18VAC47-20 Cemetery Board Rules and Regulations

REGULATIONS
Vol. 29 Iss. 7 - December 03, 2012

TITLE 18. PROFESSIONAL AND OCCUPATIONAL LICENSING

CEMETERY BOARD

Chapter 20

Proposed Regulation

Title of Regulation: 18VAC47-20. Cemetery Board Rules and Regulations (amending 18VAC47-20-70, 18VAC47-20-140).

Statutory Authority: §§ 54.1-201 and 54.1-2311 of the Code of Virginia.

Public Hearing Information:

January 8, 2013 - 9 a.m. - Department of Professional and Occupational Regulation, 9960 Mayland Drive, Second Floor, Richmond, VA

Public Comment Deadline: February 1, 2013.

Agency Contact: Christine Martine, Executive Director, Cemetery Board, 9960 Mayland Drive, Suite 400, Richmond, VA 23233, telephone (804) 367-8552, FAX (804) 527-4299, or email cemetery@dpor.virginia.gov.

Basis: The proposed regulatory action is mandated by the following sections of the Code of Virginia. To comply with these statutes, the Cemetery Board evaluates its current and projected financial position and determines the type of fees and amounts to be established for each fee that will provide revenue sufficient to cover its expenses.

§ 54.1-113 (Callahan Act) Regulatory boards to adjust fees - Following the close of any biennium, when the account for any regulatory board within the Department of Professional and Occupational Regulation or the Department of Health Professions maintained under § 54.1-308 or 54.1-2505 shows expenses allocated to it for the past biennium to be more than 10% greater or less than moneys collected on behalf of the board, it shall revise the fees levied by it for certification or licensure and renewal thereof so that the fees are sufficient, but not excessive, to cover expenses.

Subdivision 4 of § 54.1-201 describes each regulatory board's power and duty to "levy and collect fees for the certification or licensure and renewal that are sufficient to cover all expenses for the administration and operation of the regulatory board and a proportionate share of the expenses of the Department..."

Subdivision 3 of § 54.1-304 describes the power and duty of the director to "collect and account for all fees prescribed to be paid into each board and account for and deposit the moneys so collected into a special fund from which the expenses of the Board, regulatory boards, and the Department shall be paid..."

§ 54.1-308 provides for compensation of the director, employees, and board members to be paid out of the total funds collected. This section also requires the director to maintain a separate account for each board showing moneys collected on its behalf and expenses allocated to the board.

§ 54.1-2311 provides that Cemetery Board regulants pay the board a fee that shall be remitted to the State Treasurer and shall be placed to the credit and special fund of the department to be "used in the administration of this chapter."

These Code of Virginia sections require the department to:

- Pay expenses of each board and the department from revenues collected;

- Establish fees adequate to provide sufficient revenue to pay expenses;

- Account for the revenues collected and expenses charged to each board; and

- Revise fees as necessary to ensure that revenue is sufficient, but not excessive, to cover all expenses.

To comply with these requirements, the department:

- Accounts for the revenue collected for each board distinctly;

- Accounts for direct board expenses for each board and allocates a proportionate share of agency operating expenses to each board;

- Reviews the actual and projected financial position of each board biennially to determine whether revenues are adequate, but not excessive, to cover reasonable and authorized expenses for upcoming operating cycles; and

- Recommends adjustments to fees to respond to changes and projections in revenue trends and operating expenses. If projected revenue collections are expected to be more than sufficient to cover expenses for upcoming operating cycles, decreases in fees are recommended. If projected revenue collections are expected to be inadequate to cover operating expenses for upcoming operating cycles, increases in fees are recommended.

Purpose: The intent of the proposed change in the regulations is to adjust licensing fees for regulants of the Cemetery Board. The board must establish fees adequate to support the costs of the board operations and a proportionate share of the department's operations. By the close of the next biennium, fees will not provide adequate revenue for those costs.

The Cemetery Board provides protection to the safety and welfare of the citizens of the Commonwealth by ensuring that only those persons that meet specific criteria set forth in the statutes and regulations are eligible to receive a cemetery company or sales personnel registration. The Cemetery Board is also tasked with ensuring that its regulants meet standards of practice that are set forth in the regulations. Without adequate funding, complaints against regulants brought to the attention of the Cemetery Board by citizens could not be investigated and processed in a timely manner. This could provide an opportunity for a dishonest regulant waiting for action to be taken by the Cemetery Board to continue to work, harming additional citizens.

