State regulators to audit about 100 funeral homes
Focus is handling of prepaid funds
State regulators say they plan to audit nearly 100 Massachusetts funeral homes to determine whether they are properly handling millions of dollars placed in trust with them by consumers prepaying for funeral services.
''The board's interest is to ensure that consumers are properly protected and that the licensees are in compliance with the regulations," said Christopher Goetcheus, a spokesman for the state Division of Professional Licensure, which oversees the Board of Registration in Embalming and Funeral Directing.
Goetcheus said the board has never conducted such a large audit before.
Details of the probe surfaced after a legal skirmish between state officials and a Connecticut company that manages close to $36 million in funeral trust funds for 115 Massachusetts funeral homes.
Daniel J. Hammond, an assistant attorney general, said in a letter to the Connecticut company that the state is auditing 96 funeral homes, starting today. He said 74 of them were randomly selected, and 22 others are being audited ''as a result of specific information contained in documents previously filed with the board."
Hammond said the audits were for fact-finding purposes only, and indicated any funeral home not in compliance with state regulations would be given assistance and time to come into compliance.
The Connecticut company, Cooperative Funeral Fund Inc. of Madison, Conn., filed a lawsuit April 15 in Suffolk Superior Court asking a judge to bar state investigators from interviewing the firm's funeral home clients. The lawsuit indicated Mark Mannix, the president of Cooperative, believed his firm was the target of the state probe, which he charged was an attempt to smear him and steer his business to a competitor.
Mannix's attorney, Mitchel S. Ross, said yesterday that he agreed to stop seeking a preliminary injunction against the state after receiving assurances from Hammond that the audits were not targeted at Mannix.
Mannix sent a letter yesterday to funeral home clients scheduled for audits. ''Although we doubt the board's claim," Mannix wrote, ''its position is that these conferences are merely part of a random audit and do not target CFF clients."
Consumers often pay for their funerals at today's prices by signing so-called preneed contracts. The current average price of a funeral is $6,500, according to the National Funeral Directors Association.
Under state regulations designed to protect consumers in case a funeral home goes out of business, the upfront payments associated with preneed contracts must be placed in trust or used to purchase an insurance policy. Regulations require funeral homes to place the money with a Massachusetts bank or trust company that has a fiduciary responsibility to the consumer. State law requires the use of standard investing guidelines that minimize risk.
In its court filing, Cooperative Funeral Fund said it manages $36 million in preneed money in Massachusetts and $185 million nationally. The court document said the two other major players in Massachusetts are BankNorth, with $45 million under management, and New England Funeral Trust, with $100 million. New England Funeral Trust is owned and managed by the Massachusetts Funeral Directors Association.
Bruce Mohl can be reached at mohl@globe.com. 