review, and the Board should ensure that staff follow the procedures. The pro-cedures
should require staff to:
a. Identify all potential violations;
b. Determine whether the investigation supported complaint allegations;
c. Take witnesses’ statements during interviews; and
d. Obtain all necessary records for a complete investigation and use subpoe-nas
as appropriate.
Office of the Auditor General
page 17
State of Arizona
page 18
During the audit, auditors reviewed information about cemetery regulation in Arizona
and how it compares to some other states. The Funeral Board estimates that it
receives approximately 10 to 15 consumer complaints about cemeteries each year.
Because the Funeral Board has no statutory authority over cemeteries, board staff
refer consumers with cemetery concerns to the Arizona Department of Real Estate
(Department). The Department is the sole state agency with statutory authority over
cemetery matters. Although not all cemetery consumers act on the Board’s referral,
the Department also reports receiving approximately the same number of consumer
complaints regarding cemeteries annually. These complaints generally concern such
issues as cemetery upkeep, pre-arranged burial contracts, and failure to install
cemetery goods, such as grave markers, in a timely manner.
Among the small number of cemetery complaints the Department receives annually,
however, department staff estimate that only one or two complaints actually fall within
the Department’s jurisdiction. The Department has limited authority in cemetery mat-ters
that directly affect consumers. Most significantly, the Department has no statu-tory
authority to regulate cemetery goods and services, and therefore cannot inter-vene
in contractual disputes regarding the delivery or quality of goods and services.
Additionally, the Department has no statutory authority over how cemeteries maintain
their grounds on a daily basis. However, despite the Department’s limited authority,
department staff report that they routinely make courtesy calls to cemeteries on
behalf of consumers, and this oftentimes helps resolve complaints in the consumers’
favor.
Statute centers the Department’s regulatory authority over cemeteries on the follow-ing
efforts:
􀁺􇩉 Issuing certificates of authority to transact cemetery business—The Department
issues a certificate of authority to transact cemetery business to applicants that
meet criteria outlined in statute. There is a fee of $500 to apply for certification,
and there is no annual renewal fee. However, not all cemeteries must hold cer-tificates
of authority. Religiously affiliated, municipal, and certain fraternal organ-izations’
cemeteries are exempt from state regulation. While the Department
Office of the Auditor General
OTHER PERTINENT
INFORMATION
page 19
The Arizona Department
of Real Estate oversees
Arizona’s cemetery busi-ness
practices.
Arizona statute does not
provide for the regula-tion
of cemetery goods
and services.
estimates that there are approximately 100 cemeteries in the State, it has author-ity
over only 39 of them.
􀁺􇩁 Accepting cemetery plan amendments from certificate holders—Once a ceme-tery
obtains a certificate of authority, it must notify the Department when it makes
any material change to its cemetery plan, such as building a new mausoleum.
A fee of $500 is charged for a certified cemetery to register a cemetery plan
amendment with the Department.
􀁺􇩌 Licensing cemetery brokers and salespersons—The Department licenses
cemetery brokers and salespersons to expressly sell cemetery plots. Cemetery
broker and salesperson applicants must pass an examination on cemetery busi-ness
practices, land sales transactions, and state laws on the regulation of
cemeteries, cemetery brokers, and cemetery salespersons. Additionally, ceme-tery
broker applicants must have at least 3 years’ experience as a cemetery
salesperson, or licensed real estate salesperson or broker. However, any
licensed real estate agent may also engage in cemetery sales. According to
Department staff, if a person who sells cemetery plots works for a cemetery that
is exempt from the Department’s regulation, that individual is exempt from licen-sure.
The Department had a combined total of 278 active cemetery brokers and
salespersons as of January 22, 2003.
