A performance audit of the Board of Funeral Directors and Embalmers

              STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
A PERFORMANCE AUDIT
OF THE
BOARD OF FUNERAL DIRECTORS
AND EMBALMERS
AUGUST 1983
A REPORT TO THE
ARIZONA STATE LEGISLATURE
REPORT 83- 13
DOUGLAS R. NORTON. CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
August 8, 1983
Members of the Arizona L e g i s l a t u r e
The Honorable Bruce Babbitt, Governor
M r . Bryan Webber, President
S t a t e Board of Funeral Directors and Embalmers
1641 E. Jefferson
Phoenix, AZ 85007
Transmitted herewith is a report of the Auditor General, A Performance
Audit of the S t a t e Board of Funeral Directors and Embalmers. This report
is i n response t o a January 18, 1982, r e s o l u t i o n of the J o i n t L e g i s l a t i v e
Oversight Committee. The performance a u d i t was conducted as a p a r t of the
Sunset Review s e t f o r t h i n A. R. S. § § 41- 2351 through 41- 2379.
The blue pages present a summary of t h e r e p o r t ; a response from t h e S t a t e
Board of Funeral Directors and Embalmers is found on the yellow pages
preceding the appendices.
My s t a f f and I w i l l be pleased t o discuss or c l a r i f y items i n the r e p o r t .
~ ou~ k! asR . Norton
Auditor General
Staff : William Thomson
Peter N. Francis
Mark Fleming
Gloria Glover
Karen Holloway
Enclosure
1 1 1 WEST MONROE SUITE 600 PHOENIX. ARIZONA 85003 ( 602) 255- 4385
OFFICE OF THE AUDITOR GENEEZAL
A PERFORMANCE AUDIT OF THE
BOARD OF FUNERAL DIRECTORS AND EMBALMERS
A REPORT TO THE
ARIZONA STATE LEGISLATURE
REPORT 83- 13
TABLE OF CONTENTS
SUMMARY
INTRODUCTION AND BACKGROUND
SUNSET FACTORS
FINDING I
The L e g i s l a t u r e should strengthen r e g u l a t i o n of
f u n e r a l i n d u s t r y business p r a c t i c e s t o provide
more e f f e c t i v e consumer protection.
CONCLUSION
RE COFIMENDAT IONS
FINDING I1
Some l i c e n s i n g requirements f o r f u n e r a l p r a c t i t i o n e r s
and establishments a r e unnecessary and anticompetitive.
CONCLUSION
FINDING I11
Arizona s t a t u t e s governing prearranged funeral
c o n t r a c t s a r e inadequate.
CONCLUSION
OTHER PERTINENT INFORMATION
AFEAS FOR FURTHER AUDIT WORK
WRITTEN RESPONSE TO THE AUDITOR GENERAL'S REPORT
APPENDIX I
Funeral Board Suggested Price L i s t Format
Page
i
1
5
13
LIST OF TABLES
- Page
TABLE 1 Board of Funeral Directors and Embalmers
Activities Fiscal Year 1981- 82
TABLE 2 Board of Funeral Directors and Embalmers
Annual Budgets Fiscal Years 1980- 81 through
1983- 84
LIST OF FIGURES
FIGURE 1 Comparison of Proposed FTC Funeral Rule with
Arizona Requirements
The Office of the Auditor General has conducted a performance a u d i t of the
Arizona Board of Funeral Directors and Embalmers i n response t o a
January 18, 1982, r e s o l u t i o n of the J o i n t L e g i s l a t i v e Oversight
Committee. This performance a u d i t was conducted a s part of the Sunset
review s e t f o r t h i n Arizona Revised S t a t u t e s ( A. R. S.) ss41- 2351 through
41- 2379.
The Board of Funeral Directors and Embalmers r e g u l a t e s p r a c t i t i o n e r s and
establishments which handle the disposal of human remains. The Board
l i c e n s e s funeral d i r e c t o r s and embalmers, r e g i s t e r s apprentice embalmers
and a s s i s t a n t f u n e r a l d i r e c t o r s and l i c e n s e s f u n e r a l establishments.
Regulation of the f u n e r a l industry began i n the l a t e 19th century a s p a r t
of the public h e a l t h movement. More r e c e n t l y , concern over the high cost
of f u n e r a l s and deceptive p r a c t i c e s within the industry has r e s u l t e d i n
r e g u l a t i o n t o protect consumers. In 1981, the Board promulgated r u l e s
addressing business p r a c t i c e s within the funeral industry. As a r e s u l t ,
Arizona is considered a leader among the s t a t e s i n p r o t e c t i n g f u n e r a l
consumers.
Additional Protection Is Needed
f o r Funeral Consumers ( See Pages 13- 27)
Although Arizona's f u n e r a l r e g u l a t i o n s are among the s t r o n g e s t i n the
United S t a t e s , consumers may still lack adequate information about
s e r v i c e s and c o s t s p r i o r t o making funeral arrangements. The r e g u l a t i o n s
do not provide a l l information required by the Federal Trade Commission
( FTC). Even where Arizona requirements a r e s i m i l a r t o the FTC
r e g u l a t i o n s , shortcomings l i m i t t h e i r e f f e c t i v e n e s s . P r i c e lists f o r the
various establishments a r e o f t e n not comparable. The r u l e s do not require
f u n e r a l d i r e c t o r s t o provide p r i c e information by telephone or t o provide
s u f f i c i e n t casket p r i c e information.
The f u t u r e of S t a t e r e g u l a t i o n of f u n e r a l i n d u s t r y p r a c t i c e s i n Arizona is
a l s o uncertain. Segments of the industry have f i l e d s u i t challenging the
Board's a u t h o r i t y t o r e g u l a t e business p r a c t i c e s . Although a Superior
Court has ruled i n favor of the Board i n about half of t h e i s s u e s , other
i s s u e s , including the v a l i d i t y of the p r i c e list r e g u l a t i o n s , remain
undecided. The industry may a l s o appeal the Court's r u l i n g . In a d d i t i o n ,
the FTC r u l e on f u n e r a l industry p r a c t i c e s may supercede Arizona's
r e g u l a t i o n s when it becomes e f f e c t i v e i n January 1984.
The L e g i s l a t u r e should consider amending A. R. S. $ 32- 1301 - e t - seq t o c l e a r l y
authorize the Board t o e s t a b l i s h r e g u l a t i o n s t o p r o t e c t funeral
consumers. The L e g i s l a t u r e should a l s o consider 1) c l e a r l y defining a
standard format t h a t funeral homes would be required t o use f o r presenting
p r i c e information, 2) requiring f u n e r a l homes t o d i s c l o s e price
information by telephone, and 3) requiring t h a t p r i c e lists show p r i c e
ranges f o r g e n e r a l t y p e s of caskets normally offered f o r s a l e . The Board
could f u r t h e r a s s i s t consumers by developing a brochure t o inform
consumers about f u n e r a l laws and r e g u l a t i o n s , t h e i r r i g h t s and t y p i c a l
f u n e r a l arrangements.
Some Licensing Requirements
Are Unnecessary ( See Pages 29- 40)
Some l i c e n s i n g requirements f o r f u n e r a l p r a c t i t i o n e r s and establishments
a r e unnecessary and do not serve the public i n t e r e s t . Public h e a l t h r i s k s
associated with disposal of human remains a r e minimal. As a r e s u l t ,
embalmers do not need t o be licensed. For the same reason, funeral
d i r e c t o r s do not need experience as embalmers t o q u a l i f y f o r i n i t i a l
l i c e n s u r e . Several s t a t u t o r y requirements f o r l i c e n s i n g establishments
are a l s o unnecessarily r e s t r i c t i v e i n t h a t they require unneeded
f a c i l i t i e s and equipment.
The L e g i s l a t u r e should consider reducing unnecessary l i c e n s i n g
requirements by d e l e t i n g 1 ) a l l s t a t u t o r y requirements regarding
l i c e n s i n g of embalmers and apprentices and c e r t i f y i n g a s s i s t a n t funeral
d i r e c t o r s , 2) the requirement f o r f u n e r a l d i r e c t o r embalming experience,
and 3) f u n e r a l establishment f a c i l i t y requirements. I f the L e g i s l a t u r e
wishes t o continue l i c e n s i n g embalmers, it should consider revising entry
requirements t o g i v e c a n d i d a t e s the option of e i t h e r a two- year
apprenticeship or a combination of one year of apprenticeship and one year
of mortuary school. F i n a l l y , the Board should promulgate a r e g u l a t i o n
requiring establishments t o s p e c i f i c a l l y designate a t l e a s t one f u n e r a l
d i r e c t o r a s being accountable f o r a l l a c t i v i t i e s at each establishment.
Preneed S t a t u t e s Are
Inadequate ( See Panes 41- 54)
Arizona law does not s u f f i c i e n t l y p r o t e c t persons who arrange and purchase
f u n e r a l s i n advance of death. Consumers who purchase preneed f u n e r a l
plans do not always receive merchandise or s e r v i c e s purchased and r i s k
losing funds. Because current laws a r e weak, the Board of Funeral
Directors and Embalmers can t a k e o n l y limited a c t i o n i n response t o these
problems. In a d d i t i o n , t h e s t a t u t e s unnecessarily l i m i t competition i n
prearranged f u n e r a l s a l e s .
The L e g i s l a t u r e can i n c r e a s e p r o t e c t i o n of consumers who purchase preneed
f u n e r a l plans by designating the Board as the agency responsible f o r
r e g u l a t i n g s a l e s of preneed plans and vesting the Board with f u l l
a u t h o r i t y t o oversee preneed t r u s t funds. In a d d i t i o n , l e s s r e s t r i c t i v e
t r u s t requirements, combined with appropriate safeguards would increase
the a v a i l a b i l i t y of preneed f u n e r a l plans t o the public.
iii
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance a u d i t of the
Arizona Board of Funeral Directors and Embalmers i n response t o a
January 18, 1982, r e s o l u t i o n of the J o i n t L e g i s l a t i v e Oversight
Committee. This performance a u d i t was conducted as part of the Sunset
review set f o r t h i n Arizona Revised S t a t u t e s ( A. R. S.) § § 41- 2351 through
41- 2379.
The business of funeral d i r e c t i n g and embalming i n America evolved during
the mid- 19th century a s a merger of two t r a d e s : the cabinetmaker who made
and sold c o f f i n s and the druggist or chemist who developed embalming t o
preserve remains. The C i v i l War gave an impetus t o embalming. Families
who wished t o bring t h e i r dead home f o r b u r i a l had the bodies embalmed
near t h e b a t t l e f r o n t and shipped home via t h e r a i l r o a d s . America's vast
d i s t a n c e s frequently n e c e s s i t a t e , even today, a delay of several days
between death and b u r i a l . Embalming was developed i n an attempt t o
preserve the body u n t i l the s e r v i c e and b u r i a l take place.
Today, t h e f u n e r a l industry is an accepted part of American s o c i e t y .
Nationwide, more than 20,000 f u n e r a l homes engage i n a m u l t i b i l l i o n d o l l a r
business. In Arizona, approximately 127 f u n e r a l homes handled more than
17,000 a d u l t b u r i a l s and cremations during 1982 a t an estimated cost of a t
least $ 17 m i l l i o n . The f u n e r a l industry i n Arizona's major population
c e n t e r s is concentrated. One f u n e r a l home handled 24 percent of the
f u n e r a l s i n Pima County during 1982; s i x establishments accounted f o r 37
percent of t h e f u n e r a l s i n Maricopa County t h a t same year.
Public Regulation of
the Funeral Industry
S t a t e r e g u l a t i o n of f u n e r a l p r a c t i t i o n e r s began i n the l a t e 19th and e a r l y
20th c e n t u r i e s . V i r g i n i a was the f i r s t s t a t e t o l i c e n s e embalmers i n
1894. I n Arizona, the T e r r i t o r i a l Board of Embalmers was e s t a b l i s h e d i n
1909 and became the Board of Funeral Directors and Embalmers i n 1945. The
Board consists of six members: four license holders and two lay members.
Current responsibilities include licensing funeral directors and
embalmers, registering apprentice embalmers and assistant funeral
directors and licensing funeral establishments. The Board is also
responsible for examining candidates for practitioner licenses and
investigating complaints. During fiscal year 1981- 82 the Board issued or
renewed over 1,000 licenses and investigated 41 complaints ( Table 1).
TABLE 1
BOARD OF FUNERAL DIRECTORS AND EMBALMERS ACTIVITIES
FISCAL YEAR 1981- 82
Licenses Issued New
Funeral Director
Embalmer
Establishment
Total Licenses
Registrations
Assistant Funeral Director
Apprentice Embalmer
Total Registrations
Total Licenses and Registrations
Complaints
Investigations
Renewal Total
During the 1970s growing concern over industry practices and funeral costs
led to a change in the focus of public regulation. The Federal Trade
Commission ( FTC) conducted an extensive investigation of the funeral
industry, identifying a variety of practices which inflated funeral costs
and limited consumer choices. As a result, the FTC proposed a series of
regulations in 1982 which will require funeral practitioners to provide
consumers with specific information about legal requirements, services
available and itemized costs. These regulations become effective in
January 1984. The Arizona Board, however, promulgated its own regulations
in 1981 which are similar in many respects to the FTC rules. Because of
the Board's action, Arizona is considered a leader in protecting funeral
consumers.
Personnel and Budget
The Board of Funeral Directors and Embalmers employs no full- time staff.
Board members serve part- time and receive per diem reimbursement. The
State Boards Administrative Office currently provides one staff member who
devotes half- time to Board duties. In addition, the Office of the
Attorney General provides a part- time investigator and legal assistance to
the Board. The Board is a " 90- 10" agency and revenues from license fees
support Board activities. Table 2 shows actual and estimated budgets for
fiscal years 1980- 81 through 1983- 84.
TABLE 2
BOARD OF FUNEFUL DIRECTORS AND EMBALMERS ANNUAL BUDGETS
FISCAL YEARS 1980- 81 THROUGH 1983- 84
Actual Actual Estimated Appropriated
198* 3- 84 FTE positions -
Revenues :
Board Fund ( 90%)
General Fund ( 10%)
Total
Expenditures:
Personal services
Employee- related
Professional and
outside services
Travel -
In- S tate
Out- of- state
Other operating
expenses
Equipment
Total
End of Year Fund
Balance :
Audit Scope and
P u r ~ o s e
The purpose of t h e a u d i t was t o evaluate the need f o r and adequacy of
Board of Funeral Directors and Embalmers r e g u l a t i o n of f u n e r a l p r a c t i c e s .
S p e c i f i c a l l y , we examined:
The extent t o which S t a t e r e g u l a t i o n s ensure t h a t consumers have
access t o adequate information f o r making decisions about f u n e r a l s ,
The appropriateness of the l i c e n s i n g requirements f o r funeral
p r a c t i t i o n e r s , and
The e x t e n t t o which S t a t e law p r o t e c t s purchasers of prearranged
f u n e r a l plans from misrepresentation.
In a d d i t i o n , we i d e n t i f i e d s e v e r a l o t h e r p o t e n t i a l i s s u e s which we were
unable t o address because of time c o n s t r a i n t s . These i s s u e s include the
e x t e n t of the i n d u s t r y ' s compliance with s t a t u t o r y and regulatory
requirements and the e f f i c i e n c y of Board o p e r a t i o n s . F u r t h e r a u d i t work
is needed t o f u l l y address these i s s u e s ( see page 55).