The Department of Professional and Occupational Regulation (DPOR) receives no general fund money but, instead, is funded almost entirely from revenue collected for license applications, renewal fees, and other licensing fees. DPOR is self supporting and must collect adequate revenue to support its mandated and approved activities and operations. Fees must be established at amounts that will provide that revenue. Fee revenue collected on behalf of the various boards funds the department's authorized special revenue appropriation.

The Cemetery Board has no other source of revenue from which to fund its operations.

Substance: The proposed amendments increase the current licensure, renewal, and reinstatement fees for a cemetery company and the fee for the addition of a cemetery from $50 to $200 and increase the current licensure, renewal, and reinstatement fees for sales personnel registration from $20 to $75.

Issues: The primary issue for the proposed fee adjustment is the department's statutory requirement to comply with the Callahan Act.

Further issues to be addressed as regulations are developed include:

The Callahan Act requires DPOR to review each board's expenditures at the close of each biennium and adjust fees if necessary. For the 2010-2012 biennium, the Cemetery Board is expected to have a $116,787 cash balance and a Callahan Act percentage of 12.4% and for the 2012-2014 biennium, the Cemetery Board is expected to incur a deficit of $110,747 and a Callahan Act percentage of -60%.

The regulatory review process generally takes a minimum of 18 months and so it is essential to consider fee increases now, before the deficit increases to an amount greater than previously anticipated. To avoid increasing the deficit, the new fees will need to become effective in 2012. Otherwise, the board's deficit will increase to the point that the new fees would be inadequate to provide sufficient revenue for upcoming operating cycles, which could result in the board having to consider additional fee increases in the near future.

The advantage of these changes is that the regulatory program will be able to continue to function in order to protect the public. The disadvantage is that these changes will increase the cost of the license to the regulated population; however, the impact of these changes on the income of the regulated population should not be of a great significance compared to their level of income.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Cemetery Board (Board) proposes to increase all fees paid by licensees and registrants that are subject to the Board's authority.

Result of Analysis. There is insufficient information to accurately gauge whether benefits are likely to outweigh costs for these proposed changes.

Estimated Economic Impact. Under current regulations, cemetery companies pay $50 for initial licensure for one cemetery, $50 for each additional cemetery licensed and $50 each for both license renewal and license reinstatement. Cemetery sales personnel currently pay $20 for initial registration and $20 for both registration renewal and reinstatement. The Board now proposes to increase all of these fees.

Below is a comparison table for current and proposed fees:

FEE TYPE	CURRENT FEE	PROPOSED FEE	% INCREASE
Cemetery Company Licensure	$50	$200	300%
Addition of Cemetery	$50	$200	300%
Sales Personnel Registration	$20	$75	275%
Renewal of Cemetery Company License	$50	$200	300%
Reinstatement of Cemetery Company License	$50	$200	300%
Renewal of Sales Personnel Registration	$20	$75	275%
Reinstatement of Sales Personnel Registration	$20	$75	275%

Board staff reports that fees were significantly reduced in 2000 because they were set at a level that was far too high to be justified by Board expenditures. As a consequence of very high fees prior to 2000, the Board had a large surplus that has offset fees that were too low to cover all Board expenses (per regulant expenditures for 02-04 biennium were, for instance, approximately $61 but most regulants paid only $20 and the highest fee charged was $50). Absent some fee increase, Board staff reports that the Board will run a deficit this coming year. In addition to a large surplus finally being depleted, Board staff reports that fees will need to be raised because expenses have greatly increased over the last several years for several reasons:

• The number of individuals and companies that the Board regulates has increased (from 1,061 in the 02-04 biennium to 1,769 as of September 1, 2011) and so application costs and customer support services costs have increased,

• Enforcement actions have increased, and

• Information technology expenses have risen significantly.

While the number of entities that the Board regulates has increased, other things being equal, the fees from additional regulants would be expected to cover application costs, customer support services costs and any other expenses that the Board might incur in regulating them. Because fees have been kept artificially low for the last decade so that the Board could use up the very large surplus that it had accrued, fees from each new licensee or registrant may not, in this instance, be enough to cover the per person application and customer support costs.