􀁺􇩁 Auditing perpetual care trust funds—Approximately once every 5 years, the
Department conducts audits of cemeteries with endowed trusts for cemetery
maintenance and operation. These audits are conducted to verify that the trust
funds exist and ensure that cemeteries are making appropriate deposits from
plot and burial space sales into the trust fund. Department staff attempt to audit
newly certified cemeteries within the first year of operation. Statute requires
cemeteries certified after January 1, 1998, to maintain perpetual care trusts.
Certified cemeteries operating prior to January 1, 1998, must establish a trust
fund only if they make a material change to their cemetery plans. According to
department staff, approximately 28 of the 39 certified cemeteries in the State
maintain these trusts.
In comparison to the Department’s responsibilities to register real estate develop-ment
projects, and license and audit real estate brokers and salespersons, the vol-ume
of the Department’s cemetery-related work is minimal. For example, while the
Department received 1,690 development-related applications in fiscal year 2002, it
received only 7 cemetery certification applications and three cemetery plan amend-ments
in the last 4 fiscal years. Likewise, the Department’s 278 active cemetery bro-kers
and salespersons represent only 0.6 percent of the Department’s active
licensees.
State of Arizona
page 20
Most cemeteries in
Arizona are exempt from
state regulation.
Nation-wide efforts to regulate cemeteries
There have been efforts across the United States to regulate cemetery business
practices in order to protect consumers. For several years, the Federal Trade
Commission has been considering whether to place cemeteries under federal regu-lation.
However, the Federal Trade Commission, like Arizona, has found relatively few
cemetery complaints. Because the Commission must document the pervasiveness
and prevalence of a problem to justify the cost of regulation, it has yet to introduce
any trade rules over cemetery business practices.
Like Arizona, other states have licensing and trust fund monitoring responsibilities
over cemeteries, but some states have structured cemetery regulation differently and
adopted regulation of cemetery goods and services. For example, Maryland, New
York, and Virginia have established cemetery oversight agencies and boards that col-lect
annual fees from cemeteries to support regulation efforts. Like Arizona, each of
these states’ statutes requires cemeteries within their jurisdiction to maintain perpet-ual
care trust funds; however, unlike Arizona, each of these states also requires
cemeteries to submit annual financial reports of these trusts. New York’s state law, for
example, requires cemeteries to post price lists of cemetery property in their business
offices. Maryland and Virginia laws require cemeteries to provide such price lists to
not only buyers, but also to consumers who simply inquire about cemetery arrange-ments,
and these lists must also include the prices of cemetery services, such as
opening and closing gravesites. Virginia law also prescribes a form on which pre-arranged
burial contracts must be made.
Office of the Auditor General
page 21
In contrast to Arizona,
some other states regu-late
cemetery goods
and services.
State of Arizona
page 22
1. The objective and purpose in establishing the agency.
The Legislature established the Arizona State Board of Funeral Directors and
Embalmers in 1945. The Board’s mission is to maintain and enforce a set of
standards that provides protection for the health, safety, and welfare of Arizona
citizens by educating the consumer, and by actively and impartially regulating
those licensed to provide funeral goods and services. In order to carry out this
mission the Board:
􀁺􇩉 Issues licenses to anyone who advertises or engages in funeral directing,
embalming, or cremation. As of February 4, 2003, the Board had 1,177
active individual licenses and 224 active establishment licenses.1
􀁺􇩉 Investigates complaints and disciplines licensees for violating statute or
rule.
􀁺􇩉 Inspects funeral establishments to ensure compliance with state require-ments.
􀁺􇩐 Provides the public with information about funeral laws and business prac-tices
through a consumer brochure, telephone assistance, and the Board’s
Web site.
2. The effectiveness with which the agency has met its objectives and purpose and
the efficiency with which it has operated.
The Board has met some of its objectives and purpose with effectiveness and
efficiency, but it could improve in some areas. While administrative rule provides
the Board 110 days to issue most of its licenses, the Board issues most licenses
in fewer than 41 days. In addition, the Board takes an average of 144 days to
resolve complaints, which is within the 180-day standard established in previous
Auditor General regulatory board reports.