The Auditor General and s t a f f express a p p r e c i a t i o n t o the members of the
Board of Funeral Directors and Embalmers f o r t h e i r cooperation and
a s s i t a n c e during the course of our a u d i t .
SUNSET FACTORS
In accordance with A. R. S. § $ 41- 2351 through 41- 2379, the L e g i s l a t u r e must
consider the following 11 f a c t o r s t o determine, i n p a r t , whether t o
continue or terminate the Board of Funeral Directors and Embalmers.
1. Objective and purpose i n e s t a b l i s h i n g the Agency
Although the enabling s t a t u t e s f o r the Board of Funeral Directors and
Embalmers do n o t c o n t a i n an e x p l i c i t statement of objective and
purpose, they do e s t a b l i s h c l e a r r e s p o n s i b i l i t y t o r e g u l a t e
p r a c t i t i o n e r s and establishments. Arizona Revised S t a t u t e s ( A. R. S.)
$ 32- 1305 authorizes the Board t o
". . . adopt r u l e s and r e g u l a t i o n s . . . f o r the
p r a c t i c e of f u n e r a l d i r e c t i n g and
embalming . . . ( which) s h a l l be binding upon a l l
f u n e r a l d i r e c t o r s , embalmers and apprentice embalmers."
In a d d i t i o n , A. R. S. § § 32- 1321 through 32- 1340, 32- 1381 and 32- 1382
e s t a b l i s h s p e c i f i c requirements f o r obtaining p r a c t i t i o n e r and
establishment l i c e n s e s . F i n a l l y , A. R. S. § § 32- 1361 through 32- 1363 and
32- 1367 through 32- 1374 define s p e c i f i c p r a c t i c e s which must be
followed by the f u n e r a l industry.
The L e g i s l a t u r e has changed the purpose of the Board's regulatory
program i n recent years. Statutory provisions enacted p r i o r t o 1972,
d e a l i n g p r i m a r i l y w i t h q u a l i f i c a t i o n s f o r entering the profession or
e s t a b l i s h i n g a f u n e r a l home, r e f l e c t public h e a l t h concerns which
o r i g i n a l l y l e d t o r e g u l a t i o n . S i n c e 1972, the L e g i s l a t u r e has
enacted new s t a t u t e s which address s p e c i f i c industry p r a c t i c e s and
show an increasing concern f o r p r o t e c t i n g consumers from f i n a n c i a l
harm.
Regulations adopted by the Board i n 1981 c l e a r l y r e f l e c t t h i s changing
emphasis. Current r e g u l a t i o n s s p e c i f y c e r t a i n p r a c t i c e s , such a s
p r i c e lists and casket p r i c e ranges, which p r a c t i t i o n e r s must follow.
The r e g u l a t i o n s a l s o p r o h i b i t c e r t a i n deceptive p r a c t i c e s . The
Board's s t a t e d objective and purpose i n d i c a t e s t h a t while public
h e a l t h concerns are important t o the Board, consumer p r o t e c t i o n has
a l s o become a major p r i o r i t y .
2. The e f f e c t i v e n e s s with which the Agency has met i t s objective and
purpose and t h e e f f i c i e n c y with which it has operated
The Board h a s e s t a b l i s h e d a regulatory program f o r the funeral
i n d u s t r y i n Arizona which is among the s t r o n g e s t i n the United
S t a t e s . The Board's program requires f u n e r a l p r a c t i t i o n e r s t o provide
consumers p r i c e information and t o r e f r a i n from c e r t a i n deceptive
p r a c t i c e s . The program is s i m i l a r t o a Federal r e g u l a t i o n proposed by
the Federal Trade Commission and may allow Arizona t o obtain an
exemption from the Federal r u l e when t h e r u l e goes i n t o e f f e c t i n
January 1984. However, the program does not f u l l y p r o t e c t f u n e r a l
consumers because the r e g u l a t i o n s do not ensure t h a t consumers can
obtain adequate information about f u n e r a l services and c o s t s p r i o r t o
s e l e c t i n g a mortuary ( see pages 13- 27).
Due t o t i m e c o n s t r a i n t s we did not evaluate the Board's e f f i c i e n c y of
operation. Further a u d i t work is necessary t o f u l l y address t h i s
f a c t o r .
3. The extent to which the Agency has operated i n t h e p u b l i c i n t e r e s t
The Board of Funeral Directors and Embalmers operates i n the public
i n t e r e s t by p r o t e c t i n g consumers who must make a p o t e n t i a l l y expensive
choice under very d i f f i c u l t circumstances. Board r e g u l a t i o n s
governing f u n e r a l i n d u s t r y business p r a c t i c e s provide consumers with
at l e a s t a minimum of information necessary f o r making f u n e r a l
arrangements and a l s o p r o h i b i t providers from engaging i n deceptive
practices which lead to high- cost funerals. Although regulations do
not fully protect consumers, the number of complaints has declined
since the Board promulgated the regulations and the Board has taken
action against several gross violators.
Licensing funeral directors and establishments serves the public
interest by contributing to enforcement of consumer protection
legislation and regulations. However, licensing and entry
requirements for embalmers impose unnecessary costs on practitioners
without corresponding public benefits. Medical opinion does not
support the public health objective for funeral regulation stated by
both the Board and members of the funeral industry. Therefore,
deleting licensing requirements for embalmers will remove unnecessary
restrictions without harming the public. Statutory requirements that
funeral directors have embalming experience and that establishments
maintain specific facilities are unnecessary for the same reasons ( see
pages 27- 37).
4. The extent to which rules and regulations promulgated by the Agency
are consistent with the legislative mandate
The extent to which Board regulations are consistent with the Board's
legislative mandate is currently under litigation. The Board issued
new regulations in June 1981 which 1) established investigative,
disciplinary and rehearing procedures; 2) established general
standards of conduct for licensees; 3) established price list
requirements; and 4) established guidelines for embalming. The Board
complied with the requirements of the Administrative Procedures Act in
promulgating the rules' minimum competence guidelines. The Arizona
Funeral Directors Association, however, filed suit against the Board
in June 1982, contending that the rules exceeded the Board's authority
and violated due process guarantees of the U. S. Constitution.
Although the Maricopa County Superior Court upheld much of the Board's
authority in June 1983, the Court has not yet decided the validity of
the Board's price list regulation. The case may also be appealed.
5. The extent to which the Agency has encouraged input from the public
before promulgating its rules and regulations and the extent to which
it has informed the public as to its actions and their expected impact
on the public
The Board has encouraged public participation in the development of
its rules and has complied with the open meeting law. The public and
funeral industry were given opportunity for extensive input when the
Board revised its regulations in 1981. The Board has also provided
the public with adequate notice and minutes of meetings as required by
the Open Meeting Law.
The 1981 revision of Board regulations provided opportunity for public
and funeral industry participation. The Board complied with all
requirements of the Administrative Procedures Act in promulgating the
regulations. The Board notified 150 industry members and concerned
citizens, received 44 comments, conducted 2 public hearings and
obtained input from an advisory committee composed of public and
industry representatives before promulgating final regulations.
The Board appears to have complied with the requirements of the Open
Meeting Law. For all regular meetings, telephone conferences and
subcommittee meetings from January 1982 through March 1983, the Board
provided adequate notice and maintained adequate minutes of the
proceedings.
6. The extent to which the Agency has been able to investigate and
resolve complaints within its jurisdiction
The Board investigates and resolves most complaints in a timely
manner. All but 11 of the 99 complaints filed between January 1980
and December 1982 have been closed. The average time required to
handle these complaints was approximately three months. Most of the
unresolved cases were filed during 1982 and are still under
investigation by the Board. The Board closed most of the complaints
( 74 percent) it received since 1980 without taking action. These
complaints alleged a wide v a r i e t y of problems, including
unprofessional and unethical conduct, f a i l u r e t o honor prearranged
f u n e r a l plans, f e e disputes and poor embalming. However, the Board
found no v i o l a t i o n and t h e r e f o r e took no a c t i o n i n these cases.
In cases involving preneed complaints, the Board's i n a b i l i t y t o a c t i n
t h e s e c a s e s suggests t h a t it may need a d d i t i o n a l a u t h o r i t y t o
e f f e c t i v e l y d e a l with problems presented by consumers ( see pages
39- 52).
7. The extent t o which the Attorney General or any o t h e r a p p l i c a b l e
agency of S t a t e government has the a u t h o r i t y t o prosecute a c t i o n s
under enabling l e g i s l a t i o n
A. R. S. 532- 1305.01 d i r e c t s the Attorney General t o represent the Board
i n a l l l e g a l a c t i o n s . A. R. S. 532- 1368, subsection B makes v i o l a t i o n
of any of the enabling s t a t u t e s a Class 2 misdemeanor and 532- 1369
authorizes the Board to seek i n j u n c t i v e r e l i e f a g a i n s t v i o l a t o r s .
Thus, f u l l a u t h o r i t y is a v a i l a b l e t o enforce the Board's enabling
s t a t u t e s .
However, f u t u r e enforcement may be uncertain. The courts have not
f i n a l l y decided a l l i s s u e s involved i n the l e g a l challenge t o the
Board's a u t h o r i t y t o regulate business p r a c t i c e s . I n addition the FTC
r u l e on f u n e r a l i n d u s t r y p r a c t i c e s may supercede Arizona's
regulation. As a r e s u l t the Board may be able t o enforce r e g u l a t i o n s
f o r only a l i m i t e d number of a c t i v i t i e s ( see pages 25- 26).
8. The extent t o which the Agencv has addressed d e f i c i e n c i e s i n the
enabling s t a t u t e s which prevent it from f u l f i l l i n g its s t a t u t o r y
mandate
The Board proposed l e g i s l a t i o n i n 1980 ( Senate B i l l 1061) t o r e v i s e
its enabling s t a t u t e s . The l e g i s l a t i o n would have strengthened
r e g u l a t i o n of the f u n e r a l i n d u s t r y by vesting the Board with c l e a r
i n v e s t i g a t i v e a u t h o r i t y , increasing p e n a l t i e s f o r v i o l a t i o n s of r u l e s
and incorporating the proposed FTC r u l e s i n t o Arizona law. The
L e g i s l a t u r e d i d n o t e n a c t SB 1061. The 1980 Legislature did pass
House B i l l 2394 which increased p e n a l t i e s i n the same amount a s SB
1061, expanded the Board's d i s c i p l i n a r y power and increased l i c e n s e
f e e s but did not a f f e c t the Board's i n v e s t i g a t i v e or regulatory
a u t h o r i t y .
House B i l l 2490, introduced i n the 1982 l e g i s l a t u r e , would have
strengthened r e g u l a t i o n over the s a l e of prearranged funeral plans.
The b i l l designated the S t a t e Banking Department as the responsible
agency. Despite Board concern over prearranged funeral s a l e s , the
Board f e l t HB 2490 was too complicated and did not endorse it. The
L e g i s l a t u r e did not enact the b i l l .
9. The extent t o which changes a r e necessary i n the laws of the Agency t o
adequately comply with the f a c t o r s l i s t e d i n the Sunset Law
Based on our a u d i t work, we recommend the L e g i s l a t u r e consider making
the following changes i n the enabling s t a t u t e s f o r the Board of
Funeral Directors and Embalmers:
Amend A. R. S. $ 32- 1301 - e t - seq t o c l e a r l y a u t h o r i z e t h e Eoard t o
r e g u l a t e f u n e r a l industry business p r a c t i c e s ( s e e page 27);
Amend A. R. S. 932- 1301 - e t s- eq t o 1 ) define a standard format t h a t
f u n e r a l homes would be required t o use f o r presenting price
information, 2) r e q u i r e funeral homes t o disclose p r i c e
information by telephone, and 3) require t h a t price lists show
p r i c e ranges for general types of caskets normally offered f o r
s a l e ( see page 27);
Amend A. R. S. $ 32- 1301 - e t - seq t o d e l e t e 1) a l l requirements f o r
l i c e n s i n g embalmers and apprentice embalmers, 2) embalming
requirements f o r f u n e r a l d i r e c t o r l i c e n s e s , 3) provisions f o r
r e g i s t e r i n g a s s i s t a n t funeral d i r e c t o r s , and 4) f a c i l i t y
requirements f o r f u n e r a l establishments ( see page 40); and
Enact l e g i s l a t i o n governing the s a l e of preneed c o n t r a c t s t o
ensure adequate a c c o u n t a b i l i t y f o r funds paid i n advance f o r
f u n e r a l s ( see pages 53- 54).
10. The e x t e n t t o which the termination of the Agency would s i g n i f i c a n t l y
harm the public h e a l t h , s a f e t y or welfare
Terminating the Board and its r e g u l a t i o n s protecting funeral consumers
would increase the p u b l i c ' s exposure t o deceptive p r a c t i c e s and
misleading information about f u n e r a l s e r v i c e s and c o s t s . Lack of such
information can r e s u l t i n serious f i n a n c i a l harm. Although t h e O f f i c e
of the Attorney General could o f f e r p r o t e c t i o n through the Consumer
Fraud Act ( A. R. S. $ 44- 1521 - et - seq ) and the FTC could enforce its
r e g u l a t i o n s i n Arizona, n e i t h e r a l t e r n a t i v e o f f e r s the v i s i b i l i t y and
s i n g l e state- wide focus of the Board i n f u n e r a l - r e l a t e d m a t t e r s . In
a d d i t i o n , the Board o f f e r s a consumer- industry forum f o r defining
appropriate standards and r e s o l v i n g d i s p u t e s .
The Board's b e n e f i t t o the public l i e s s o l e l y i n its a b i l i t y t o
promulgate consumer p r o t e c t i o n r e g u l a t i o n and enforce standards of
conduct within t h e f u n e r a l industry. The Board's a u t h o r i t y t o do so
is now i n question i n a lawsuit. The L e g i s l a t u r e should consider
amending A. R. S. $ 32- 1301 - e t - seq t o c l e a r l y a u t h o r i z e t h e Board t o
regulate f u n e r a l industry business p r a c t i c e s . I f the Board l o s e s its
a u t h o r i t y t o regulate f u n e r a l business p r a c t i c e s , then there would
appear t o be l i t t l e public harm i n terminating the Board. In f a c t ,
the S t a t e of Colorado terminated its Piortuary Science Board i n 1982.
However, the Colorado l e g i s l a t u r e did not d e l e t e s t a t u t e s governing
business p r a c t i c e s and conduct. Enforcement of these s t a t u t e s now
r e s t s with l o c a l prosecuters while the a t t o r n e y general i n v e s t i g a t e s
complaints.
11. The extent t o which the l e v e l of r e g u l a t i o n exercised by the Agency is
appropriate and whether l e s s or nore s t r i n g e n t l e v e l s would be
appropriate
Board r e g u l a t i o n s approximate the FTC proposed r e g u l a t i o n s and thus
provide reasonable p r o t e c t i o n a g a i n s t deceptive and misleading funeral
industry p r a c t i c e s . However, the L e g i s l a t u r e should strengthen
r e g u l a t i o n t o ensure t h a t consumers can obtain information before
choosing a mortuary through telephone d i s c l o s u r e ( s e e page 27).