Board staff reports that enforcement activity has increased precipitously in the last biennium and that most of the increase in complaints (enforcement actions) concern cemetery companies improperly depositing money into the companies' trust accounts. Board staff reported the number of enforcement actions for each year from FY02 to FY11, which will now be listed in the format FY(number of disciplinary cases): FY02(80), FY03(96), FY04(80), FY05(57), FY06(53), FY07(52), FY08(57), FY09(67), FY10(97) and FY11(103). While complaints have increased precipitously over the last two years, the number of complaints per person for FY10-FY11 (.0556 complaints per regulated entity) is still well below the per person complaint level in FY02-FY03 (.0829 complaints per regulated entity). DPB does not have information about the long term disciplinary case average and, therefore, does not know whether the years FY05 through FY08 represent a lull in enforcement activity or whether both ends of the data stream reported represent unusually high levels of disciplinary cases.

Board staff reports that the Department of Professional and Occupational Regulation (DPOR) has already paid $3.6 million, and expects to pay an additional $1.6 million, for its new automated licensure system. The Board's portions of those costs are $21,600 and $9,600, respectively. These costs are additional to other IT (VITA) costs which have increased for all state agencies. It is likely that most of the per regulant expenditure increase in the last decade is due to these increased information systems costs. Over the 02-04 biennium, the Board spent $60.98 per regulant; for the 04-06 biennium, per regulant spending was $52.19. During the 06-08 biennium, per regulant spending increased to $76.63 and has increased in both of the biennia since (estimated spending for the current biennium is approximately $87 per regulant). Given this information, it is not at all clear that these increased information systems costs represent a net benefit for the Board's regulated entities.

Increasing fees will likely increase the cost of being licensed or registered and, so, will likely slightly decrease the number of people who choose to be remain in these jobs or businesses. To the extent that the public benefits from the Board regulating these professional populations, they will also likely benefit from the Board's proposed action that will increase fees to support Board activities. There is insufficient information to ascertain whether benefits will outweigh costs.

Businesses and Entities Affected. Board staff reports that the Board currently regulates 1,796 individuals and companies. Of this number, 92 are cemetery companies, 146 are cemeteries and 1531 are cemetery sales personnel.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. Fee increases in this regulatory action will likely marginally decrease the number of individuals who choose to work in professional fields that are regulated by the Board. Individuals who work part time or whose earnings are only slightly higher in these regulated fields than they would be in other jobs that do not require licensure or registration will be more likely to be affected.

Effects on the Use and Value of Private Property. Fee increases will likely slightly decrease business profits and make affected businesses slightly less valuable.

Small Businesses: Costs and Other Effects. Board staff reports that most of the firms regulated by the Board likely qualify as small businesses. Affected small businesses will bear the costs of proposed increased fees.

Small Businesses: Alternative Method that Minimizes Adverse Impact. There are several actions that the Board could take that might mitigate the necessity of raising fees overall. The Board could slightly lengthen the time that it takes to process both license applications and complaints so that staff costs could be cut. This option would benefit current licensees but would slightly delay licensure, and the ability to legally work, for new applicants. Affected small businesses would also likely benefit from increased scrutiny of the IT costs that are driving increases in Board expenditures.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 36 (06). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The agency concurs with the approval. However, we do not agree with the statements made by Department of Planning and Budget in the economic impact analysis regarding the new licensing system as well as some of the statements regarding fees. The fees were reduced in 2006 not 2000 as 2000 was the first year we regulated the program. In the 02-04 biennium, most regulants paid $50 and the highest fee paid was $600. The board kept the fees low for the last six years. With regard to the licensing system, the new software package is being purchased to replace an unsustainable legacy system that is currently over two decades old and operating on an unsupported operating platform created by the Digital Corporation and currently owned by Hewlett-Packard. Migration from the old system to the new system is necessitated by the need to sustain licensing operations.

The legacy system had 20 years of programming customizations built into the system, and those customizations resulted in significant automation of processes, constructing many business rules into system operations, and allowed for the development and institutionalizing of training and operating that system. The new, commercial off the shelf solution does not include many of our automated processes, handles information differently, and has made all of the agency's staff novices at understanding and operating the system. As a result of these realities we don't expect to be operating with less staff or as efficiently in the next few years. We are clearly more optimistic in hoping the continued unfolding of the new licensing system offers substantial improvements in service times, ease of access for citizens, and reduced staff time by making the licensing process paperless. Further, once the development and implementation of the new system is complete, DPOR will be provided the source code for the new system by the vendor and will be able to maintain, customize, and respond the near certain changing requirements of our mission for decades to come.