Office of the Auditor General
page 23
1 These totals do not represent the number of individual persons or establishments, however, as a single person may hold
up to four licenses, and an establishment may have an endorsement to sell prearranged funeral agreements.
SUNSET FACTORS
Despite the timeliness of licensing and complaint resolution, the Board could
improve the effectiveness of its inspections (see Finding 1, pages 7 through 12).
Specifically, the Board should improve formal guidelines for conducting routine
and follow-up inspections to ensure consistent inspections across establish-ments,
implement an inspection tracking system, and develop a compliance rat-ing
system to consistently convey inspection results. Further, the Board should
share inspection results with the public to help consumers make informed deci-sions
about funeral arrangements.
In addition, to further improve the efficiency of board operations, the Board
should develop better procedures to guide staff investigations (see Finding 2,
pages 13 through 17). Because complaint investigations performed by staff
have been incomplete, the Board has insufficient information to efficiently adju-dicate
complaints.
3. The extent to which the agency has operated within the public interest.
The Board has largely operated in the public interest. The Board’s licensing of
practitioners helps ensure that licensees are qualified and professional. Through
a Board-produced brochure distributed at all funeral establishments, telephone
assistance, and its Web site, the Board advises consumers of their rights and
helps them make more informed decisions about funeral arrangements.
According to board staff, board representatives have also provided consumers
with information through speaking engagements at numerous civic organiza-tions.
Additionally, the Board’s inspection program helps protect consumers
from misleading and deceptive funeral practices. The Board conducts inspec-tions
of nearly all licensed funeral establishments at least once a year.
Opportunity exists, however, for improvement in some areas. The Board should
improve the inspection program by making inspection results available to the
public (see Finding 1, pages 7 through 12). In addition, to improve consumer
access to the Board, board staff should open complaint investigations for all
written complaints received and forward these to the Board for resolution (see
Finding 2, pages 13 through 17).
4. The extent to which rules adopted by the Board are consistent with the legisla-tive
mandate.
At the request of Auditor General staff, the Governor’s Regulatory Review
Council (GRRC) reviewed the Board’s statutory requirements for promulgating
rules and determined that the Board has adopted most but not all of the rules
required by statute. In particular, GRRC noted that the Board has no rules related
to inspections of funeral establishments and crematories. Audit work conducted
State of Arizona
page 24
on the Board’s inspection process (see Finding 1, pages 7 through 12) further
supports the need for rules to address the inspection process. Specifically, the
Board should establish in rule how inspectors rate compliance in establish-ments.
Further, rules should outline the time frame that licensees have to correct
deficiencies identified by the inspector, the steps the Board may take to verify
improvements, and the consequences of noncompliance.
The Board completed a 5-year review of its rules in January 2002 and identified
several rules to revise. The Board has since started the process of amending its
rules regarding some general provisions, such as hearing procedures, as well
as some licensing provisions and continuing education requirements. The
Board filed a notice with the Secretary of State’s Office in February 2003 to begin
the rulemaking process.
5. The extent to which the Board has encouraged input from the public before
adopting its rules, and the extent to which it has informed the public of its actions
and their expected public impact.
The Board adheres to statute by publishing notices in the Arizona Administrative
Register as a means of notifying the public of proposed rules and soliciting feed-back.
According to staff, the Board has also contacted professional entities
involved in or impacted by the Board’s rules and mailed them copies of pro-posed
rules. As part of the process of adopting rules in 2000 regarding licens-ing
time frames, the Board held meetings in Phoenix, Flagstaff, and Tucson to
explain the proposed rules and obtain input from the public.
Additionally, the Board appears to use executive session appropriately. The
Board has recently filed with the Secretary of State the required statement of
where meeting notices will be posted. However, the Board should ensure that
notices appear at all designated locations at least 24 hours in advance of the
meeting. Further, in order to avoid any appearance of conflict of interest on the
part of a board member, staff should note in the meeting minutes when a board
member recuses him/herself from a vote.
