When the State Board first discussed the seller records proposal in December 2015, the disbursements records drew complaints from industry members that the examination process was delving too deeply into how funeral homes were conducting their business.   Some comments were directed at whether examiners would review statements of goods and services to determine if consumers received what had been promised by the preneed contract.  We’ve also heard concerns over whether the examination would look at the funeral home’s profit margin in areas such as casket and vault sales.

In response, the Board’s staff revised the seller records proposal regarding disbursement records to the following:

Records showing payment for fulfilled preneed contracts including, but not limited to, written certificate of performance for each preneed contract fulfilled, requests to the financial institution and/or insurance company for payment, evidence of the date the seller received the funds from the financial institution or insurance company, the account from which the funds were paid to the seller, and documentation of the payment by the seller to the provider including, but not limited to,  the name to whom payments were made, the date and amount of each payment, and a description of payment to the provider.

At the most recent State Board meeting, objections were raised against the staff’s revision because it leaves open the door to require new, unspecified records.  The language includes not once, but twice the phrase “but not limited to”.   That prompted us to compare the staff’s two proposals, and focus on the following language from their first proposal:

(4) accountings showing the disbursement of funds;

(5) records showing disbursements;

(6) the physical or electronic equivalents of all checkbook registers, bank statements, records of deposit, pre-numbered canceled checks, and substitute checks provided by a financial institution;

(7) records of all electronic transfers from preneed trust or preneed joint accounts, including the name of the person authorizing transfer, the date of transfer, the name of the recipient and confirmation from the financial institution of the trust account number from which money was withdrawn and the date and the time the transfer was completed;

(8) reconciliations of the preneed accounts;

While industry members may fear the exam looking into each performed contract, we suspect the staff’s main objective is to seek records that would allow a reconciliation of trust disbursements.  While the NPS collapse was the impetus for getting preneed reform passed in Missouri, the staff probably remains mindful of the events that transpired subsequently in Illinois, Wisconsin and California.  Master trusts in those states were making performance distributions on individual account allocations that did not use market value.  All had serious funding deficiencies that resulted from years of ignoring the trust’s market value.