Hcs/405 Week 2 Individual Assignment
Reporting Practices and Ethics Kara Moore HCS/405 August 1, 2011 Barbara Archer Reporting Practices and Ethics Financial reporting practices and ethics have manifested an ocean of literature. This has mainly come from organization theorists that address accounting practices. These theorists and professionals have given fresh accountability measures. Their ideals give this industry the tools needed to survive, grow and prosper.
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The way an organization prepares and reports its financial information and handles its daily operations is in essence financial practices, and in the way it accomplishes this reveals their ethical standards to which they adhere to. This paper will discuss the financial practices, ethical standards, and financial management in health care. Financial management in simple terms is a management of finances for an organization. The goal of financial management is to achieve financial objectives, and can be broken down into four phases.
The four elements of financial management are: planning, controlling, organizing and directing, and decision making (Baker & Baker, 2009). In the planning phase financials managers need to pinpoint the organizations objectives and the necessary steps to achieve those (Baker & Baker, 2009). In the controlling phase it is all about ensuring that each department is following the guidelines set forth in the planning stage. This can be accomplished by comparing quarterly reports to see if the departmental goals are being followed.
When in the organizing and directing phase it is important for managers to use the organizations resources and to work on a daily basis to make sure the organization is running smooth and according to plan. In the last phase decision making in fact coincides with all the other three phases (Baker & Baker, 2009). Decisions will always need to be put into action during all four phases of financial management. Financial statements like income statements, balance sheets, and cash-flow are prepared using the GAAP standard (McCartney & Arnold, 2000).
Public traded organizations and many private organizations in the United State follow GAAP guidelines. GAAP financial statements are necessary for financial managers, creditors, and potential investors to make sound economic decisions about the organization. Even though GAAP is not written law, the Securities and Exchange Commission (SEC) makes necessary certain regulated organizations and publicly traded organizations comply with GAAP for their financial reporting (McCartney & Arnold, 2000).
Without GAAP organizations could decide themselves how to report financial information and what financial information is pertinent. This would not only be unethical financial practices, but make decision making for stakeholders and even management quite difficult. The whole point of GAAP is to make financial reporting uniform to reflect the economic reality of the organization. This is to ensure that financial managers, investors, creditors and make rational decisions for the organization.
The essence of GAAP is reliable, relevant, consistent, and comparable data. The Department of Health (2009) website states there are five financial reporting requirements for public hospitals, which include: monthly financial reporting, quarterly whole of government reporting, annual report, annual return, and annual commonwealth aged care reporting. The monthly analysis forms the baseline in monitoring the industry by the department. This information gives the financial reports and shows how the hospitals position to the department.
The quarterly whole government reporting is based on Annual Financial Reports (AFR) and is required under the Financial Management Act (FMA) of 1994 (Department of Health, 2009). The AFR information is then consolidated by the DHS to create a portfolio for the states. In the annual reports, the FMA detail explanatory notes reports of operations, and financial statements (Department of Health, 2009). These financial statements contain information such as balance sheets, income statements, and statement of cash-flow.
Annual returns are created in an electronic format, which provide operational and financial information that is not in the annual report (Department of Health, 2009). This financial information must be on par with the audited annual report. The annual commonwealth aged care reporting gives capital to hospitals in exchange for information on age care services (Department of Health, 2009). The push for ethical practices is hitting financial managers from all angles from patient advocate groups, IRS, regulation bodies, and more.
The scrutiny of financial reports has never been more important. One area under the microscope in financial reporting by hospitals seems to be its tax exempt status. The potential for tax misconduct is high and calls into question if hospital should be tax exempt (Valletta, 2005). This area is calling strongly for strict ethical guidelines. Health care organizations operate in a different market segment. Publicly traded organizations need to watch their earnings reports, while the health care sector is concerned with payments, hospital length stays, and admissions.
To become more transparent and reduce the chances of unethical behavior some hospitals, including the Mayo Foundation, New York Presbyterian, and Ascension Health post audited financial statements online (Valletta, 2005). In another attempt to curb financial mishaps and abuses the financial statements for the medical industry must be signed off on by CEOs and CFOs. They must declare under the form 990 that to the best of their knowing this information is correct, or face criminal charges (Valletta, 2005). Hospitals and all subsidiaries need their information to be accurate or suffer severe consequences.
In this aspect financial managers of hospitals need internal process. These processes that aid management gives them the ability to verify in writing that all of the finances for their organization are accurate and completed. A key to accurate reporting would be the implementation of the four phases of financial management. In the creation of standardized processes the level of complexity can be reduced, thus ensuring sound financial reporting (Valletta, 2005). These internal controls are essential to the organization’s management to produce financial reports quickly and accurately.
In conclusion the goal of presenting practical financial statements is for proper decision making. The financial information needs be comprehensive to aid in the evaluation of the organization. Financial reporting should be information about the organizations economic resources. It should provide information on financial performance. It also needs to be useful to the executive body that directs the organization on behalf of the people. References Baker, J. J. , & Baker, R. W. (2009). Health Care Finance: Basic Tools for Non-Financial Managers (3rd ed. . Sudbury, MA: Jones & Bartlett. McCartney, S. , & Arnold, T. (2000, November). George Hudson’s financial reporting practices. Accounting, Business & Financial History, 10(3), 293 – 316. Valletta, R. (2005, August). Clear as glass: transparent financial reporting: if your financial statements aren’t transparent, you may be setting your organization up for scrutiny. Healthcare Financial Management, Department of Health. (2009). Victorian Government Health Information. Retrieved from http://www. health. vic. gov. au/doh/