P r a c t i t i o n e r l i c e n s i n g , on t h e o t h e r hand, is more r e s t r i c t i v e i n some
areas than necessary. Licensing embalmers and r e q u i r i n g f u n e r a l
d i r e c t o r s t o have experience a s embalmers do not promote consumer
p r o t e c t i o n . S t a t u t o r y requirements f o r f a c i l i t i e s and equipnent a l s o
serve t o increase c o s t s unnecessarily ( see page 40).
Existing r e g u l a t i o n of preneed c o n t r a c t s does not provide f o r adequate
a c c o u n t a b i l i t y and c o n t r o l over funds paid by i n d i v i d u a l s f o r
prearranged f u n e r a l s . The L e g i s l a t u r e should consider enacting
l e g i s l a t i o n t o designate a s p e c i f i c agency t o oversee management of
these funds, require holders t o make annual r e p o r t s on t h e i r r e c e i p t s
and disbursements and c l a r i f y the r i g h t s and o b l i g a t i o n s of each party
t o the preneed contract ( see pages 53- 54).
FINDING I
THE LEGISLATURE SHOULD STRENGTHEN REGULATION OF FUNERAL INDUSTRY BUSINESS
PRACTICES TO PROVIDE MORE EFFECTIVE CONSUPER PROTECTION.
Arizona's regulations governing funeral industry practices are stronger
than most states but do not fully protect consumers. Funeral industry
regulation is needed to promote competition and protect consumers who are
vulnerable and often lack the information to make a knowledgeable
decision. Existing regulations, however, do not ensure that consumers
can obtain meaningful information about services and costs before making
funeral arrangements. Moreover, legal challenges to the Arizona
regulations and implementation of Federal regulations may limit the
authority of the Board of Funeral Directors and Embalmers to ensure
adequate consumer protection.
Rationale for Licensing
Occupational or professional licensing and regulation seek to prevent
significant harm to the public which may result from unrestricted practice
of a particular activity. The Council of State Governments has published
criteria for assessing the potential for harm in a given occupation.
Using these criteria, the State should regulate a particular occupation if
The unlicensed practice poses a serious risk to the consumer's
life, health, safety or economic well- being;
e The users of the service cannot be expected to possess the
knowledge needed to properly evaluate the qualifications of those
offering services; and
The b e n e f i t s of l i c e n s i n g t o t h e p u b l i c c l e a r l y outweigh any
p o t e n t i a l harmful e f f e c t s such a s p r i c e s of s e r v i c e s ,
a v a i l a b i l i t y of providers and r e s t r i c t i o n s on use of personnel.
The c r i t e r i a e s t a b l i s h a balance between the p o t e n t i a l harm t o the
consumer and the impact of the regulation. Thus, l i c e n s i n g may be needed
but should be no more r e s t r i c t i v e than necessary.
Need f o r Regulation Is t o Protect Consumers
The only need f o r r e g u l a t i n g f u n e r a l industry p r a c t i c e s is t o protect
consumers by promoting p r i c e competition and p r o h i b i t i n g p r a c t i c e s t h a t
increase f u n e r a l c o s t s . Although the o r i g i n a l purpose f o r regulating
f u n e r a l p r a c t i c e s was t o p r o t e c t p u b l i c h e a l t h , the disposal of human
remains does not generally pose a t h r e a t t o public health and s a f e t y ( see
pages 30- 32 f o r f u r t h e r d e t a i l on the r e l a t i o n s h i p between public h e a l t h
and embalming). However, consumers can s u f f e r s u b s t a n t i a l f i n a n c i a l
l o s s e s because they lack adequate knowledge about making funeral
arrangements and because funeral d i r e c t o r s have engaged i n deceptive
p r a c t i c e s . Because of the p o t e n t i a l f o r s i g n i f i c a n t f i n a n c i a l harm, the
Board promulgated r e g u l a t i o n s t o p r o t e c t consumers.
Cost and Circumstances of the Funeral Transaction - Arranging a funeral
can r e s u l t i n s u b s t a n t i a l c o s t s t o consumers. Funerals a r e expensive.
However, few consumers have experience i n making funeral arrangements and
the emotional trauma r e s u l t i n g from death can a f f e c t the judgment of
survivors confronted with t h i s task.
Funerals a r e a major expenditure, often exceeded during l i f e only by house
and automobile purchases. Although d e f i n i t i v e data on funeral c o s t s a r e
not a v a i l a b l e , one funeral d i r e c t o r estimates t h a t h i s average funeral
c o s t s about $ 1,400. National Funeral Directors Association ( NFDA)
s t a t i s t i c s showed the average cost i n the Mountain Region was $ 1,780 i n
1981. However, NFDA f i g u r e s only include b a s i c f u n e r a l home charges plus
c a s k e t c o s t . Other common expenses include interment r e c e p t a c l e s ,
o b i t u a r y n o t i c e s , c l e r g y honoraria, death c e r t i f i c a t e s , cemetery expenses
and flowers. The Federal Trade Commission ( FTC) estimated t h a t when these
a d d i t i o n a l charges were included, the average cost of t h e t y p i c a l
" t r a d i t i o n a l " a d u l t f u n e r a l was $ 2,360 i n 1978.
Despite the high cost of f u n e r a l s , consumers a r e of ten unable t o make
informed choices about f u n e r a l arrangements. The FTC i n v e s t i g a t e d f u n e r a l
p r a c t i c e s over a 10- year period and c l e a r l y documented the d i f f i c u l t i e s
faced by consumers. Unlike most ordinary consumer t r a n s a c t i o n s , an
i n d i v i d u a l purchases a f u n e r a l out of necessity r a t h e r than choice and
cannot d e f e r t h e purchase i f not f u l l y s a t i s f i e d . Most persons arranging
f u n e r a l s have l i t t l e or no p r i o r experience i n making arrangements.
Consumers must make t h e s e d e c i s i o n s under extreme time pressure. The
consumer who has not made arrangements beforehand is severely hampered i n
seeking information a f t e r a death occurs. According t o one consumer, her
family was forced t o make a c o s t l y decision i n a short time with adverse
r e s u l t s .
Case 1
The survivors of a man who died i n a Phoenix h o s p i t a l a t
1 1 : O O p. m. learned t h a t they had t o remove the body within
a few hours. The family selected a mortuary from the
yellow pages and hearing nothing adverse from t h e h o s p i t a l
s t a f f sent the body t o the mortuary. However, t h e p r i c e s
quoted the family f o r a " bare n e c e s s i t i e s " f u n e r a l came t o
over $ 4,600. After the family complained t o a l o c a l media
o u t l e t , the f u n e r a l hone offered a $ 1,145 refund.
Survivors are also likely to suffer from emotional trauma and guilt. As a
result, they may be highly suggestible. The trauma of death-- one of " the
most intense of all human experiencesm-- often limits the survivors'
abilities to make considered judgements about funeral arrangements. Guilt
may also lead survivors to purchase a more expensive funeral than they
might otherwise wish. Thus, the funeral transaction meets several of the
basic requirements for regulation: funerals can involve high costs in an
environment where the consumer is at a disadvantage in dealing with the
funeral director. As a result of its investigation, the FTC concluded:
" Together, the emotional trauma of bereavement, the
lack of information and the time pressures place the
consumer at an enormous disadvantage in making funeral
arrangements. These conditions mean that the funeral
consumer lacks much of the information and freedom of
choice available in most other consumer
transactions. . . ."
Business Practices - Business practices and sales techniques within the
funeral industry may also place the consumer at a disadvantage. Prior to
1981, Arizona regulations did not 1) require funeral directors to provide
price lists to consumers or 2) prohibit specific practices such as
misrepresenting legal requirements for caskets or embalming. As a result,
consumers often made costly decisions without realizing it.
Case 2
A clergyman collected information showing that one funeral
home charged substantially different prices for the same
casket during a six- month period in 1978 and 1979. The
establishment sold a casket with a wholesale cost between
$ 60 and $ 66 at prices ranging from $ 200 to $ 795. The
funeral home sold two cremation containers wholesaling for
$ 10 on the same day, one for $ 50 and the other for $ 100.
Case 3
According t o a complaint f i l e d with the Board, a family
arranging a cremation purchased a casket a f t e r t h e f u n e r a l
d i r e c t o r told the widow t h a t S t a t e law required caskets f o r
cremation. Arizona law does not r e q u i r e c a s k e t s f o r
cremation. Thus, the family was misled i n t o spending $ 230
f o r an unneeded casket. A subsequent Board i n v e s t i g a t i o n
r e s u l t e d i n the funeral home reimbursing the family f o r the
casket cost.
In both instances consumers lacked s p e c i f i c information which would have
enabled them t o evaluate p r i c e s or statements made by the f u n e r a l
d i r e c t o r . In another case a mourner reported t h a t a family was harassed
by a f u n e r a l d i r e c t o r .
Case 4
A family made arrangements with a f u n e r a l home f o r
s e r v i c e s , agreeing t o pay the balance before the funeral.
During the rosary service the funeral d i r e c t o r i n t e r r u p t e d
t h e s e r v i c e t o demand immediate payment i n f u l l ,
threatening t o stop the s e r v i c e . Although no one had
s u f f i c i e n t cash, one of the mourners paid by c r e d i t card.
In 1981 the Board of Funeral Directors and Embalmers promulgated
r e g u l a t i o n s t o p r o t e c t consumers from p r a c t i c e s such a s these. The
requirement t h a t f u n e r a l d i r e c t o r s d i s c l o s e p r i c e s ( R4- 12- 303) seeks t o
provide consumers with s p e c i f i c information about c o s t s . The r e g u l a t i o n s
a l s o p r o h i b i t a v a r i e t y of deceptive p r a c t i c e s including making f a l s e
statements about l e g a l requirements f o r caskets ( R4- 12- 302). I n a d d i t i o n ,
t h e r e g u l a t i o n s r e q u i r e p r a c t i t i o n e r s t o r e f r a i n from conduct which
causes o r r e s u l t s i n d i s r e s p e c t f o r the deceased, d i s r u p t i o n of the
f u n e r a l services or i n j u r y t o the family ( R4- 12- 301). An FTC s t a f f
a t t o r n e y describes Arizona a s ". . . one of the very few s t a t e s t h a t has
enacted the type of provisions . . . necessary t o p r o t e c t consumers."
However, the Arizona r e g u l a t i o n s have not eliminated a l l problems. Some
establishments f a i l t o comply with s p e c i f i c requirements of the
r e g u l a t i o n s .
Case 5
According t o one family member, t h e f u n e r a l home where her
family arranged a f u n e r a l i n May 1983 did not provide a
p r i c e list t o the family as required by regulation. The
family paid approximately $ 4,000 f o r the f u n e r a l .
Although the i n d i v i d u a l f e e l s t h a t her family was
overcharged, no formal complaint was made i n order t o
avoid f u r t h e r trauma.
Although the Board r e g u l a t i o n s i n c r e a s e the information a v a i l a b l e t o
consumers, noncompliance by some funeral homes means t h a t consumers may
lack e s s e n t i a l information and continue t o be subject t o misleading
p r a c t i c e s . Further a u d i t work i s needed, however, t o determine the extent
of such noncompliance within the Arizona funeral industry.
Regulations Do Not Ensure Adequate
Information f o r Consumers
Consumers i n Arizona may s t i l l lack adequate information about s e r v i c e s
and c o s t s p r i o r t o making funeral arrangements even i f establishments
comply f u l l y with Board regulations. The r e g u l a t i o n s do not provide a l l
information recommended by the FTC. In addition, even where Arizona
requirements are similar to the FTC regulations, shortcomings limit their
effectiveness. Price lists for the various establishments are often not
comparable. The rules do not require funeral directors to provide price
information over the telephone, and funeral directors are not required to
provide sufficient information regarding casket prices. The Board could
increase the information available to consumers by publishing a consumer
brochure.
Arizona Regulations vs. FTC - Although Arizona regulations are among the
strongest in the nation, they do not address all of the areas covered by
the FTC rule. Figure 1 compares the key provisions of the FTC rule to
Arizona's regulations and statutes. The major differences are that
Arizona does not require: 1) telephone disclosure, 2) casket and outer
container price lists, or 3) some of the disclosure statements by which
the FTC rule seeks to inform consumers about services and merchandise. In
addition, the FTC rule requires funeral directors offering direct
cremation services to make containers available for cremation. Arizona's
regulations do not address this matter.
Arizona's regulations provide consumers with less information than would
be available under the FTC rule. Funeral homes in Arizona currently need
not provide price information by telephone to consumers. Moreover,
disclosure statements about legal and other funeral requirements are less
extensive under Arizona statutes and regulations than under the FTC rule.
The FTC rule requires that funeral homes specifically disclose on their
price lists that embalming is not always required, caskets are not
necessary for direct cremation and outer burial containers are usually not
required. Although A. R. S. $ 32- 1373. B. requires funeral homes to disclose
on t h e i r memorandums of s e r v i c e s t h a t Arizona law does n o t r e q u i r e a
casket except i n c e r t a i n circumstances, Arizona requirements lack the
a f f i r n a t i v e d i s c l o s u r e about the other l e g a l requirements c a l l e d f o r by
the FTC. Instead, Board r e g u l a t i o n s ( R4- 12- 302) p r o h i b i t p r a c t i t i o n e r s
from making f a l s e or misleading statements about any l e g a l requirements.
Price L i s t Format - Although p r i c e d i s c l o s u r e i s a key element of Board
r e g u l a t i o n , consumers may f i n d it d i f f i c u l t t o make meaningful comparisons
of f u n e r a l c o s t s . Price list formats vary among f u n e r a l homes.
Establishments use d i f f e r e n t c a t e g o r i e s of services and d i f f e r i n the way
they present t h e i r p r i c e s .
Regulation R4- 12- 303 requires t h a t p r a c t i t i o n e r s provide ". . . a w r i t t e n
o r printed p r i c e l i s t . , . before such licensee o f f e r s or shows any
funeral merchandise. . . ." The r e g u l a t i o n i d e n t i f i e s seven individual
items whose p r i c e s must be shown s e p a r a t e l y and d e f i n e s t h e components of
some of the items. When the p r i c e list r e g u l a t i o n became e f f e c t i v e i n
1981, the Board developed a suggested format and standardized c a t e g o r i e s
f o r use by f u n e r a l homes ( see Appendix I).
However, f u n e r a l homes use d i f f e r e n t c a t e g o r i e s of s e r v i c e s i n t h e i r p r i c e
lists t h a t render comparisons d i f f i c u l t t o make. For example, the
r e g u l a t i o n r e q u i r e s t h a t f u n e r a l homes i n d i c a t e p r i c e s f o r embalming. Two
of f i v e p r i c e l i s t s we reviewed list a s i n g l e p r i c e which includes
embalming, h a i r care, cosmetics and placing remains i n the casket. Three
other f u n e r a l homes l i s t separate p r i c e s f o r embalming and other care.
S i m i l a r l y , f u n e r a l homes vary i n t h e i r l i s t i n g s of charges f o r removing
remains: two show a s i n g l e cost f o r removals within the Phoenix area, two
others have variable c o s t s depending on l o c a t i o n and time of day.