6. The extent to which the Board has been able to investigate and resolve com-plaints
that are within its jurisdiction.
The Board has sufficient statutory authority and disciplinary options to investi-gate
and adjudicate complaints within its jurisdiction. The Board resolved nine
complaints in fiscal year 2002. The Board most commonly receives complaints
involving unprofessional services, which involve insensitive or disrespectful treat-ment
of a funeral consumer or the deceased. The types of discipline the Board
Office of the Auditor General
page 25
can impose on licensees include civil penalties, probation, reprimand, censure,
and license suspension and revocation.
7. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling legisla-tion.
A.R.S §32-1306 authorizes the Attorney General’s Office to represent the Board
in all legal actions and proceedings, including prosecution. In addition to the dis-ciplinary
actions that the Board may take against licensees who commit viola-tions,
the Board may also prevent any person from engaging in any act that vio-lates
board statutes and rules in one of two ways: the Board may issue a cease
and desist order, or it may seek an injunction in a superior court through the
Attorney General or a county attorney. One assistant attorney general currently
advises the Board on legal matters during board meetings.
8. The extent to which the Board has addressed deficiencies in its enabling
statutes which prevent it from fulfilling its statutory mandate.
The Legislature repealed the Board’s statutes in 1998 and approved new
statutes to address numerous deficiencies in the Board’s statutes. The changes
included establishing standards for funeral establishment operation, pre-arranged
funeral agreements, clarifying license qualifications, crematory
requirements, and disciplinary processes. More recent statutory changes have
further enhanced the Board’s ability to fulfill its statutory mandate. For example:
􀁺􇩌 Laws 2002, Chapter 190 established licensure requirements for persons
who perform cremation of human remains. The changes outlined the
license application process, prescribed a licensing fee, and clarified the
responsibility of the individual who manages a crematory to ensure com-pliance
with state law.
􀁺􇩌 Laws 2002, Chapter 168 expanded the disciplinary actions that the Board
may take against funeral establishments, including censure, probation, and
civil penalties. Previously, the Board could only revoke or temporarily sus-pend
the license of an establishment. The changes also clarified that the
Board considers any violation committed by an agent or employee of an
establishment to be a violation committed by the employing establishment.
State of Arizona
page 26
Office of the Auditor General
page 27
9. The extent to which changes are necessary in the laws of the Board to ade-quately
comply with the factors listed in the Sunset law.
Auditors identified an area in which a statutory change could eliminate a barrier
to marketplace competition in the funeral services industry. Currently, A.R.S. §32-
1382 requires each licensed funeral establishment to have an embalming
preparation room. This requirement, which dates to the Board’s creation in 1945,
creates a barrier for new establishments to enter the market, and thereby limits
competition. The Legislature should consider modifying this requirement by
requiring that any establishment that offers embalming must have a preparation
room or access to one. Having access to a preparation room could mean
access to another establishment under the same ownership or a contractual
agreement with another funeral establishment. Establishments that do not offer
embalming would not be subject to this requirement. The Auditor General made
a similar recommendation in its last performance audit in 1983.
Arizona’s embalming preparation room requirement is costly and acts as a bar-rier
to new competition. Establishments can spend anywhere between $10,000
and $35,000 on embalming equipment and building space for the preparation
room. These increased costs are then passed along to consumers in the form
of higher funeral prices. However, in today’s funeral services market, many
funeral establishments do not need to have their own in-house preparation
rooms because they provide embalming services through other establishments.
For example, one corporation owns 24 establishments in Phoenix, but embalms
at only 5 of these facilities. Similarly, of the five establishments this corporation
owns in Tucson, one establishment provides embalming services for all Tucson
locations. However, every one of these establishments is required by law to have
a preparation room.
