Cost of auditing funeral home trusts.

              INTERIM STUDY REPORT
Insurance Committee
Representative Charles Key, Chairman
Oklahoma House of Representatives
Interim Study, 11-026, Representatives Dan Kirby and Mike Sanders
September 13, 2011
The Cost of Auditing Funeral Home Trusts
Oklahoma State Senator Kim David
david@oksenate.gov
• Authored SB 289 (2011) which sought to remove language requiring that the cost of certain examinations conducted by the Insurance Commissioner will be borne by the company which is the subject of the examination.
• Introduced Mr. Jeff Hamilton, Director of Mallett Funeral Home, who is a constituent. The Insurance Commissioner performed a random audit on Mr. Hamilton’s Funeral Home. This was a ‘no cause’ audit; there were no complaints drawn against the funeral home that led to the audit. Senator David believes this is an undue cost on small business owners and recommended that there may need to be a stipulation made in the law that requires the company to pay for the cost of the examination only if there are complaints drawn against the subject company. It is her belief that if there is a ‘no cause’ audit, then the Insurance Department should be responsible for the cost of the examination.
Jeff Hamilton, Funeral Director
Mallett Funeral Home, Wagoner, Oklahoma
• Mallett Funeral Home has been in business for 62 years. The funeral homes are required to hold premium trust accounts separately. Mr. Hamilton’s business hires an independent accountant to provide an accounting of the financial records every year, where the accounting report is then required to be submitted to the Insurance Department. The Insurance Department sends a letter of approval or disapproval. Mr. Hamilton stated that he has never had a letter of disapproval. He believes that these yearly examinations allow him to check the way they do business and are helpful.
• The Insurance Department conducted an extra examination to audit the funeral home and the recent examination cost the funeral home $3,484. Mr. Hamilton feels the process requires an unnecessary examination and that the current system is wrong.
• Recommended that removing language in Title 36, Section 309.3(d) would remedy the problem. Section 309.3(d) states, “When making an examination under Sections 309.1 through 309.7 of this title, the Commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or an accounting firm or individual holding a permit to practice public accounting, certified financial examiners or other professionals and specialists as examiners, the cost of which shall be borne by the company which is the subject of the examination.”
• Stated that other industries, such as banks, hospitals, and real estate, are not required to periodically furnish audits and these businesses do not have to bear the cost for audit. Mr.