FIGURE 1
COMPARISON OF PROPOSED FTC FUNERAL RULE WITH ARIZONA REQUIREElENTS
FTC Requirement
Requires provision of specific
price inf onnation
1. Telephone disclosure
2. Casket price list
3. Outer container price list
4. General price list
5. Written, itemized statement
of goods and services
Prohibits misrepresentations about
needs for services or merchandise
1. Embalming
Disclosure statement*"
2. Casket for cremation
Disclosure statement*"
3. Outer container
Disclosure statement*"
4. Legal or cemetery requirements
Disclosure statement**
5. Preservation or protective value
6. Cash advance requirements
Disclosure statement**
Prohibits required purchases
1. Casket for cremation ( other than
unfinished wood box)
2. Provide inexpensive
container as alternative
3. Other purchases
Disclosure statement*"
Covered by Arizona
Regulations or Statutes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
* Regulation R4- 12- 303, Paragraph A, Subsection 1 requires funeral
directors to show the price range of caskets offered for sale on their
price lists. A. R. S. $ 32- 1372 requires prices on individual caskets on
display at the funeral home. In contrast the FTC rule requires funeral
homes to maintain a list showing prices of all caskets normally offered
for sale or to use other formats to show this information. If the
funeral director uses a list, he must provide the list to all persons
who inquire in person about casket prices. ** Disclosure statements specifically inform consumers about legal or other
requirements for funeral services or merchandise or the value of such
services or merchandise. For example, a requirement for a disclosure
statement regarding the need for caskets for cremation would require a
funeral director to include on their general price list an affirmative
disclosure that a casket is not needed and that alternative containers
are available for cremation.
2 1
Lack of comparability a l s o extends t o p r i c e list appearance. One
establishment presents customers with a brochure t h a t shows p r i c e s charged
f o r seven basic s e r v i c e s plus p i c t u r e s and p r i c e s of caskets i n several
p r i c e ranges. Another establishment uses a six- page p r i c e list showing
charges f o r over 25 s e p a r a t e s e r v i c e s and the p r i c e range of caskets.
Although a d i l i g e n t consumer could assemble cost comparisons u s i n g t h e s e
lists, the limited time a v a i l a b l e i n most cases and the emotional
d i f f i c u l t y of arranging f u n e r a l s e r v i c e s means t h a t consumers may be
unable t o e f f e c t i v e l y use information presented i n d i s s i m i l a r formats.
To ensure t h a t customers can reasonably compare funeral home p r i c e s , the
Board's Attorney General r e p r e s e n t a t i v e has noted t h a t 1 ) the Board needs
c l e a r s t a t u t o r y a u t h o r i t y t o require t h a t funeral homes present price
information using a standard format, and 2) p r i c e list items must be more
c a r e f u l l y defined i n law. Lacking such a u t h o r i t y and c l e a r d e f i n i t i o n ,
the Board w i l l be unable t o promote comparability of funeral home p r i c e
lists.
Telephone Disclosure - A second shortcoming of the Arizona r e g u l a t i o n s is
t h a t p r a c t i t i o n e r s a r e not required t o provide p r i c e information by
telephone before the family s e l e c t s a f u n e r a l home. The FTC r u l e would
r e q u i r e telephone p r i c e d i s c l o s u r e . The Arizona regulations do not
require telephone disclosure. * Being able t o obtain p r i c e information
before s e l e c t i n g a mortuary provides the consumer a convenient means f o r
comparing p r i c e s and a v a i l a b l e s e r v i c e s before the mortuary takes
possession of the body. Given the s h o r t time o f t e n a v a i l a b l e t o perform
t h i s task, the telephone may be the only means by which some consumers can
make such comparisons. Further, according t o the FTC, once a mortuary
* The president of the Arizona Funeral Directors Association t o l d Auditor
General s t a f f t h a t h i s establishment provides p r i c e information by
telephone. In a d d i t i o n , Auditor General s t a f f c a l l e d f o u r f u n e r a l homes
whose owners have challenged the Board r e g u l a t i o n s t o o b t a i n p r i c e
information on s e r v i c e s and a s p e c i f i c casket model. A l l provided p r i c e
information. Even i f p r i c e s a r e a v a i l a b l e by telephone, however, the
lack of comparability among p r i c e f o m a t s discussed above may render the
information u s e l e s s .
takes possession of a body the next of kin a r e usually r e l u c t a n t t o move
the body. As a r e s u l t , a family which chooses a funeral home without
knowledge of p r i c e s may be unable t o arrange s e r v i c e s a t a d e s i r e d c o s t .
Casket Prices - Although c u r r e n t r e g u l a t i o n s and s t a t u t e s require
d i s c l o s u r e of casket p r i c e s , t h e information a v a i l a b l e t o consumers is
l i m i t e d . The p r i c e list r e g u l a t i o n only requires establishments t o
provide the p r i c e range of caskets. Consumers thus lack knowledge of
i n d i v i d u a l p r i c e s and s e l e c t i o n before s e l e c t i n g a mortuary.
Differences i n casket p r i c e s can r e s u l t i n higher p r i c e s t o consumers.
The casket is the only r e a l variable i n a t y p i c a l funeral and can be a
major expense. One f u n e r a l home v i s i t e d by Auditor General s t a f f claimed
t o mark up caskets 20 percent over wholesale cost while another reported
marking up caskets as much as 300 percent. As a r e s u l t , casket c o s t s can
vary among funeral homes. For example, Auditor General s t a f f found one
establishment s e l l i n g a metal casket f o r $ 2,600 t h a t was comparable t o one
sold by another f u n e r a l home f o r $ 270. The l e a s t expensive container at
one f u n e r a l home was a wooden box s e l l i n g f o r $ 437. Another funeral home
sold its l e a s t expensive container f o r $ 54. Thus, consumers who
i n v e s t i g a t e casket p r i c e s may r e a l i z e s u b s t a n t i a l savings.
Arizona r e g u l a t i o n s and s t a t u t e s do not ensure t h a t consumers have
s u f f i c i e n t information t o compare casket p r i c e s , p a r t i c u l a r l y i f they
inquire by telephone. Current r e g u l a t i o n s ( R4- 12- 303) r e q u i r e only t h a t
t h e p r i c e range of caskets be shown on p r i c e lists. A. R. S. s32- 1372
r e q u i r e s establishments t o conspicuously d i s p l a y c a s k e t p r i c e s on each
unit.* These requirements do not provide a consumer with meaningful
* Even when consumers examine caskets at a f u n e r a l home, however, they
may n o t o b t a i n p r i c e s . During a v i s i t , Auditor General s t a f f found
t h a t one funeral home h i d c a s k e t p r i c e s under the pillows d e s p i t e the
l e g a l requirement t o conspicuously d i s p l a y p r i c e s .
information on c a s k e t p r i c e s u n l e s s t h e consumer a c t u a l l y v i s i t s the
f u n e r a l home. For example, a consumer c a l l i n g the two establishments
described above would have no way t o determine t h a t the $ 270 casket and
$ 2,600 casket a r e comparable i n q u a l i t y .
The proposed FTC r u l e seeks t o increase consumer information about casket
p r i c e s by requiring funeral homes t o show i n d i v i d u a l p r i c e s f o r caskets
normally a v a i l a b l e f o r s a l e which do not require s p e c i a l ordering. The
p r i c e s can be displayed i n s e v e r a l ways: on the general p r i c e l i s t , on a
separate list or by notebooks or other formats. The FTC r u l e a l s o allows
f u n e r a l homes t o show casket p r i c e ranges on t h e g e n e r a l p r i c e l i s t with a
statement t h a t complete p r i c e information is a v a i l a b l e a t t h e f u n e r a l home.
Board members and the Board's a s s i s t a n t Attorney General believe the FTC
requirement f o r i n d i v i d u a l c a s k e t p r i c e s may a c t u a l l y prove confusing t o
the consumer. Due t o the d i f f e r e n t brands of caskets a v a i l a b l e , varying
model numbers and constantly changing stock, consumers would have a
limited a b i l i t y t o s o r t and compare a l l the d e t a i l they would be
presented. They suggest a b e t t e r a l t e r n a t i v e is t o require t h a t p r i c e
lists show p r i c e ranges f o r the general types of c a s k e t s s o l d ( e. g.,
c o n t a i n e r s , cloth- covered wood, metal, metal s e a l i n g and polished wood).
Such p r i c e information, when combined with current requirements t o display
casket p r i c e s , would provide consumers s u f f i c i e n t information f o r making
informed choices but would do so without requiring unnecessary d e t a i l .
Consumer Information Brochure - Because most consumers lack experience i n
arranging f u n e r a l s and a v a i l a b l e information o f t e n does not allow f o r
meaningful comparisons among f u n e r a l homes, the Board should consider
publishing a consumer information brochure. Consumers' u n f a m i l i a r i t y with
f u n e r a l s o f t e n means t h a t they a r e unaware of the options a v a i l a b l e t o
them or t h e i r r i g h t s t o s e l e c t f u n e r a l arrangements compatible with t h e i r
d e s i r e s and finances. The d i f f e r e n c e s among funeral home p r i c e lists may
pose d i f f i c u l t i e s t o f a m i l i e s t r y i n g t o compare f u n e r a l prices.
Other Arizona regulatory agencies provide consumer information. The
Department of Real E s t a t e publishes two pamphlets informing consumers of
the p o t e n t i a l hazards and t h e i r r i g h t s i n purchasing land. The Department
of Insurance occasionally publishes comparisons which show the d i f f e r e n c e s
i n cost among insurance companies f o r t y p i c a l insurance p o l i c i e s .
An information brochure about f u n e r a l s could provide s i m i l a r a s s i s t a n c e t o
funeral consumers by 1 ) informing them about l e g a l requirements f o r
f u n e r a l s , 2) describing consumer r i g h t s i n f u n e r a l arrangements, and 3)
d e t a i l i n g the basic components of t y p i c a l f u n e r a l s e r v i c e s . Providing
such information w i l l allow consumers t o become f a m i l i a r with the f u n e r a l
t r a n s a c t i o n before d e a l i n g w i t h funeral homes and w i l l allow consumers t o
evaluate information received from the establishments.
Future of Funeral Regulation i s Uncertain
The f u t u r e of Board r e g u l a t i o n of f u n e r a l industry p r a c t i c e s i n Arizona is
uncertain. Segments of t h e i n d u s t r y have f i l e d s u i t challenging the
Board's a u t h o r i t y t o regulate business p r a c t i c e s . The FTC r u l e on f u n e r a l
industry p r a c t i c e s may a l s o supercede Arizona's r e g u l a t i o n s .
The f u n e r a l industry maintains t h a t the Board lacks s t a t u t o r y a u t h o r i t y t o
i s s u e consumer p r o t e c t i o n r e g u l a t i o n s . S e v e r a l m o r t u a r i e s , l i c e n s e e s and
the Arizona Funeral Directors Association ( AFDA) have f i l e d a lawsuit
challenging the v a l i d i t y of the Board's regulations. The s u i t a l l e g e s
t h a t 1) S t a t e law authorizes the Board t o regulate only the p r a c t i c e s of
f u n e r a l d i r e c t i n g and embalming and, t h e r e f o r e , 2) the Board l a c k s t h e
a u t h o r i t y t o regulate business and e t h i c a l p r a c t i c e s of the f u n e r a l
i n d u s t r y . The Attorney General reviewed the r e g u l a t i o n s p r i o r t o
promulgation and responded t o the lawsuit by arguing t h a t the Board does
have s u f f i c i e n t a u t h o r i t y t o regulate f u n e r a l industry business p r a c t i c e s .
The case is s t i l l i n the courts. In a June 10, 1983, r u l i n g t h e Maricopa
County Superior Court affirmed the v a l i d i t y of r u l e s and deceptive
p r a c t i c e s , general f u n e r a l s e r v i c e requirements and t r u s t fund
requirements f o r prearranged f u n e r a l plans. The r u l i n g disposes of about
half of t h e i s s u e s i n t h e f u n e r a l d i r e c t o r s ' s u i t . However, the court did
not r u l e on the Board's p r i c e l i s t requirements. Moreover, the Superior
Court decision may be appealed. I f the Court f i n d s the p r i c e list
requirements t o be i n v a l i d o r i f AFDA u l t i m a t e l y succeeds i n its
challenge, Arizona consumers w i l l have t o depend on the FTC r e g u l a t i o n s
t o d e t e r abuses. Because p r o t e c t i n g consumers from the f i n a n c i a l
consequences of deceptive p r a c t i c e s is the primary purpose f o r r e g u l a t i n g
t h e f u n e r a l i n d u s t r y , the L e g i s l a t u r e should c l e a r l y authorize the Board
t o promulgate consumer p r o t e c t i o n regulations.
The FTC r u l e on f u n e r a l p r a c t i c e s may a l s o l i m i t Board regulatory
a u t h o r i t y when it becomes e f f e c t i v e i n January 1984. The r u l e allows
s t a t e s t o seek exemptions from its provisions i f s t a t e r e g u l a t i o n s a r e
equal. Although Arizona's r e g u l a t i o n s a r e strong, they do not address two
c r i t i c a l areas covered by the FTC: telephone p r i c e d i s c l o s u r e and casket
p r i c e lists. As a r e s u l t , the Board may l o s e its a u t h o r i t y t o enforce i t s
r e g u l a t i o n s f o r these business p r a c t i c e s . Although Arizona consumers
would be able t o complain t o the FTC about these p r a c t i c e s , t h e FTC w i l l
have nationwide j u r i s d i c t i o n and is not as l i k e l y t o be as e f f e c t i v e i n
resolving problems a s an agency concerned s o l e l y with Arizona.
CONCLUSION
The Arizona Board of Funeral Directors and Embalmers provides needed
p r o t e c t i o n t o consumers through its r u l e s and regulations requiring t h a t
l i c e n s e e s d i s c l o s e p r i c e information and ref r a i n from deceptive
p r a c t i c e s . However, the r e g u l a t i o n s do not ensure t h a t consumers can
obtain a l l relevant information before making decisions on mortuaries or
arrangements. As a r e s u l t , the Board may l o s e i t s a u t h o r i t y t o enforce
its r e g u l a t i o n s on business p r a c t i c e s when the FTC r u l e becomes
e f f e c t i v e . The Board may a l s o use i t s a u t h o r i t y t o r e g u l a t e t h e s e
p r a c t i c e s i f the industry lawsuit is u l t i m a t e l y successful.
RECOFIMENDAT IONS
1. The L e g i s l a t u r e should consider amending A. R. S. s32- 1301 - e t - seq t o
c l e a r l y authorize the Board of Funeral Directors and Embalmers t o
e s t a b l i s h r e g u l a t i o n s t o p r o t e c t funeral consumers.
2. The L e g i s l a t u r e should f u r t h e r strengthen r e g u l a t i o n of f u n e r a l
business p r a c t i c e s by
a. Requiring f u n e r a l homes t o use a standardized format f o r p r i c e
lists and define the p r i c e list items,
b. Requiring telephone d i s c l o s u r e of p r i c e s , and
c. Requiring t h a t p r i c e lists show p r i c e ranges f o r t h e g e n e r a l
types of caskets normally a v a i l a b l e f o r s a l e .
3. The Board should develop a brochure t o inform consumers about f u n e r a l
laws and r e g u l a t i o n s , consumer r i g h t s and t y p i c a l f u n e r a l arrangements.
FINDING I1
SOME LICENSING REQUIREMENTS FOR FUNERAL PRACTITIONERS AND ESTABLISHMENTS
ARE UNNECESSARY AND ANTICOMPETITIVE.
Some Board l i c e n s i n g requirements f o r f u n e r a l p r a c t i t i o n e r s and
establishments a r e unnecessary and do not s e r v e t h e public i n t e r e s t .