In contrast to Arizona, several other states are more flexible in their requirements
for preparation rooms. In a review of 23 other states’ laws and rules, auditors
identified eight states (Arkansas, California, Florida, Maryland, Texas, Utah,
Washington, and West Virginia) that do not require preparation rooms in every
establishment.1 Four states require only establishments that offer embalming to
have access to a preparation room, either in-house or at a separate location.
The four other states allow establishments under the same management to
share embalming facilities, usually if they are within a specified geographic dis-tance
of one another.2
1 Auditors reviewed the statutes of the following states: Alabama, Arkansas, California, Delaware, Florida, Iowa, Maryland,
Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Pennsylvania, Rhode Island,
South Carolina, South Dakota, Texas, Utah, Washington, West Virginia, and Wisconsin. Auditors selected these states by
reviewing section titles of other states’ statutes and identifying the several states with section titles that distinctly
addressed license requirements for funeral establishments.
2 The four states that require only access to an embalming preparation room are Arkansas, Florida, Maryland, and
Washington. The four states that allow establishments under the same management to share embalming facilities are
California, Texas, Utah, and West Virginia. In practice, Texas does require all establishments to have a preparation room,
as they do not currently grant exemptions to this requirement.
Additionally, as discussed in Finding 1 (see pages 7 through 12), if the Board
elects to require funeral establishments to post inspection results, the Board
would have to seek a statutory change to add this requirement.
10. The extent to which termination of the Board would significantly harm the public
health, safety, or welfare.
Without the Board’s regulatory and enforcement activities that ensure funeral
establishment compliance with state law, the public could be subject to unpro-fessional,
deceptive, or misleading business practices. Because funeral con-sumers
often do not comparison shop for this costly and infrequent purchase,
and it is a purchase made at a time of significant emotional distress, they are
more susceptible to these problems. Therefore, terminating the Board would
harm the public’s welfare because there would be a gap in regulatory oversight
to protect consumer economic interests.
11. The extent to which the level of regulation exercised by the agency is appropri-ate
and whether less or more stringent regulation would be appropriate.
The Board appears to exercise an appropriate amount of regulation through its
enforcement of Arizona law, with the exception of its statutory requirement for
funeral establishments to have an embalming preparation room (see Sunset
Factor 9, page 27).
12. The extent to which the Board has used private contractors in the performance
of its duties and how effective use of private contractors could be accomplished.
The Board does not currently hold any private contracts, and auditors did not
identify any uses for private contractors.
State of Arizona
page 28
Office of the Auditor General
AGENCY RESPONSE
Office of the Auditor General April 28, 2003
Debra K. Davenport
2910 N. 44th Street Suite 410
Phoenix Arizona 95018
Dear Ms. Davenport,
Pursuant to the Auditor General’s findings and recommendations, the Arizona State Board of
Funeral Directors and Embalmers submit the attached responses for your review. The conduct and
professiona lism displayed by representatives of your agency is to be commended. The Board
appreciates the consideration given in terms of down time and minimum loss of consumer service
provided by your staff. The Arizona State Board of Funeral Directors and Embalmers ultimate
goal is to provide the best possible service to residents of this state. The audit performed by your
staff will assist in creating a more effective and efficient agency benefiting both consumer and
licensee alike.
Sincerely,
Rodolfo R. Thomas
Executive Director
AUDITOR GENERAL FINDING 1
Recommendation 1
Improvements needed in inspection process
Agency Response: The finding of the Auditor General is agreed to and the findings will be
implemented.
Voluntary compliance and education of licensees is the Boards goal. The increase in the number
of inspections should facilitate these efforts.
Statutory guidelines mandate the inspection of all funeral establishments and crematories at least
once every five years. In July of 2000 an Inspector was appropriated and the effort to provide
consumers with optimum funeral services began. Prior inspections though sporadic, provided an
experimental base of which to improve upon. The Board has developed a detailed checklist,
which precludes guesswork by the inspector ensuring that every area of compliance is evaluated.
