09.34.01.06

.06 Business Application — Financial Stability.

A. The following are the categories of cemeteries and burial goods businesses for purposes of determining financial stability:

(1) A for-profit cemetery or a cemetery which sells burial goods making initial application;

(2) A nonprofit cemetery which does not sell burial goods making initial or renewal application;

(3) A for-profit cemetery or a cemetery which sells burial goods applying for renewal of permit;

(4) A burial goods business or new burial goods business making initial application, or existing burial goods business applying for renewal;

(5) A new cemetery which sells burial goods or new cemetery which does not sell burial goods; and

(6) A cemetery which no longer sells goods or space and in which an average of five or fewer interments have occurred within the past 3 fiscal years.

B. To determine financial stability of each category of affiliated cemetery or burial goods business, the responsible party shall:

(1) Submit an application on a form supplied by the Director;

(2) Be in good standing with the Maryland Department of Assessments and Taxation or have an equivalent status, as determined by the Director;

(3) Submit any additional documentation required as set forth in §§C—H of this regulation; and

(4) If the applicant is a cemetery, state whether the cemetery is organized as a for-profit or nonprofit operation and whether it sells burial goods.

C. The responsible party for a cemetery described in §A(1) of this regulation shall submit:

(1) A balance sheet; and

(2) A review by a certified public accountant retained by the affiliated cemetery, prepared in accordance with generally accepted accounting principles, as to the financial stability of the cemetery.

D. The responsible party for a cemetery described in §A(2) of this regulation shall submit an affidavit which states that the cemetery does not sell burial goods and has nonprofit status.

E. The responsible party for a cemetery in §A(3) of this regulation shall submit:

(1) A comparative balance sheet; and

(2) A review by a certified public accountant retained by the affiliated cemetery, prepared in accordance with accepted accounting principles, as to the financial stability of the cemetery.

F. The responsible party for a burial goods business in §A(4) of this regulation shall submit the documents required by §B(1) and (2) of this regulation.

G. Development Stage Enterprise Financial Sheet.

(1) The responsible party for a cemetery described in §A(5) of this regulation shall submit a development stage enterprise financial sheet, prepared in accordance with generally accepted accounting principles, by a certified public accountant retained by the affiliated cemetery.

(2) If the certified public accountant retained by the affiliated cemetery has substantial doubt about the reporting entity's ability to continue in business beyond 1 year from the development stage enterprise financial sheet, the certified public accountant shall specifically reference this concern in the development stage enterprise financial sheet.

H. The responsible party for a cemetery described in §A(6) of this regulation shall submit an affidavit stating that the cemetery no longer sells space or goods and that there has been an average of five or fewer interments per year in the past 3 fiscal years.

I. The balance sheet and the comparative balance sheet in this regulation shall include:

(1) Note disclosures which, if applicable to the affiliated cemetery or burial goods business, shall include:

(a) A description of how cemetery roadways, garden features, and other features of the cemetery are accounted for, whether as fixed assets and depreciated, or as cost of the grave space inventory and part of cost of sales as spaces are sold;

(b) The method of providing for allowance for cancellations on installment contracts;

(c) The method of accounting for developed burial gardens, constructed mausoleum crypt or niche inventories, and related cost of sales;

(d) Receivables sold with recourse;

(e) The method of accounting for preconstruction sales of burial gardens, mausoleum crypts, or niche spaces;

(f) A description of how the obligation for undelivered merchandise sold as preneed is accounted for;

(g) The method of recognizing preneed sales of services and related costs;

(h) The nature and amount of any perpetual care assets included in the classified balance sheet, which may or may not be in accordance with generally accepted accounting principles;

(i) The existence and nature of any nonstatutory trust funds;

(j) Loans or other amounts receivable from, or payable to, merchandise and service trust funds or perpetual care trust funds not otherwise reported on the face of the classified balance sheet or in the supplementary information; and

(k) A description of loans or other amounts receivable from, or payable to, shareholders, directors, trustees, or officers; and

(2) Supplementary information which, if applicable to the affiliated cemetery or burial goods business, shall include:

(a) Amounts of installment contracts receivable for which customer payments are more than 120 days beyond their scheduled payment dates and the dollar amounts that are beyond the 120 days; and

(b) Details of liabilities due upon collection of final payment on installment contracts receivable.

J. The balance sheet and comparative balance sheet, related note disclosures, and supplementary information submitted to the Office shall be that of the most recently ended fiscal year of the affiliated cemetery. The comparative balance sheet shall also include a comparison with the statements submitted for the reported fiscal year in the previous application.

K. If the certified public accountant has substantial doubt about the reporting entity's ability to continue in business beyond 1 year from the balance sheet date, the certified public accountant shall specifically reference this concern in the review report or related note disclosures, or both.

L. If the cemetery or burial goods business is owned by a publicly traded company, or is owned by a company or individual that normally reports its financial statements on a consolidated basis, the balance sheet may be prepared on a combined basis for all of its cemeteries or burial goods businesses located in Maryland, only if the publicly traded company, company, or individual that owns multiple cemeteries or burial goods businesses guarantees its obligations to consumers among all of its Maryland properties or businesses that are included in the combined report.

M. The Office may waive the financial stability requirement of this regulation only if the affiliated cemetery or burial goods business has fulfilled the financial stability requirements of this regulation within the past 2 years.