Because dead bodies pose minimal p u b l i c h e a l t h r i s k s , embalmers do not
need t o be licensed. For the same reason requirements f o r f u n e r a l
d i r e c t o r s should be changed t o r e f l e c t the need f o r consumer p r o t e c t i o n
r a t h e r than public h e a l t h . Several establishment l i c e n s i n g requirements
a r e a l s o unnecessarily r e s t r i c t i v e . Rather than serving the public, these
requirements s h i e l d t h e f u n e r a l i n d u s t r y from competition which could
b e n e f i t consumers.
Currently, the Board of Funeral Directors and Embalmers l i c e n s e s both
embalmers and funeral d i r e c t o r s . Funeral d i r e c t o r s must p r a c t i c e as a
licensed embalmer t o q u a l i f y f o r l i c e n s u r e . Although most f u n e r a l
d i r e c t o r s i n Arizona a r e a l s o licensed embalmers, i n d i v i d u a l s need not
maintain an embalming l i c e n s e a f t e r i n i t i a l l i c e n s u r e a s a f u n e r a l
d i r e c t o r . These l i c e n s i n g requirements a r e based l a r g e l y on public h e a l t h
concerns which were prevalent i n the l a t e 19th century. Representatives
of the f u n e r a l i n d u s t r y s t r o n g l y b e l i e v e t h a t embalming is important t o
p r o t e c t the public by preventing the spread of i n f e c t i o u s disease caused
by dead bodies.
Licensing Embalmers
Is Unnecessary
Continued l i c e n s i n g of embalmers is not necessary. Public h e a l t h concerns
which were once used t o j u s t i f y l i c e n s u r e a r e not v a l i d because dead
bodies pose l i t t l e or no r i s k t o the g e n e r a l p u b l i c . Moreover, embalmers
work under the supervision of licensed f u n e r a l d i r e c t o r s and c r e a t e no
s i g n i f i c a n t economic r i s k t o funeral consumers. The few public complaints
and Board a c t i o n s taken involving embalmers do not i n d i c a t e t h a t dead
bodies a r e a t h r e a t t o p u b l i c h e a l t h . Further, even i f embalmer l i c e n s i n g
is continued, the e x i s t i n g e n t r y requirements appear t o be overly
r e s t r i c t i v e .
Embalming, as generally defined, e n t a i l s r e s t o r i n g a body t o a l i f e l i k e
appearance through i n j e c t i o n of chemicals, cleansing and a p p l i c a t i o n of
cosmetic techniques. Embalming provides only temporary preservation of
the body and is usually performed to allow a family the option of viewing
the body f o r a short period p r i o r t o interment." Although the process
r e q u i r e s t e c h n i c a l s k i l l and knowledge, Arizona law does not require
apprentice embalmers t o have any t e c h n i c a l t r a i n i n g o r education p r i o r t o
beginning t h e i r apprenticeships.
Public Health Risks Are Minimal - Although r e g u l a t i o n of embalming began
i n the l a t e 19th century i n response t o public h e a l t h concerns, current
medical opinion i n d i c a t e s t h a t dead bodies do n o t r e p r e s e n t a r e a l health
t h r e a t . Therefore, embalming has l i t t l e value as a h e a l t h measure. For
t h i s reason, Arizona h e a l t h r e g u l a t i o n s do not require embalming i n most
cases and allow r e f r i g e r a t i o n a s a means of preservation.
Embalming is not e s s e n t i a l t o p r o t e c t p u b l i c h e a l t h . An o f f i c i a l of the
U. S. Public Health Service, Center f o r Disease Control ( CDC) t o l d u s t h a t
h i s experience provided no evidence t h a t embalming serves a public health
f u n c t i o n . He added t h a t pathogens i n the human body a r e highly s e n s i t i v e
t o t h e i r host environment and cease reproducing i f the body tenperature
f l u c t u a t e s even more than a few degrees from normal. He described
embalming a s a cosmetic procedure.
* Viewing is a l s o possible without embalming by preserving the body
through r e f r i g e r a t i o n . Arizona law does not require embalming.
Medical experts i n Arizona have voiced s i m i l a r opinions about the lack of
danger from dead bodies. One medical examiner noted t h a t dead bodies pose
less hazard than l i v e ones t h a t cough or sneeze. He f u r t h e r noted t h a t
Europe ( where embalming is not commonly p r a c t i c e d ) would be depopulated i f
t h e h e a l t h claims of the f u n e r a l i n d u s t r y were t r u e . A forensic
p a t h o l o g i s t a t the University of Arizona a l s o t o l d u s t h a t dead bodies are
of l i t t l e danger t o the l i v i n g . He said t h a t while t h e r e i s some possible
hazard, it is not l i k e l y and is limited t o persons handling the body.*
The p a t h o l o g i s t described embalming as cosmetic r a t h e r than e s s e n t i a l t o
p u b l i c h e a l t h .
Even i n cases involving communicable d i s e a s e , t h e need f o r embalming is
questionable. The Federal Trade Commission report on the f u n e r a l i n d u s t r y
quoted one h e a l t h o f f i c i a l who s t a t e d :
". . . embalming serves no u s e f u l purpose i n preventing
the transmission of communicable disease. In those few
cases where a person d i e s of a highly i n f e c t i o u s
d i s e a s e , a f a r b e t t e r procedure would be t o wrap and
securely s e a l the body i n heavy p l a s t i c sheeting before
removing it from the place where death occurred."
The Department of Health Services ( DHS), which is responsible f o r
r e g u l a t i n g t h e d i s p o s a l of dead bodies, is a l s o reconsidering the need f o r
embalming i n cases where death occurs from communicable disease. DHS has
promulgated r e g u l a t i o n s governing the general preservation of bodies
( R9- 19- 310), preservation a f t e r death caused by c e r t a i n d i s e a s e s
( R9- 19- 311) and d i s p o s i t i o n of bodies ( R9- 19- 312). With t h e exception of
death from c e r t a i n communicable d i s e a s e s , the r e g u l a t i o n s do not r e q u i r e
* Licensure does not even appear t o be necessary t o p r o t e c t these
people. There a r e other persons who a r e unlicensed who r e g u l a r l y
handle dead bodies and who do so using reasonable precautions. An
example of such persons is morgue attendants.
embalming. However, i n a recent memo, one department o f f i c i a l proposed
changing the requirement f o r embalming such bodies t o " d i s i n f e c t i o n and
preservation." Thus, embalming is not e s s e n t i a l f o r p r o t e c t i n g public
h e a l t h because dead bodies pose minimal h e a l t h r i s k s which can be
addressed i n other ways.
Embalmers Pose L i t t l e Danger - Embalmers, furthermore, pose no s i g n i f i c a n t
t h r e a t t o the public. They t y p i c a l l y work under the d i r e c t i o n of licensed
f u n e r a l d i r e c t o r s and do not independently arrange f u n e r a l s or s e l l
merchandise-- activities which involve the g r e a t e s t p o t e n t i a l f o r economic
harm. Further, persons can and do embalm bodies before receiving formal
t r a i n i n g .
As noted i n Finding I ( see pages 13- 18), the business aspects of the
f u n e r a l t r a n s a c t i o n have the g r e a t e s t p o t e n t i a l f o r public harm. The
worst harm an embalmer can cause is to prepare a body poorly. Friends or
r e l a t i v e s of the deceased may s u f f e r emotional or psychological d i s t r e s s
i f the body is improperly prepared. However, the r e l a t i v e l y low incidence
of complaints about poor embalming suggests t h a t t h i s occurs infrequently
and does not c r e a t e s u f f i c i e n t harm t o warrant Arizona's r e s t r i c t i v e
l i c e n s i n g requirements.
Even the r i s k of poor preparation is minimal. Embalmers t y p i c a l l y work
under the d i r e c t i o n of licensed f u n e r a l d i r e c t o r s . Funeral d i r e c t o r s , f o r
example, may review embalming r e p o r t s which d e t a i l the condition of the
body and what s p e c i f i c a l l y was done during the embalming process. In
a d d i t i o n , d i r e c t o r s may v i s u a l l y inspect bodies a f t e r embalming to
determine i f the work is adequate. If the f u n e r a l d i r e c t o r is not
s a t i s f i e d , the embalmer may perform a d d i t i o n a l work. I f the work
continues t o be u n s a t i s f a c t o r y , t h e f u n e r a l d i r e c t o r has the option of
f i r i n g the embalmer. lioreover, the funeral establishment t h a t s e l l s
embalming and o t h e r f u n e r a l s e r v i c e s can be held responsible f o r the
q u a l i t y of s e r v i c e s rendered. In a recent Kew York d e c i s i o n , for example,
a $ 35,000 judgment was entered a g a i n s t a f u n e r a l d i r e c t o r because an
embalmer improperly prepared a body.
Arizona requirements f o r apprentice embalmers a l s o r e f l e c t the limited
harm t h a t embalmers may cause. A. R. S. s32- 1326 requires only t h a t
apprentice embalmers be high school graduates and be endorsed by the
a p p r e n t i c e ' s employer. Board r e g u l a t i o n R4- 12- 311 provides t h a t
apprentices can embalm without d i r e c t supervision a f t e r completing s i x
months of t h e i r apprenticeships and embalming ten bodies. ( Currently, an
apprentice embalmer who has not attended mortuary school is working i n an
Ajo f u n e r a l home under the supervision of a licensee i n
Phoenix.) Further, apprentices i n Arizona t y p i c a l l y embalm a t l e a s t 25
bodies p r i o r t o attending mortuary school. Thus, unlicensed apprentices
may r e g u l a r l y embalm bodies i n Arizona.
Lack of Complaints - The low number of consumer complaints and lack of
Board a c t i o n involving embalmers, f u r t h e r demonstrates the minimal
p o t e n t i a l harm from embalming. For the 3- year period 1980 through 1982,
the Board received 99 complaints from the public, 6 of which involved
improper preparation of the bodies. None of the complaints alleged t h a t
the poorly embalmed body posed any h e a l t h r i s k s . Rather, complainants
were concerned about the bodies' appearances and, i n one case, possible
f a i l u r e t o embalm the body. The Board closed four of t h e s e c a s e s and took
a c t i o n i n only one of them. In the one case where the Board acted, it
f i n e d t h e responsible f u n e r a l d i r e c t o r f o r allowing an unlicensed embalmer
t o embalm the body. ( The embalmer had been licensed i n another s t a t e and
had applied f o r a r e c i p r o c a l l i c e n s e i n Arizona but was not licensed at
the time. The Board subsequently licensed the individual.) The Board is
considering a c t i o n i n one of the pending cases, but the v i o l a t i o n s involve
f a i l u r e t o provide a p r i c e list and w r i t t e n contract t o the consumer
r a t h e r than any problems with the embalming.
The only case i n r e c e n t y e a r s i n which the Board took a c t i o n f o r poor
embalming occurred i n 1977. In t h i s case the Board suspended the
apprentice embalmer's c e r t i f i c a t e of r e g i s t r a t i o n f o r nine months. The
Board a l s o suspended two l i c e n s e s held by the person who supervised t h i s
apprentice embalmer. The s u p e r v i s o r ' s f u n e r a l d i r e c t o r l i c e n s e was
suspended f o r 18 months and h i s embalmer l i c e n s e f o r 24 months. In
a d d i t i o n , t h e Board suspended the establishment l i c e n s e f o r 90 days.
Despite these a c t i o n s , complaints about embalming a r e r e l a t i v e l y
infrequent and do not i n d i c a t e t h a t dead bodies pose a t h r e a t t o public
h e a l t h .
R e s t r i c t i v e Entry Requirements - Entry requirements i n Arizona, moreover,
a r e more r e s t r i c t i v e than i n most other s t a t e s and r e s u l t i n high c o s t s t o
persons entering the p r a c t i c e . To q u a l i f y f o r an embalming l i c e n s e i n
Arizona a candidate must serve a 2- year apprenticeship, embalm 25 bodies
and graduate from an accredited mortuary school. Most s t a t e s require only
a one- year apprenticeship i n a d d i t i o n t o school. The need f o r mortuary
school is a l s o questionable. Most apprentice embalmers have embalmed 25
bodies before attending school. Two s t a t e s require no schooling a t a l l .
Colorado has completely deregulated the profession. Hawaii o f f e r s
candidates the option of a one- year a p p r e n t i c e s h i p p l u s one year of school
or longer apprenticeships with no schooling.* Arizona's requirements mean
t h a t t o become an embalmer, a candidate must spend two years a s an
apprentice and pay up t o $ 3,000 f o r a year of mortuary school.
The Board argues t h a t embalmers should be licensed because a l l
r e s p o n s i b i l i t y should not r e s t on the funeral d i r e c t o r and t h a t the Board
needs revenue generated through embalming licensure.** However, the
p o t e n t i a l f o r public harm caused by embalmers is not s u f f i c i e n t t o j u s t i f y
S t a t e regulation. In most businesses, managers and supervisors a r e
responsible f o r subordinate employees. Loss of revenues, on the other
hand, can be addressed through an a l t e r n a t i v e fee s t r u c t u r e .
* Hawaii requires a two- year apprenticeship f o r high school graduates or
a five- year apprenticeship f o r persons who have not completed high
school.
** The Board obtains approximately $ 13,500 i n revenue annually from
approximately 450 embalmers who each pay a $ 30 renewal fee.
Requirements f o r Funeral Directors
Should Reflect Need f o r
Consumer Protection
Although l i c e n s i n g f u n e r a l d i r e c t o r s is a reasonable means of ensuring t h a t
p r a c t i t i o n e r s comply with consumer p r o t e c t i o n s t a t u t e s and r e g u l a t i o n s , the
requirement t h a t candidates be licensed embalmers t o q u a l i f y f o r i n i t i a l
l i c e n s u r e as a f u n e r a l d i r e c t o r is unnecessary. Funeral d i r e c t o r s do not
need embalming experience t o perform t h e i r d u t i e s nor t o supervise
adequately the f u n e r a l home personnel. However, f u n e r a l d i r e c t o r s should
be s p e c i f i c a l l y responsible f o r the performance and conduct of a l l
employees.
No Need f o r Embalming Experience - The primary harm i n arranging f u n e r a l s
r e s u l t s from deceptive or misleading p r a c t i c e s used t o increase f u n e r a l
c o s t s . Continued l i c e n s i n g of funeral d i r e c t o r s ensures t h a t someone i n
each f u n e r a l establishment is responsible f o r the conduct of subordinates.
However, funeral d i r e c t o r s do not need t o be embalmers t o provide adequate
supervision. Funeral d i r e c t i n g t y p i c a l l y i n c l u d e s a r r a n g i n g and
supervising f u n e r a l s e r v i c e s a s well a s s e l l i n g caskets and other
merchandise. The g r e a t e s t p o t e n t i a l f o r harm occurs i n t h i s l a t t e r
a c t i v i t y . Although f u n e r a l d i r e c t o r s may a l s o embalm bodies, t h e i r primary
function i s t o meet with f a m i l i e s to make arrangements. Experience a s an
embalmer does not ensure competence i n these a c t i v i t i e s or guarantee t h a t
a l l employees comply with consumer p r o t e c t i o n laws and regulations.