This initial modified form will be continually revised to meet the recommendations of the Auditor
General’ Office. The inspecting official while utilizing the modified checklist will be required to
take closer visual inspection and not rely on the responses of the licensee. Documentation
randomly gathered by the inspector will be scrutinized for accuracy, authorization and compliance.
The General Price List and Statement of Goods and Services shall be reviewed for containment of
necessary disclosures and accurate pricing as indicated in the modified checklist. A
compliance/inspection guideline has been created with procedures that are synergetic to the
checklist in an effort to identify deficiencies and protect consumers. The checklist is to be utilized
on every inspection per established guidelines. Modifications of the checklist and guidelines will
be made accordingly and reflect continuity and directions for the compliance administrator. This
initial form will also be revised and updated to ensure effectiveness and efficiency in this area.
AUDITOR GENERAL FINDING 1
Recommendation 2 - The Board should adopt an administrative rule that defines a standard for
whether an establishment is in compliance at the end of an inspection.
Agency Response: The finding of the Auditor General is agreed to and the findings will be
implemented.
The Board’s notice of proposed rulemaking was February 28, 2003. This provides an excellent
opportunity for revisions concerning the standard for establishment compliance upon conclusion
of an inspection. The modified rating system and Compliance Checklist should enhance the
standard for determining whether an establishment is in compliance after an inspection. The
inclusion of this finding shall be applied to the rule making process
AUDITOR GENERAL FINDING 1
Recommendation 3 – The Board should implement a rating system that is understandable to
consumers and describes the violations of funeral establishments, and adopt this system in
administrative rule.
Agency Response: The finding of the Auditor General is agreed to and the findings will be
implemented.
The Board has included in the checklist six areas of concern and the maximum achievable
percentage rating obtained through evaluation by the inspector. One hundred is the maximum
amount of percentile that an establishment may obtain. Through visual inspection, deficiencies
found by the inspector will be documented on the checklist. Each deficiency will create a negative
adjustment to the total score for each establishment. The Board will determine the methodology
for the rating system and advise all licensees. After determination by the Board of the rating
system, the licensee will be advised of passing or failure of the inspection. The computerized
compliance tracking system additionally provides space for a description of any violations or
deficiencies and the date corrections made. Lastly, the licensee is also notified in writing of
violations and when corrections are acceptable. The inclusion of this finding shall be applied
during the rule making process.
AUDITOR GENERAL FINDING 1
Recommendation 4 – The Board should develop administrative rules and procedures that govern
the inspection follow-up process.
Agency Response: The finding of the Auditor general is agreed to and the findings will be
implemented.
The Board has created guidelines for time frames for correcting deficiencies, normally thirty days.
The circumstances under which the Board may open a complaint against an establishment in order
to take disciplinary action as the result of an inspection are additionally included in guidelines.
Board has included many of the guidelines provided in A.R.S. 41-0009 as a template in obtaining
the best results from inspections. The inclusion of these findings shall be applied during the rule
making process.
2
AUDITOR GENERAL FINDING 1
Recommendation 5 – The Board should implement a system for tracking the results of
compliance inspections.
Agency Response: The finding of the Auditor General is agreed to and the finding will be
implemented.
The Board has created a system for monitoring the results of inspections. The program
recently implemented and installed on the Funeral Board database monitors discrepancies
and contains pertinent dates. Additional information such as the date of corrections and method of
verifying corrections is provided in the system. The inspection data also indicates status of an
inspection including the percentage obtained as a result of the inspection. Lastly, included
in the system is a means of obtaining the results of all compliance visits by indicating time
parameters of compliance visits conducted. Again, time frames and Board rules for disciplinary
action will be included in rules.
AUDITOR GENERAL FINDING 1
Recommendation 6 – The Board should make inspection results available to the public via the
telephone and inform the public about the availability of this information through its consumer
brochure. If resources are available, the Board should also make results available on its Web site
or at establishments.
