ALBANY — State financial examiners have begun checking the books at Albany’s Twin Oaks Memorial Gardens and Mausoleum.

Meanwhile, after a year of waiting, the daughter of one Twin Oaks client has all but given up on her parents getting the headstone they prepaid for and has ordered another one on her own.

Twin Oaks is under state review because of a dispute between present and past owners over unfunded liabilities.

Operators in the cemetery industry routinely sell goods and services ahead of time, and when they do, they’re supposed to place part of the money in trust so it’s there to cover costs when the time comes.

In court documents, Twin Oaks’ current operator, Mike Terwilliger, alleges former owners Andres and Chantelle Hernandez failed to do that with more than $450,000 in proceeds.

That’s why, he says, many clients have complained of slow service; the money needed to give them what they paid for is not there.

The Hernandezes deny Terwilliger’s allegation.

Examiners from the Department of Consumer and Business Service’s Division of Finance and Corporate Securities went to Twin Oaks last week to begin sorting out the situation, which includes a foreclosure judgment against the cemetery, which is on Riverside Drive.

That judgment is on behalf of investors who three years ago put up three-quarters of the purchase price, or $600,000, when Terwilliger and his associate, William F. Clark Sr., bought the place.

Still pending in Linn County Circuit Court is a suit filed by the Hernandezes against Terwilliger and Clark. At issue is a $200,000 contract the couple agreed to carry to complete the sale; the suit alleges that Terwilliger and Clark defaulted.

Another point of contention is the whereabouts of money taken in through advance sales of plots, burial vaults, headstones and other such items.

Terwilliger is still running the facility despite the February foreclosure judgment because the investors have chosen not to proceed with a sheriff’s sale at this time. He alleges in a countersuit that the Hernandezes failed to deposit the proceeds into trust accounts.

And he says he didn’t learn about the scope of the problem until after he had bought Twin Oaks.

“I haven’t taken a dime out of that cemetery for personal gain,” he said. “I’ve used every dime it created to cover that debt.”

The Hernandezes say any unfunded liabilities predate their ownership and that Terwilliger had ample opportunity to inspect the operation’s books prior to purchase.

But the bottom line for a number of Twin Oaks’ “pre-need clients” (Terwilliger estimates the number is in the thousands) is that when they die, there may not be funds to cover what they’ve paid for.

Whether the money exists — and if so, where it is — is what the Division of Finance and Corporate Securities has begun looking into.

Mike McCord, who manages the DFCS branch that oversees pre-need trusts, and an examiner visited Twin Oaks on Monday.

“I gave them everything they needed,” Terwilliger said. “They did not have to open it up file by file. It was already documented in a three-ring binder. I made everyone’s job easier.”

Still, Terwilliger said the two spent six hours in his office and gave no indication the state would be able to make quick work of the investigation.

“They were pretty tight; they didn’t give me a lot of information,” Terwilliger said. “It will take them some while to digest all the information I gave them.”

Lisa Morawski, communications director for the Department of Business and Consumer Services, confirmed the visit but said her agency would refrain from commenting “until we come to a conclusion or at least determine the next steps.”

Unfortunately, while the investigators and the attorneys representing Terwilliger, Clark and the Hernandezes claw their way through the paperwork jungle, the frustration continues for multiple pre-need clients.

That list includes Susan McClelland of Portland.

McClelland’s mother, Theresa Mann of Albany, died Nov. 26, 2007, at 92; her father, retired Linn County tax appraiser George Mann, is 93 and under hospice care in Milwaukie, where he moved from Albany in February after falling and fracturing his shoulder.

He subsequently fell and broke his hip.

Twelve years ago, George and Theresa paid $1,025 for a bronze headstone. But nearly a year after Theresa’s death, all that marks the grave is a plastic-covered paper marker provided by the Albany funeral home that handled Theresa’s arrangements, AAsum-Dufour.

It was AAsum-Dufour that helped a resigned McClelland order a new headstone.

“We picked out a different one for about $900,” she said. “It’s granite, with trees, a lake and a boat. My dad liked to fish up at Clear Lake.

“It’s not what they wanted, but what they bought is worth $3,000 or $4,000 now, and we can’t afford that,” McClelland said. “My dad’s care is over $4,000 per month. He has a rental in Albany, and we’re borrowing against his house to pay for his care.”

Terwilliger says he covered the cost of Theresa’s burial vault out of his own pocket.

“The only thing that wasn’t purchased was the headstone,” he said.

McClelland is dismayed that the Division of Finance and Corporate Securities hasn’t stepped in to help via its consumer protection fund. But she promises she won’t let her contact person, DFCS examiner Mary McCarron, forget about her or her mother and father.

“I told her I’m going to call her when he passes,” McClelland said. “It won’t change anything, but I’ll call anyway, though I’m not even sure why. I guess I just want them to know these aren’t just names — that they’re real people.”