In most s t a t e s where the requirement f o r d u a l l i c e n s u r e has been
challenged, the c o u r t s have held t h a t such requirements a r e not j u s t i f i e d
and a r e invalid." In Gholson v. Engle ( 138 N. E. 2d 500, 1956), f o r example,
the I l l i n o i s Supreme Court held t h a t the requirement t h a t funeral d i r e c t o r s
be embalmers violated the I l l i n o i s Constitution. In its d e c i s i o n , the
Court s t a t e d t h a t n e i t h e r public h e a l t h considerations nor the
r e s p o n s i b i l i t y t o supervise embalmers j u s i f i e d t h e requirement:
" The record does not, i n our opinion, e s t a b l i s h t h a t public
h e a l t h c o n s i d e r a t i o n s j u s t i f y the requirement t h a t a f u n e r a l
d i r e c t o r be a licensed embalmer. The f u n e r a l d i r e c t o r is
concerned primarily with the amenities of the funeral
s e r v i c e . Proper performance of h i s o t h e r f u n c t i o n s , such a s
removing and dressing the body, a s c e r t a i n i n g t h e cause of
death, and inspecting the body while it is i n t h e c o f f i n , does
not require a year of c o l l e g e , nine nonths a t an embalming
school and a y e a r ' s s e r v i c e as an apprentice embalmer. Nor
a r e these q u a l i f i c a t i o n s necessary i n order t h a t he may
e f f e c t i v e l y supervise the work of the embalmer. Specialized
t r a i n i n g is not required i n order t o recognize the conditions
t h a t require f u r t h e r work on the p a r t of the embalmer."
Embalming primarily serves a cosmetic purpose which f u n e r a l d i r e c t o r s can
adequately a s s e s s through v i s u a l i n s p e c t i o n . S p e c i a l i z e d knowledge of
embalming is not necessary t o assess the q u a l i t y of an embalmer's work.
Moreover, f u n e r a l d i r e c t o r s have an economic and p r o f e s s i o n a l i n t e r e s t i n
ensuring t h a t t h e i r embalners a r e q u a l i f i e d and capable. As the
responsible i n d i v i d u a l , a f u n e r a l d i r e c t o r can ensure embalmers' q u a l i f i c a -
* See Cleere v. Bullock, 361 P. 2d 616 ( Colo. 1961); Gholson, v. Engle,
138 N. E. 2d 508 ( I l l . 1956); Remplinger v. Whyte, 188 N. W. 607 ( Wis.
1922); S t a t e v. P, ice, 80 A. 1026 ( lid. 1911); People v. Ringe, 90 N. E.
451 ( N. Y. 1910); Wyeth v. Thomas, 86 N. E. 925 ( Mass. 1909). ( Cases
c i t e d i n Florida S t a t e University Law Review, Vol. 5, ( Summer 1977) pg.
414, note 199) One of the exceptions is an Arizona case, McKiney v.
R e i l l y , 96 Arizona 176, 393 P. 2d 268 ( 1964) i n which the Arizona
Supreme Court upheld the Eoard's decision t o deny a l i c e n s e t o an
out- of- state f u n e r a l d i r e c t o r who had 25 years experience but was not a
licensed embalmer.
t i o n s by h i r i n g only mortuary school graduates or c a r e f u l l y checking
references and experience-- procedures one normally expects employers t o
follow i n other business s e t t i n g s . However, current l i c e n s i n g
requirements impose s u b s t a n t i a l c o s t s on persons wishing t o become f u n e r a l
d i r e c t o r s because candidates must f i r s t q u a l i f y as embalmers. As noted i n
the previous s e c t i o n , meeting the requirements t o become an embalmer can
e n t a i l s u b s t a n t i a l time and c o s t , thus posing an unnecessary b a r r i e r t o
persons wishing t o become funeral d i r e c t o r s .
Continued Licensing Needed - Although f u n e r a l d i r e c t o r s do not need
experience as embalmers, the Board should continue t o l i c e n s e f u n e r a l
d i r e c t o r s . Licensing f u n e r a l d i r e c t o r s allows the Board t o hold an
i n d i v i d u a l responsible at each f u n e r a l establishment f o r its operation.
Focusing r e s p o n s i b i l i t y on the funeral d i r e c t o r i n t h i s way eliminates the
need f o r s t a t u t e s t o l i c e n s e subordinate employees, including embalmers or
a s s i s t a n t f u n e r a l d i r e c t o r s . " Instead, each f u n e r a l d i r e c t o r would be
f r e e to assign d u t i e s t o any employee capable of performing the d u t i e s i n
compliance with Board regulations and t o the f u n e r a l d i r e c t o r ' s
s a t i s f a c t i o n .
Since f u n e r a l t r a n s a c t i o n s c r e a t e major p o t e n t i a l f o r economic harm,
however, licensed f u n e r a l d i r e c t o r s should be c l e a r l y responsible f o r
ensuring t h a t a l l personnel and t r a n s a c t i o n s comply with applicable
s t a t u t e s and Board regulations.** One way t o achieve t h i s objective would
* A. R. S. $ 32- 1332 allows q u a l i f i e d embalmers t o become c e r t i f i e d a s
a s s i s t a n t f u n e r a l d i r e c t o r s upon recommendation of the funeral d i r e c t o r
f o r whom they work and payment of a $ 40 fee. No examination i s
required. The a s s i s t a n t f u n e r a l d i r e c t o r l i c e n s e is usually held by a
recently licensed embalmer who wishes t o p r a c t i c e f u n e r a l d i r e c t i n g .
However, c e r t i f i c a t i o n as an a s s i s t a n t f u n e r a l d i r e c t o r is n o t r e q u i r e d
f o r l i c e n s u r e as a f u n e r a l d i r e c t o r . ** Current s t a t u t e s and r e g u l a t i o n s allow unlicensed employees t o make
f u n e r a l arrangements and draw up c o n t r a c t s . A. R. S. $ 32- 1381 requires
t h a t a s p e c i f i c f u n e r a l d i r e c t o r be i d e n t i f i e d a s responsible f o r each
licensed establishment.
be for the Board to promulgate a regulation that specifically holds the
funeral director designated under A. R. S. s32- 1381 responsible for all
activities and transactions within the establishment.
Establishment Requirements
Are too Restrictive
Statutory requirements for funeral establishments are too restrictive.
Licensing establishments provides another assurance that funeral home
personnel comply with Board regulations, particularly where owners
themselves are not licensed funeral directors. However, current
requirements that funeral homes maintain specific facilities and equipment
are not necessary to protect the public and can unnecessarily increase
costs of maintaining an establishment.
A . R . S . § 32- 1338 requires every funeral establishment to maintain specific
facilities and equipment. In particular, each establishment must have:
A chapel for conducting funeral services;
A preparation room with sanitary flooring, drainage and
ventilation, equipped with instruments and supplies necessary for
the preparation and embalming of dead human bodies for burial or
transportation;
A display room for funeral caskets and shipping cases; and
A hearse or funeral coach properly equipped for the purpose and
kept in a sanitary and professional manner.
Enacted in 1945, these requirements ensure that funeral homes have all
equipment thought necessary for providing safe and healthful " traditional"
funerals. A " traditional" funeral usually involves embalming the body,
viewing and services conducted with the body present. These facilities are
not needed, however, to provide low- cost services such as direct cremation
or direct interment. In recent years, these nontraditional methods of
disposing of bodies, which do not require embalming or purchase of a
casket, have become more popular." For example, 6,846 ( 37 percent) of the
18,484 bodies disposed of in Arizona in 1982 were cremated.** If past
nationwide estimates are correct, more than 4,000 of these cremations were
direct cremations with no prior ceremony. Neither a chapel, preparation
room, nor a display room are needed to provide cremation or direct burial
services. These services require only minimal storage and transportation
facilities. Nor are these statutory requirements necessary to protect the
public. The public health rationale implicit in some of these requirements
is not supported by current medical opinion.
However, these statutory requirements do impose a substantial barrier to
entry into the funeral industry-- particularly should a firm desire to
engage only in direct dispositions.*** To obtain an establishment
license a funeral director must invest in or, according to the Board's
Attorney General representative, at least have access to the required
equipment and facilities. As a result persons wishing to offer low
overhead, inexpensive funerals may be unable to do so because of the cost
of meeting these requirements.
* Because direct dispositions are neither " traditional" nor widely
advertised, many consumers may still be largely unaware of this
alternative. ** Another low- cost alternative is direct interment without embalming or
services. However, because records are unavailable, we were unable
to determine how many additional bodies were disposed of through
direct burial. *** The first firm to specialize in direct dispositions began operation
in California in 1971. Operating without the overhead expenses of
traditional funeral homes, it was able to offer services at costs
generally lower than those charged for direct dispositions by
traditional funeral homes.
CONCLUSION
Some Board l i c e n s i n g requirements a r e unnecessary and do not p r o t e c t t h e
public. Because dead bodies do not generally pose r i s k s t o public h e a l t h ,
embalmers do not need t o be licensed nor do f u n e r a l d i r e c t o r s need p r i o r
experience as licensed embalmers. Funeral establishment requirements a r e
a l s o more r e s t r i c t i v e than necessary because they r e q u i r e f u n e r a l homes t o
maintain unnecessary equipment and f a c i l i t i e s .
1. The L e g i s l a t u r e should consider revising s t a t u t o r y requirements f o r
l i c e n s i n g f u n e r a l s e r v i c e p r a c t i t i o n e r s by d e l e t i n g :
a. A l l requirements regarding l i c e n s i n g of embalmers and apprentice
embalmers ( A. R. S. § § 32- 1321 through 32- 1329),
b. The requirement t h a t funeral d i r e c t o r candidates be p r a c t i c i n g
embalmers i n order t o q u a l i f y f o r l i c e n s u r e ( A. R. S. s32- 1330), and
c. The provision f o r c e r t i f y i n g a s s i s t a n t f u n e r a l d i r e c t o r s ( A. R. S.
$ 32- 1332).
2. I f l i c e n s i n g of embalmers i s continued, t h e L e g i s l a t u r e should
consider revising entry requirements t o g i v e c a n d i d a t e s t h e o p t i o n of
e i t h e r a two- year apprenticeship or a one- year apprenticeship
combined with one year of mortuary school.
3. The L e g i s l a t u r e should consider deleting s t a t u t o r y requirements f o r
f u n e r a l establishment f a c i l i t i e s ( A. R. S. $ 32- 1338).
4. The Board of Funeral Directors and Embalmers should promulgate a
r e g u l a t i o n t h a t c l e a r l y i d e n t i f i e s licensed f u n e r a l d i r e c t o r s as the
r e s p o n s i b l e p a r t y f o r a l l employee actions and business t r a n s a c t i o n s
within t h e i r establishments.
FINDING I11
ARIZONA STATUTES GOVERNING PREARMNGED FUNERAL CONTRACTS ARE INADEQUATE.
Arizona law does not s u f f i c i e n t l y p r o t e c t persons who arrange and purchase
f u n e r a l s i n advance of death. Consumers who purchase preneed funeral
plans do not always receive merchandise or s e r v i c e s purchased and r i s k
l o s i n g funds. Because current laws a r e weak, the Board of Funeral
Directors and Embalmers can take only l i m i t e d a c t i o n i n response t o these
problems. In a d d i t i o n , t h e s t a t u t e s unnecessarily l i m i t competition i n
prearranged f u n e r a l s a l e s .
Preneed Funeral Plans
Can Benefit Consumers
Prearranged funeral plans o f f e r several advantages t o consumers. Through
a preneed plan, the buyer can purchase the kind of f u n e r a l he d e s i r e s , and
a t the same time, minimize d i s t r e s s and inconvenience f o r h i s survivors.
Because the buyer has the opportunity t o " shop around" and compare p r i c e s ,
he can a l s o reduce f u n e r a l c o s t s . Generally, prearranged plans save
consumers approximately $ 400 i n funeral expenses.
Consumers may arrange and pay f o r funerals i n advance of death i n several
ways. Consumers may i n i t i a t e the t r a n s a c t i o n by going t o a funeral home,
or f u n e r a l d i r e c t o r s o r r e p r e s e n t a t i v e s of firms s e l l i n g prearranged
f u n e r a l plans may s o l i c i t i n d i v i d u a l s a t home. The payments may be made
i n one lump sum or i n installments. Typically, a consumer signs a
contract which should describe i n some d e t a i l which funeral goods and
s e r v i c e s w i l l be provided i n the f u t u r e .
Consumers who purchase preneed plans, however, a r e vulnerable t o abuse and
fraud because they a r e t y p i c a l l y e l d e r l y i n d i v i d u a l s , making a unique and
unusual purchase. Preneed c o n t r a c t s a r e o f t e n lengthy, complex and o f f e r
g r e a t opportunity f o r misrepresentation.
Consumers Risk Losing Funds
Consumers purchasing preneed f u n e r a l plans r i s k losing funds i n a t l e a s t
t h r e e p o s s i b l e ways. F i r s t , consumers who purchase preneed f u n e r a l plans
nay not receive a n t i c i p a t e d merchandise and s e r v i c e s . Second, the accrued
i n t e r e s t is not always a p p l i e d a g a i n s t t h e f u n e r a l c o s t s . Third,
follow- up schemes involving issuance of insurance and/ or debentures may
f u r t h e r reduce the value of the preneed plan f o r the consumer.
Preneed f u n e r a l plans a r e generally of two types. One s p e c i f i e s a l l the
s e r v i c e s and merchandise t o be delivered a t time of death. The second
s p e c i f i e s t h a t the amount invested s h a l l be applied against whatever
f u n e r a l goods and s e r v i c e s a r e s e l e c t e d by survivors a t time of need.
However, the wording on the preneed c o n t r a c t is f r e q u e n t l y vague and leads
t o misunderstanding on the p a r t of the buyer a s t o what he is a c t u a l l y
purchasing.
Problems and d i s p u t e s about prearranged f u n e r a l s a r e a repeated source of
complaints t o the Board. Over the three- year period 1980 through 1982,
the Board received 99 complaints, 12 concerning preneed c o n t r a c t s . Nine
of these complaints involved the same f u n e r a l home. Since January 1978
the Board has received 21 complaints about preneed plans sold by t h i s same
f u n e r a l home. In these cases complainants sometimes had t o pay hundreds
of d o l l a r s more f o r the f u n e r a l under the guaranteed f u n e r a l plan.
Although the preneed complaints have been concentrated a t a s i n g l e f u n e r a l
home, the number of preneeds sold may i n c r e a s e and more complaints may
r e s u l t i f s a l e s of preneeds become more competitive ( s e e pages 51- 53).
Consumers Do Not Get What They Paid For - Purchasers of preneed f u n e r a l
plans o f t e n think t h a t they have f u l l y paid f o r t h e i r f u n e r a l s but, a t
time of need, there are a d d i t i o n a l c o s t s t h e y d i d not a n t i c i p a t e . The
following examples i l l u s t r a t e t h i s problem.
Case 1
According t o one complaint, the consumer had purchased a
paid- in- full b u r i a l plan. The guarantee c e r t i f i c a t e
s p e c i f i e d a casket which was no longer a v a i l a b l e . The
f u n e r a l d i r e c t o r told the sons t h a t i f they wanted a
casket t h a t met t h e d e s c r i p t i o n on the guarantee
c e r t i f i c a t e they would have t o purchase a current model
at $ 858 e x t r a . Since the consumer had v i s i t e d the
f u n e r a l d i r e c t o r only a month before h e r d e a t h and was
t o l d t h a t her preneed plan would pay f o r a l l her b u r i a l
expenses, the sons questioned the a d d i t i o n a l charges.