Agency Response: The finding of the Auditor General is agreed to and the finding will be
implemented.
The programming utilized for monitoring compliance/inspections results for the two years of
enhanced inspections was in developmental stages and subsequent recommendation provided by
the evaluation of the Auditor Generals Office has been implemented. The brochure has been
modified to include the statement “Additionally, establishment complaint history and inspection
results can be obtained by contacting this office”. Future brochures will inform the public of these
services and will be distributed immediately. Relative to providing this information on the Web
site, current resources preclude the Board from implementing this recommendation at this time.
However, in the future when appropriations become ava ilable, the recommendation of including
this consumer information on the Web site will be considered.
3
AUDITOR GENERAL FINDING 2
Recommendation 1 – Board should ensure tha t staff follow established procedures for complaint
handling.
Agency Response: The finding of the Auditor General is agreed to and the recommendations
will be implemented.
The Board has in the past stressed the importance of having a State Board Comp laint Form
completed and forwarded by the complainant. Additionally, the Board has previously received
complaints written on stationary other then Board Complaint forms and processed the complaint
without receipt of official forms. This practice was not intended to discourage or hamper the
process but provide all pertinent documentation required in the completion of a thorough
investigation. In these instances, an official complaint form was mailed to the complainant while
the investigation continued. This Board will investigate and forward all complaints to the Board
for disposition. Additionally, procedures and guidelines for complaint investigations has been
revised and implemented based upon Auditor General recommendations. These procedures will be
continually updated and revised to ensure that all recommendations by the Auditor General are
completed. Included in the procedures are guidelines for ensuring that all complaints will be
forwarded to the Board for disposition.
AUDITOR GENERAL FINDING 2
RECOMMENDATION 2 - The Board should further develop its complaint investigation
procedures to instruct and guide staff in preparing complete investigations for the Board’s review,
and the Board should ensure that staff follow the procedures.
Agency Response: The finding of the Auditor General is agreed to and the recommendations will
be implemented in sub-category 2 (a).
The Auditor General finding indicates that the Board should identify all potential violations. This
Board has always attempted to review and provide all possible violations for disposition by Board.
The Board will place additional emphasis on determining the possible violations for all
disciplinary phrases of the investigation.
Agency Response: The finding of the Auditor Gene ral is agreed to and the recommendation will
be implemented in sub-category 2(b).
4
The Auditor General’s finding recommended that the Board should determine whether the
investigation has supported complaint allegations. The Board agrees with the finding in so much
as staff should support all allegations. However, the Board should make its own determination on
the merits of each complaint and not be tainted or prejudiced by the staff investigative response.
The Board’s concern is that complaints identified as being substantiated by staff will impede with
the process and further taint the Boards disposition. The Board investigative staff as indicated
previously shall provide all potential violations and conduct a thorough investigation for final
disposition by Board members. All allegations will be supported with proper documentation.
Agency Response:2 © The finding of the Auditor General is agreed to and the recommendation
will be implemented.
The Auditor General Finding recommends that the Board take witnesses statements during
interviews. The Board has in fact taken witness statements during interviews however not
specifically indicated as such in the report. The procedures now included in the investigation
guidelines mandate interviews and statements be included in the report and have been additionally
noted on correspondence to both complainants and licensee.
Agency Response: 2(d) The findings of the Auditor General is agreed to and the recommendation
will be implemented.
The Board shall include in the investigations, case file management notes and any other fragments
or written material contributing directly or indirectly to the case. Additionally, complaint history
will be provided for Board review. The investigative guidelines also include the procedures to be
followed. The Board has and will always utilize subpoenas powers for investigative processes and
these guidelines as with previously mentioned procedures shall be revised and updated to meet
recommendations stated by the Auditor General’s Office.