The projected Callahan percentages are the result of consideration of projected expenses and the effect on the board's budget that a single unforeseen expense could create. As there is a small regulant population for this Board (and the resulting revenue stream is small as well), any unforeseen expense would adversely affect the financial status of this program and quickly create a deficit situation.

In regard to the correlation of enforcement activity to fees for this particular occupation, it is not the intent to establish fees that cover the cost of any specific process at the occupation level. Fees for each board are established at amounts that will provide total revenues sufficient but not excessive to meet all operating and allocated expenses of the board (see §§ 54.1-113 and 54.1-308 of the Code of Virginia).

Finally, DPOR was directed by VITA to purchase a commercial off the shelf product to replace our legacy system. After going through the procurement process, the new product was selected based on the criteria established for the solicitation. In conclusion, DPOR cannot continue to rely on the existing legacy system as it runs on an unsupported platform. Further, commencing another procurement to select and purchase another system would add additional expense and time to this effort with no assurance of a different outcome and would also likely involve time consuming and costly litigation in terminating the current contract.

Summary:

The proposed amendments increase all fees paid by licensees and registrants subject to the authority of the Cemetery Board including initial licenses, registrations, renewals, and reinstatements for cemetery companies and cemetery salespersons.

18VAC47-20-70. Application ~~Fees~~ fees.

Application fees are nonrefundable.

Cemetery company license	~~$50~~ $200 per cemetery
Addition of cemetery	~~$50~~ $200 per cemetery
Sales personnel registration	~~$20~~ $75 per cemetery

18VAC47-20-140. Renewal and reinstatement fees.

All fees required by the board are nonrefundable. The date on which the fee is received by the department or its agent shall determine whether the licensee or registrant is eligible for renewal or reinstatement or must reapply as a new applicant.

Renewal of cemetery company license	~~$50~~ $200 per cemetery
Renewal of sales personnel registration	~~$20~~ $75 per cemetery
Reinstatement of cemetery company license	~~$50~~ $200 per cemetery
Reinstatement of sales personnel registration	~~$20~~ $75 per cemetery

NOTICE: The following forms used in administering the regulation were filed by the agency. The forms are not being published; however, online users of this issue of the Virginia Register of Regulations may click on the name to access a form. The forms are also available from the agency contact or may be viewed at the Office of the Registrar of Regulations, General Assembly Building, 2nd Floor, Richmond, Virginia 23219.

FORMS (18VAC47-20)

~~Compliance Agent/Director/Officer Change Form, 49ADOCHG (eff. 7/05).~~

~~Cemetery Addition Form, 49CADD (eff. 1/06).~~

~~Cemetery Company License Application, 49LIC (eff. 1/06).~~

~~New Trustee/Transfer of Funds Notification Form, 49NEWTR (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report Instructions, 49PCTINS (eff.7/03).~~

~~Perpetual Care Fidelity Bond Form, 49PCFBND (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report, 49PCTFR (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report-Schedule A (Statement of Receipts and Expenses), 49PCTFRA (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report-Schedule B (Statement of Required Deposits), 49PCTFRB (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report-Schedule C (Statement of Expenses Incurred for the General Care, Maintenance, Embellishment and Administration of Cemeteries), 49PCTFRC (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report-Schedule D (Statement of Investment Securities), 49PCTFRD (eff. 7/05).~~

~~Perpetual Care Trust Fund Financial Report-Schedule E (Cemeteries Covered by Trust Fund), 49PCTFRE (eff. 7/05).~~

~~Preneed Trust Fund Financial Report Instructions, 49PTINS (eff. 7/03).~~

~~Preneed Fidelity Bond Form, 49PFBND (eff. 7/05).~~

~~Preneed Trust Fund Financial Report, 49PTFR (eff. 7/05).~~

~~Preneed Trust Fund Financial Report-Schedule A (Statement of Receipts and Expenses), 49PTFRA (eff. 7/05).~~

~~Preneed Trust Fund Financial Report-Schedule B (Statement of Financial Deposits), 49PTFRB (eff. 7/05).~~

~~Preneed Trust Fund Financial Report-Schedule C (Statement of Investment Securities), 49PTFRC (eff. 7/05).~~

~~Cemetery Company Renewal/Reinstatement Application, 49RENREI (eff. 1/06).~~

~~Sales Personnel Registration Form, 49SLSREG (eff. 1/06).~~

~~Perpetual Care Trust Fund Trustee Verification, 49TRVER (eff. 7/05).~~

~~Trustee Approval Application, 49TRAPP (eff. 7/05).~~