The owner of t h e f u n e r a l home told them t h a t they could
e i t h e r pay the a d d i t i o n a l charges or t h e i r mother would
" stay i n our f r e e z e r u n t i l you do and there w i l l be
storage costs." The sons paid the a d d i t i o n a l charges.
This complaint is pending i n v e s t i g a t i o n .
Case 2
A preneed f u n e r a l c o n t r a c t s t a t e d t h a t t h e f u n e r a l hone
would provide a redwood casket f o r use i n t h e f u n e r a l
s e r v i c e s . The f u n e r a l home did not honor t h a t contract
when it provided a cloth- covered redwood casket over the
s u r v i v o r ' s s p e c i f i c o b j e c t i o n s . A f t e r the survivor f i l e d
a complaint, the Board obtained a consent agreement
providing r e s t i t u t i o n because c o n t r a c t u a l prearrangements
were not met. The funeral home agreed t o refund $ 75 t o
a t l e a s t 13 consumers who had been guaranteed a redwood
casket, but received a l e s s expensive s u b s t i t u t e . Also,
the order requires t h a t t h e f u n e r a l home give a l l holders
of guarantee c e r t i f i c a t e s , promising any type of redwood
casket, t h e o p t i o n of canceling with f u l l r e s t i t u t i o n of
monies or a $ 75 reduction f o r f a i l u r e t o provide a
redwood casket.
I n t e r e s t Earned Not Available t o Survivor - In some cases t h e i n t e r e s t
which accrues on a prepaid funeral plan may not be used t o pay f o r the
cost of t h e f u n e r a l . I n one case t h e f u n e r a l home attempted t o withhold
i n t e r e s t and make a d d i t i o n a l charges.
Case 3
A consumer purchased a preneed f u n e r a l p l a n i n November
1969 which s t a t e d t h a t c e r t a i n funeral goods and services
would be provided at an e s t a b l i s h e d p r i c e of $ 395. A t the
time of death i n June 1981, the preneed t r u s t account
amounted t o $ 669 including accrued i n t e r e s t . The t o t a l
cost of the funeral was more than $ 1,000. However, the
f u n e r a l home credited only $ 365 against f u n e r a l c o s t s and
the survivor had t o pay approximately $ 700 more.
Following the complaint i n v e s t i g a t i o n , r e s t i t u t i o n was
made t o the survivor.
Transactions Involving Preneed Plans May Be Confusing - Purchasers of
preneed f u n e r a l plans have been the o b j e c t s of complicated schemes which
make it even more d i f f i c u l t t o determine what f u n e r a l s e r v i c e s or expenses
w i l l be covered by the plan. One complicated plan s t a r t e d out with the
s a l e of a guaranteed funeral plan. Later, the consumer received a b u r i a l
policy and a l s o " debentures" issued by t h e f u n e r a l home. Such complicated
gimmicks or schemes confuse the consumer about h i s preneed purchase and
provide o p p o r t u n i t i e s f o r misrepresentation. As a r e s u l t of problems with
these schemes, a t l e a s t one s e l l e r of preneed funeral plans l o s t his
insurance l i c e n s e . In a d d i t i o n , t h i s s e l l e r was under i n v e s t i g a t i o n by
the Attorney General's o f f i c e and the Corporation Comxnission for
i r r e g u l a r i t i e s i n the s a l e s and/ or issuances of these debentures.
Although most complaints about preneed plans involved one funeral home,
complaints have alleged s i m i l a r problems a t other establishments. The
following complaint received by the Board i l l u s t r a t e s t h i s problem.
Case 4
A consumer purchased a funeral plan i n 1956. Later she
received an insurance policy. In 1971 she received
debentures. The f u n e r a l home allowed her t o cash i n the
debentures i n 1979 f o r $ 267 which included i n t e r e s t . A t
t h a t time they said t h i s withdrawal would not a f f e c t her
f u n e r a l plan. However, when the consumer died two years
l a t e r , the funeral hone s a i d t h e plan would not cover the
funeral expenses. The survivors had t o pay an a d d i t i o n a l
$ 349. When questioned, the owner became loud and
obnoxious, f u r t h e r upsetting t h e s u r v i v o r s . This case was
turned over t o the Attorney General's o f f i c e f o r
i n v e s t i g a t i o n .
These examples r e f l e c t t y p i c a l preneed complaints received by the Board.
In a d d i t i o n to the monetary problems, it was common p r a c t i c e a t the
funeral home with the most complaints f o r employees t o become loud,
abusive and rude t o those survivors who balked a t paying a d d i t i o n a l
charges f o r a guaranteed f u n e r a l plan. Thus, the good i n t e n t i o n s of the
deceased i n purchasing a preneed f u n e r a l plan may have a c t u a l l y caused
survivors a d d i t i o n a l monetary and psychological g r i e f .
Preneed S t a t u t e s Are Inadequate
Three weaknesses a r e present i n e x i s t i n g s t a t u t e s which r e s u l t i n
inadequate p r o t e c t i o n f o r consumers who arrange and pay f o r f u n e r a l s i n
advance: 1 ) a c c o u n t a b i l i t y f o r funds paid by consumers is minimal at b e s t ;
2) d i s c l o s u r e requirements do not ensure t h a t consumers receive e s s e n t i a l
information about the provisions of t h e i r preneed c o n t r a c t s ; and 3) the
Board lacks c l e a r a u t h o r i t y t o take a c t i o n a g a i n s t preneed s e l l e r s . As a
r e s u l t t h e d e t e r r e n t a g a i n s t preneed fraud is not s u f f i c i e n t .
Current trade and commerce s t a t u t e s ( A. R. S. § § 44- 1721 through 44- 1725)
provide l i t t l e c o n t r o l over preneed s a l e s and c o n t r a c t s . The law defines
a preneed plan and requires t h a t 100 percent of the payments made under
such a plan be deposited i n a t r u s t fund i n a timely manner. Upon proof
of death the s t a t u t e s require the s e l l e r t o t u r n t r u s t fund proceeds over
t o the b e n e f i c i a r y . V i o l a t i o n s of these s t a t u t e s a r e c l a s s i f i e d as a
Class 2 misdemeanor. At l e a s t 11 s t a t e s * have enacted stronger, more
comprehensive l e g i s l a t i o n designed t o c o n t r o l abuses i n s a l e s of preneed
f u n e r a l plans.
No Accountability f o r Preneed Sales - Accountability f o r s a l e and
management of preneed c o n t r a c t s is very limited. Current s t a t u t e s do not
designate a s p e c i f i c agency t o be responsible f o r overseeing preneed
c o n t r a c t s . There is no annual reporting requirement f o r s e l l e r s of
preneed s a l e s nor is p e r i o d i c a u d i t i n g required. As a r e s u l t , the
consumer has no source of information about persons or establishments
s e l l i n g preneed f u n e r a l plans or how the funds a r e managed.
No agency is c u r r e n t l y responsible f o r r e g u l a t i n g preneed s a l e s . A s i n g l e
responsible agency would provide a c c o u n t a b i l i t y f o r consumer funds which
a r e paid t o s e l l e r s of preneed plans. In 11 other s t a t e s , a s p e c i f i c
agency r e g u l a t e s preneed s a l e s . I n f i v e s t a t e s , t h e r e s p o n s i b l e agency is
one which is accustomed t o r e g u l a t i n g f i n a n c i a l t r a n s a c t i o n s ( egg.,
insurance, banking or comptroller). In the other s i x s t a t e s the f u n e r a l
board or p r o f e s s i o n a l l i c e n s i n g department i s responsible f o r regulating
preneed s a l e s .
Since s e l l e r s of preneed funeral plans a r e associated with establishments
licensed by the Board of Funeral Directors and Embalmers, and the Board
already r e g u l a t e s business p r a c t i c e s of funeral homes, the Board appears
t o be a l o g i c a l agency f o r r e g u l a t i n g preneed c o n t r a c t s i n Arizona. To
ensure adequate c o n t r o l , the Eoard should be s p e c i f i c a l l y authorized t o
regulate a l l aspects of preneed sales and management. With such
a u t h o r i t y , the Board could hold funeral d i r e c t o r s responsible f o r t h e i r
* C a l i f o r n i a , Colorado, F l o r i d a , Hawaii, I l l i n o i s , Indiana, Iowa,
Kentucky, Maryland, Oklahoma, Washington
personnel who s e l l preneed plans. This would be s i m i l a r t o the
r e s p o n s i b i l i t y of f u n e r a l d i r e c t o r s f o r ensuring t h a t t h e i r s t a f f members
comply with consumer p r o t e c t i o n r e g u l a t i o n s i n other a r e a s ( see page 35).
The lack of annual reporting requirements i n Arizona a l s o l i m i t s
a c c o u n t a b i l i t y f o r preneed funds. Annual reporting by sellers ensures
a c c o u n t a b i l i t y of preneed funds by i n d i c a t i n g t h e l e v e l of a c t i v i t y and
resources a v a i l a b l e t o meet f u t u r e f u n e r a l o b l i g a t i o n s . This d i s c l o s u r e
is similar t o t h a t which Arizona r e q u i r e s of other e n t i t i e s , such a s
banks, t r u s t companies and t i t l e companies which hold t r u s t funds. These
e n t i t i e s must report how the funds a r e handled and where the funds a r e
invested. An annual report can a l s o serve a s t h e b a s i s f o r determining
the present value of f u t u r e o b l i g a t i o n s . Reporting should be required a s
long as the s e l l e r has outstanding preneed p l a n s . Eight of eleven s t a t e s
we reviewed require annual reporting." At l e a s t one state** requires t h a t
the d i s c l o s u r e be c e r t i f i e d by a public accountant.
Audits o r examinations of the records of s e l l e r s a l s o ensures account-a
b i l i t y . Seven*** of the eleven s t a t e s we surveyed examined s e l l e r s '
preneed account records on a periodic and/ or exception basis. The cost of
the examination could be borne by the s e l l e r , which is common p r a c t i c e i n
Arizona when f i n a n c i a l i n s t i t u t i o n s a r e examined by the S t a t e Banking
Department. Four states**** which p e r i o d i c a l l y examine t r u s t accounts of
s e l l e r s of preneed plans charge those s e l l e r s a f e e f o r the a u d i t . The
charges vary depending upon the d o l l a r amount of the t r u s t or the amount
of time involved i n the a u d i t . For example Colorado, with a population
s i m i l a r i n s i z e t o Arizona, has preneed t r u s t s t o t a l l i n g $ 42.5 m i l l i o n
* C a l i f o r n i a , Colorado, Hawaii, I l l i n o i s , Indiana, Kentucky, Oklahoma,
Washington
** Washington
*** Colorado, Hawaii, I l l i n o i s , Indiana, Kentucky, Oklahoma, Washington
**** Colorado, I l l i n o i s , Oklahoma, Washington
( market value). One funeral home chain has between $ 14 and $ 15 m i l l i o n i n
s e v e r a l t r u s t s . The examination f e e f o r t h i s s e l l e r i s approximately
$ 2,300.
The requirement t o make annual r e p o r t s t o the Board and the a u t h o r i z a t i o n
t o conduct a u d i t s would ensure t h a t the Board would have access t o the
information needed t o ensure compliance with the s t a t u t e s on preneed.
Although the Board has use of only a half- time s t a f f p o s i t i o n and a
p a r t - t i n e i n v e s t i g a t o r from the Attorney General's o f f i c e , i f necessary,
a u d i t s of the records could be contracted out. Annual reports would be
a v a i l a b l e f o r inspection when a problem a r i s e s .
Disclosure Requirements Do Rot Protect Consumer - Current s t a t u t e s do not
r e q u i r e d i s c l o s u r e statements on the contract which inform the buyer of 1 )
the s p e c i f i c funeral s e r v i c e s and merchandise included, 2) any provisions
f o r s u b s t i t u t i o n of goods and s e r v i c e s , and 3) t h e d i s p o s i t i o n of the
funds and the treatment of accrued i n t e r e s t . I n a d d i t i o n , a s t a t u t o r y
" cooling o f f " period and t h e p u b l i c a t i o n of a consumer brochure would
a s s i s t purchasers i n evaluating proposed c o n t r a c t s .
The preneed contract should s p e c i f y e x a c t l y what funeral s e r v i c e s and
merchandise w i l l be furnished a t time of need. Currently, the lack of
such s p e c i f i c i t y is a source of problems a s shown i n Cases 1 and 2 of t h i s
Finding. Sometimes the problem i s which casket was purchased. Other
times the guaranteed f u n e r a l plan implies t h a t a l l customary s e r v i c e s w i l l
be provided but a t time of need there a r e a d d i t i o n a l charges f o r such
things a s use of the chapel f o r a service.
Any provisions f o r the s u b s t i t u t i o n of goods and s e r v i c e s should a l s o be
disclosed. While some f u n e r a l goods and s e r v i c e s s p e c i f i e d i n the plan
may not be a v a i l a b l e or desired a t time of need, s u b s t i t u t i o n s to the plan
often r e s u l t i n a d d i t i o n a l charges. Sometimes t h e s p e c i f i e d casket model
i s no longer manufactured. Since many years may pass between purchase of
plan and death, customs may have changed. Services with the body present
may no longer be d e s i r e d . The terms of the preneed f u n e r a l c o n t r a c t must
c l e a r l y s t a t e what provisions w i l l be made i f s p e c i f i e d goods or s e r v i c e s
cannot be delivered at time of need. Also, t h e c o n t r a c t should c l e a r l y
s t a t e whether the survivor has the r i g h t t o s u b s t i t u t e one funeral s e r v i c e
f o r another, such a s cremation instead of b u r i a l , without incurring
a d d i t i o n a l c o s t s .
Consumers should a l s o understand exactly what w i l l happen t o the i n t e r e s t
which accrues t o the t r u s t fund. I n t e r e s t is taxable t o the purchaser of
a preneed plan as long as he l i v e s . Treatment of i n t e r e s t following
death, however, is not covered i n current s t a t u t e s . Because preneed plans
may not specify t h a t accrued i n t e r e s t can be applied t o meet f u n e r a l
expenses, problems a r i s e a t time of need over use of i n t e r e s t funds by
f u n e r a l homes. As noted i n Case 3 funeral homes s o ~ e t i m e s f a i l t o c r e d i t
consumers with i n t e r e s t on t h e i r accounts.
An a d d i t i o n a l assurance t h a t consumers f u l l y understand t h e i r preneed
c o n t r a c t s and do wish t o make the purchases would be t o allow c a n c e l l a t i o n
without penalty f o r the period three t o f i v e days immediately following
the sale. " Cooling- off" periods a r e commonly used where s a l e s a r e made
door t o door. According t o an a s s i s t a n t Attorney General, a cooling- off
period f o r a l l preneeds is recommended because of the unique nature of
t h i s purchase and the f a c t t h a t many e l d e r l y persons need t h i s protection.
The Board could a s s i s t preneed purchasers by publishing a brochure about
purchasing preneed funeral plans. The brochure should provide consumers
with 1) basic information on types of preneed plans, 2) what provisions
and s t i p u l a t i o n s t o include i n a c o n t r a c t , and 3) where t o c a l l i f they
have questions. The Board could publish the information a s p a r t of the
consumer information brochure recommended i n Finding I ( see page 27) o r a s
a s e p a r a t e brochure.