AUDITOR GENERAL FINDING
SUNSET FACTORS
RECOMMENDATION 9 - The requirement for a new establishment to contain a preparation
room creates a barrier and unnecessarily creates increased costs to the consumer.
Agency Response: The finding of the Auditor General is not agreed with and the agency will not
implement or seek to implement any changes in this requirement.
The core purpose of a funeral establishment license in the State of Arizona is to provide to the
consumer offerings of their choice as to the disposition of a loved one. It is a reasonable
assumption of a consumer that an establishment can provide to them a full choice of offerings
concerning their care.
5
The requirement of a functioning preparation room is both reasonable and necessary in providing
this care. If a body is prepared at a sight away from the establishment and a problem occurs with
the body, it is reasonable to expect that a consumer could have that problem resolved in a timely
manner. It would not be in public health interests to not have the necessary equipment and area to
perform these procedures on sight and immediately. It is a requirement that each establishment
employ a licensed responsible funeral director to comply with statutes and rules that apply to the
industry of both federal and state laws. In the State of Arizona a licensed funeral director must
also be a licensed embalmer.
Statutes at this time do not require that these embalming facilities be used but that they must be
functional and operative. Many establishments in the state utilize service centers where they
centralize preparation procedures. In our findings these centralized preparation facilities do not
reduce the cost to the consumer. In fact the opposite may be the case. The cases stated in the
findings of the Auditor General’s report in both Maricopa Count y and Tucson have some of the
highest costs for these professional services to the consumer yet the economies of scale would
suggest the opposite.
A chain of custody is necessary to determine if a licensee is complying with not only our statues
and rules, but also the requirements of many governmental agencies. Some of these agencies
include EPA and OSHA. They include the tracking of hazardous waste and the use of protective
equipment that both protect the individual and the consuming public.
In the State of Arizona over 50 percent of the dispositions is cremation. This does not preclude a
consumer from desiring services that require embalming. A large percentage of the deaths in our
state are shipped to a decedent’s state of residence. Embalming in these cases is almost always
required for shipping purposes. Embalming and the ability to embalm at a funeral establishment is
a fundamental requirement for licensure.
The analogy may be used that when a consumer enters a restaurant for service he assumes that the
licensed restaurant has a kitchen and that the kitchen is inspected and functional. He may order
only a salad and not anything from the grill or oven yet it is reasonable to expect that those
services are available if desired. The costs attributable to the cost of the menu items have more to
do with location, size, décor, ambiance and other factors then the size and functionality of the
kitchen.
As to an agency we feel that the statutes and rules that we have provide a reasonable and
functional way to protect and serve the consumers of this state. We support the way requirements
are now constituted. The three or four other states that have different requirements do not
necessarily reflect the needs and practices that this state mandates to protect its consumers and
licensees.
6
02-01 Arizona Works
02-02 Arizona State Lottery
Commission
02-03 Department of Economic
Security—Kinship Foster Care
and Kinship Care Pilot
Program
02-04 State Parks Board—
Heritage Fund
02-05 Arizona Health Care Cost
Containment System—
Member Services Division
02-06 Arizona Health Care Cost
Containment System—Rate
Setting Processes
02-07 Arizona Health Care Cost
Containment System—Medical
Services Contracting
02-08 Arizona Health Care Cost
Containment System—
Quality of Care
02-09 Arizona Health Care Cost
Containment System—
Sunset Factors
02-10 Department of Economic
Security—Division of Children,
Youth and Families, Child
Protective Services
02-11 Department of Health
Services—Health Start
Program
02-12 HB2003 Children’s Behavioral
Health Services Monies
02-13 Department of Health
Services—Office of Long Term
Care
03-01 Government Information
Technology Agency—
State-wide Technology
Contracting Issues
03-02 Registrar of Contractors
03-03 Water Infrastructure Finance
Authority
Performance Audit Division reports issued within the last 12 months
Future Performance Audit Division reports
Department of Commerce
Electric Deregulation