Board Lacks Authority t o Discipline Preneed S e l l e r s - The Board of Funeral
Directors and Embalmers cannot take e f f e c t i v e a c t i o n a g a i n s t preneed
s e l l e r s who defraud consumers. Neither preneed s t a t u t e s nor the Board's
enabling s t a t u t e s define fraud i n the s a l e or management of preneed plans
as a v i o l a t i o n of law. Moreover, the Board's enabling s t a t u t e s do not
include preneed fraud a s a ground f o r d i s c i p l i n a r y a c t i o n against
l i c e n s e e s . These problems led the Arizona Court of Appeals t o conclude
t h a t the Board has l i m i t e d a u t h o r i t y t o regulate preneed s a l e s .
Existing s t a t u t e s do not define fraud or misrepresentation i n the s a l e of
preneed f u n e r a l plans as a v i o l a t i o n of law. A. R. S. $ 44- 1721 - e t - seq
a d d r e s s o n l y the terms of the preneed agreement and e s t a b l i s h m e n t , d e p o s i t
and d i s p o s i t i o n of the t r u s t fund. Although A. R. S. $ 44- 1725 defines
f a i l u r e t o comply with preneed s t a t u t e s a s a Class 2 misdemeanor, the
penalty does not apply t o fraud or misrepresentation.
The Board's enabling s t a t u t e s a r e a l s o s i l e n t on the matter of preneed
fraud. A. R. S. $ 32- 1368 does not i n c l u d e f r a u d u l e n t preneed s a l e among the
v i o l a t i o n s i d e n t i f i e d as unlawful. A. R. S. $ 32- 1363 does not s p e c i f i c a l l y
list preneed fraud a s a ground f o r d i s c i p l i n a r y a c t i o n a g a i n s t l i c e n s e e s ,
although subsection 13 g e n e r a l l y p r o h i b i t s p a r t i c i p a t i o n i n an
". . . e n t e r p r i s e or plan whereby the public is defrauded."
Combined w i t h t h e Board's lack of s p e c i f i c r e s p o n s i b i l i t y f o r regulating
preneed s a l e s noted previously, the vagueness of e x i s t i n g s t a t u t e s l i m i t s
the Board's a b i l i t y t o take a c t i o n against preneed s e l l e r s . I n a 1980
decision, the Arizona Court of Appeals recognized l i m i t a t i o n s on the
Board's a b i l i t y t o p r o h i b i t fraudulent behavior:
". . . While the Board of Funeral Directors and
Embalmers may regulate the e n t i r e spectrum of its
p r o f e s s i o n ' s a c t i v i t i e s , i t s r e g u l a t i o n is not directed
at those a c t i v i t i e s which would be apt t o e n t a i l fraud
upon the consuming public. While the Board is charged
with the duty of enforcing the s t a t u t o r y standards s e t
f o r the profession and a l e r t i n g prosecuting a u t h o r i t i e s
t o prearranged f u n e r a l plan l e g i s l a t i o n v i o l a t i o n s ,
t h e r e is nothing i n Chapter 12 of T i t l e 32 t h a t
provides it the type of s u b s t a n t i a l i n v e s t i g a t i v e force
accorded t o the S e c u r i t i e s Division of the Corporation
Commission f o r the i n v e s t i g a t i o n of frauds or possible
frauds on the consuming public."
Thus, the Board is limited i n taking a c t i o n t o d e t e r fraud i n the s a l e of
preneed funeral plans. As a r e s u l t it has taken a c t i o n i n r e l a t i v e l y few
complaints and has not revoked t h e l i c e n s e of one f u n e r a l home with a long
h i s t o r y of preneed complaints.
C l a r i f i c a t i o n of e x i s t i n g s t a t u t e s would allow the Board t o more
adequately protect consumers. Amending A. R. S. § § 32- 1368 and 32- 1363 to
s p e c i f i c a l l y i d e n t i f y preneed fraud as an unlawful a c t and a ground f o r
d i s c i p l i n a r y a c t i o n would strengthen Board r e g u l a t i o n of t h i s area. This
change would allow the Board t o revoke l i c e n s e s and impose a d m i n i s t r a t i v e
p e n a l t i e s up t o $ 2,500 f o r i n d i v i d u a l s and $ 5,000 f o r establishments." In
a d d i t i o n , t h e e x i s t i n g preneed s t a t u t e s ( A. R. S. § § 44- 1721 through 44- 1725)
should a l s o s p e c i f i c a l l y define fraudulent a c t s so t h a t both s e l l e r s and
the Board w i l l know what a c t s a r e s p e c i f i c a l l y prohibited.
Even i f the s t a t u t e s a r e strengthened to provide more protection f o r
buyers of preneed funeral plans, however, problems created by preneed
plans purchased i n the past w i l l continue. As the population continues t o
age, the Board w i l l probably continue t o receive complaints a s the plans
a r e presented.
Existing Arizona law unnecessarily r e s t r i c t s competition i n the s a l e of
prearranged f u n e r a l plans. High t r u s t requirements and buyers'
c a n c e l l a t i o n p r i v i l e g e s discourage funeral homes from offering o r promoting
t h i s s e r v i c e . As a r e s u l t , prearranged f u n e r a l plans a r e not r e a d i l y
a v a i l a b l e t o consumers.
Current requirements discourage f u n e r a l o p e r a t o r s from offering preneed
funeral plans. According t o A. R. S. $ 44- 1722, a l l proceeds of preneed
s a l e s must go i n t o t r u s t . The law p r o h i b i t s t h e f u n e r a l operator from
* Currently the penalty under A. R. S. 944- 1721 - e t - seq is a maximum f i n e
of $ 750 and two months imprisonment.
deducting any c o s t s of s e l l i n g o r marketing the plan from the preneed
proceeds. Thus, c o s t s of a d v e r t i s i n g , payments t o salesmen and
a d m i n i s t r a t i v e c o s t s must be covered by current revenues or other
resources. I n a d d i t i o n , the s t a t u t e s a l s o r e s t r i c t the entrepreneur
because, under the terms of a prearranged f u n e r a l c o n t r a c t , the s e l l e r
cannot even recoup h i s s a l e s and a d m i n i s t r a t i v e expenses i f the buyer
cancels the contract anytime before death. At l e a s t one f u n e r a l d i r e c t o r
interviewed during our a u d i t said he would not o f f e r preneed services f o r
these reasons.
The 100 percent t r u s t requirement is higher than requirements governing
preneed s a l e s i n other s t a t e s . At l e a s t e i g h t s t a t e s allow s e l l e r s of
preneed plans t o r e t a i n a portion of the proceeds. However, four of these
s t a t e s require s e l l e r s who r e t a i n proceeds post a s e c u r i t y bond, cash or
s e c u r i t i e s t o ensure t h a t f u t u r e f u n e r a l o b l i g a t i o n s can be met.* I f the
L e g i s l a t u r e reduces t r u s t requirements, a s i m i l a r bonding requirement
would provide an important p r o t e c t i o n f o r Arizona consumers. The amount
of the s e c u r i t y should be reasonably r e l a t e d t o the current s a l e s volume
and the value of the outstanding preneed plans. The Insurance Department
h a s e s t a b l i s h e d f o r example, a s l i d i n g s c a l e f o r the bondlsecurity
requirement of persons/ companies o f f e r i n g motor v e h i c l e s e r v i c e c o n t r a c t s .
Euyers' c a n c e l l a t i o n p r i v i l e g e s a l s o discourage funeral d i r e c t o r s from
o f f e r i n g preneed f u n e r a l plans. Buyers who cancel preneed c o n t r a c t s may
wish t o change f u n e r a l homes, d e s i r e a l t e r n a t i v e funeral s e r v i c e s ( e. g.
d i r e c t cremation instead of b u r i a l ) or may move out of the funeral home's
s e r v i c e area. I f the s e l l e r has not been permitted to keep a percentage
or a fixed fee from the proceeds t o cover s e l l i n g and administrative
c o s t s , buyer c a n c e l l a t i o n would r e s u l t i n a net l o s s . Generally the
s e l l e r can cancel the contract only when the buyer has f a i l e d t o pay h i s
i n s t a l l m e n t payments.
* I l l i n o i s allows a c t u a l expenses up t o 5 percent. Colorado, Iowa,
Oklahoma and Washington allow between 10 and 20 percent t o be
r e t a i n e d . Hawaii allows up t o 30 percent r e t e n t i o n . C a l i f o r n i a and
Indiana do not specify i n s t a t u t e s the amount retained.
Because current law discourages f u n e r a l operators from offering preneed
plans, t h i s p o t e n t i a l l y b e n e f i c i a l service i s not r e a d i l y a v a i l a b l e t o
consumers. Advertising and promotion of preneed plans is limited t o a few
funeral homes c u r r e n t l y o f f e r i n g preneed plans. Thus, consumers who could
b e n e f i t from a prearranged plan may not know t h a t t h i s service is
a v a i l a b l e . Others i n t e r e s t e d i n buying a preneed plan a r e limited t o the
few homes which c u r r e n t l y o f f e r a plan.
CONCLUSION
Arizona law does not adequately c o n t r o l abuses which can occur i n the s a l e
of prearranged f u n e r a l s e r v i c e s . Current law lacks f i n a n c i a l reporting,
d i s c l o s u r e and other requirements which ensure a c c o u n t a b i l i t y f o r t r u s t
funds and consumer knowledge of contract provisions. The Board of Funeral
Directors and Embalmers lacks a u t h o r i t y t o take a c t i o n against s e l l e r s who
defraud consumers. I n a d d i t i o n , c u r r e n t t r u s t requirements unnecessarily
l i m i t competition i n prearranged f u n e r a l s a l e s .
The L e g i s l a t u r e should consider strengthening p r o t e c t i o n of consumers
who purchase f u n e r a l plans by
a. Designating the Board of Funeral Directors and Embalmers t o
regulate s a l e s and placing A. R. S. 544- 1721 - e t - seq under the
Board's enabling s t a t u t e s ;
b. Authorizing a u d i t s of preneed records t o ensure conpliance and
allowing the Board t o recover t h e a c t u a l c o s t s of the a u d i t s from
the s e l l e r of the preneed agreements;
c . Requiring d i s c l o s u r e statements on c o n t r a c t s specifying: ( 1)
s e r v i c e s and merchandise t o be d e l i v e r e d , ( 2) how accrued
i n t e r e s t w i l l be handled a f t e r death, and ( 3 ) the conditions
under which a l t e r n a t e f u n e r a l goods and services may be
s u b s t i t u t e d ;
d. Amending A. R. S. § 32- 1368 t o define misrepresentation and
fraudulent a c t i v i t i e s i n the s a l e of preneed plans; and
e. Amending A. R. S. $ 32- 1363 t o a u t h o r i z e t h e Board t o take
d i s c i p l i n a r y a c t i o n s a g a i n s t l i c e n s e e s and establishments f o r
v i o l a t i o n s of preneed s t a t u t e s and regulations.
2. The L e g i s l a t u r e should a l s o consider amending A. R. S. $ 44- 1721 - e t - seq
t o reduce t r u s t requirements by
a. Enacting l e s s r e s t r i c t i v e t r u s t p r o v i s i o n s s o t h a t preneed
s e l l e r s may r e t a i n e i t h e r a percentage of the proceeds or a fixed
charge ;
b. Requiring s e l l e r s t o post bonds when l e s s than 100 percent of the
proceeds goes i n t o t r u s t , with the s i z e of the bond reasonably
r e l a t e d t o the s a l e s volume and f u t u r e o b l i g a t i o n s ; and
c. E s t a b l i s h i n g a cooling- off period of s e v e r a l business days f o r
buyers of preneeds. However, i n cases i n which the s e l l e r has
put 100 percent i n t r u s t , c a n c e l l a t i o n a f t e r a cooling- off period
should allow the s e l l e r t o r e t a i n a f e e .
OTHER PERTIENT INFORMATION
Although the Board of Funeral Directors and Embalmers r e g u l a t e s a c t i v i t i e s
r e l a t e d t o preparing human remains f o r f i n a l d i s p o s a l , t h e Board has no
r e s p o n s i b i l i t y f o r cemetery s a l e s o r cemetery and crematory operations.
Cemetery Sales
The Arizona Department of Real E s t a t e is c u r r e n t l y responsible f o r
r e g u l a t i n g cemetery s a l e s . A. R. S. $ 332- 2194 through 32- 2194.14 require
t h a t a l l cemeteries, except f o r r e l i g i o u s , municipal or f r a t e r n a l
cemeteries, be operated by a c o r p o r a t i o n l i c e n s e d i n Arizona and approved
by the Real E s t a t e Commissioner. These s t a t u t e s a l s o require cemetery
owners t o meet the requirements on the s a l e of subdivided lands ( A. R. S.
$ 932- 2181 through 32- 2185.08) and e s t a b l i s h t r u s t requirements f o r
perpetual or endowed care cemeteries.
Cemetery and Crematory Operations
No agency r e g u l a t e s the operations of cemeteries and crematories. The
Board's a u t h o r i t y ends once t h e f u n e r a l d i r e c t o r t u r n s a body over t o the
cemetery or crematory. The Department of Health Services ( DHS) r e q u i r e s
operators t o maintain accurate records of disposals and monitors
smokestack emissions from crematories but has no s p e c i f i c requirements f o r
the handling of bodies between delivery and interment or cremation.
AREAS FOR FURTHER AUDIT WORK
During the course of our a u d i t , we i d e n t i f i e d p o t e n t i a l problems requiring
f u r t h e r a u d i t work i n s e v e r a l a r e a s r e l a t e d t o the Board of Funeral
Directors and Embalmers. Due t o time and s t a f f i n g c o n s t r a i n t s , we were
unable t o review t h e s e a r e a s . These p o t e n t i a l i s s u e s a r e :
1. Does the Board adequately enforce its s t a t u t e s and regulations?
2. Does the Board operate e f f i c i e n t l y ?
AUDITOR GENERAL COmiENT
Because the following response from the Board of
Funeral Directors and Embalmers c i t e s extremely graphic
d e t a i l s regarding the harm from poor embalming, we
c a r e f u l l y rereviewed the i s s u e s contained i n Finding I1
of the r e p o r t . The problems described i n the Board
response a r e problems f o r which a funeral d i r e c t o r
could be held responsible. ( I n f a c t , open wounds,
leaking sutures and f a i l u r e t o embalm should be
apparent t o most untrained observers.) Therefore,
l i c e n s i n g only f u n e r a l d i r e c t o r s provides s u f f i c i e n t
p r o t e c t i o n i n t h i s area.
With regard t o the h e a l t h r i s k s addressed i n the
response, we recontacted the public h e a l t h a u t h o r i t i e s
c i t e d i n the r e p o r t . These a u t h o r i t i e s s t a t e d the
h e a l t h r i s k s c i t e d by the Board a r e minimal and t h a t
reasonable precautions ( such as wearing gloves) can
e a s i l y be taken to f u r t h e r reduce any r i s k .
& xirono $ tote @ DZX~ of @ lmeral Firertors nttb Embalmess
1645 West Jefferson Phoenix, Arizona 85007
e
August 2, 1983
Douglas R. Norton
Auditor General
111 West Monroe, Suite 600
Phoenix, AZ 85003
Re: Performance Audit - Sunset Review
Dear Mr. Norton:
This i s i n response t o the revised p r e l i m i n a r y r e p o r t d r a f t of the Sunset
Review performance a u d i t received on J u l y 28, 1983 which requests a response
by August 5, 1983. While we understand t h a t you have a t i g h t schedule, we wish
the record t o show t h a