Reporting_Practices_and_Ethics

Reporting Practices and Ethics Paper Maryann Bocak HCS/405 November 21, 2011 David W. Catoe Reporting Practices and Ethics Paper For any business, there are four basic financial statements or reports, which are a must or the business to be able to survive. They include the Balance Sheet, the Statement of Revenue and Expense, the Statement of Fund Balance or Net Worth, and the Statement of Cash Flows (Baker, 2011). The Balance Sheet records what an organization owns, what owes, and what it is worth. The total of what the organization owns, its assets, will equal the combined total of what the organization owes and what it is worth. Assets will include current assets, property, plant and equipment other assets. Current assets are supposed to be convertible into cash within one year. Property, plant and equipment represent the long-term assets. Liabilities are those reflected as current liabilities, and long-term debt. The current liabilities are items the corporation will pay within the next year, while long-term debt covers many years. The amount of long-term debt due within the next year should be deducted from the long-term debt amount and moved to the current liabilities section (Baker, 2011). The Statement of Revenue and Expense covers a specific period for the organization. The statement reflects the operating revenue less expenses results in the operating income for the organization. If the revenue exceeds the expenses, the statement will reflect a positive outcome. If the expenses exceed the revenue, the statement will reflect a loss and a year that was not profitable (Baker, 2011). The Statement of Changes in Fund Balance/Net Worth reflects the operating revenue that is excess flowing back into equity or the fund balance. This statement links the balance sheet, the statement of revenue and expenses (Baker, 2011). The Statement of Cash Flow takes the accrual basis statement and converts them to a cash flow for the period through a series of reconciling adjustments that account for the noncash amounts. It starts with the income from business operations; it adds the depreciation and interest back into the revenue, along with changes in assets and liabilities, positive and negative. The next items included are capital and related financial activities, concluding with adjustment for investing activities. The results in the net increase in cash and cash equivalents are then included in the cash balance from the beginning of the year, which gives you the cash balance at the end of the year (Baker, 2011). There is also included a Subsidiary Report which supports major projects in more detail. Another name for the subsidiary report is schedules (Baker, 2011). Since 1973, the Financial Accounting Standards Board (FASB) establishes standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Such standards are important to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, and understandable financial information (2011 Art Branch Inc). Generally Accepted Accounting Principles (abbreviated GAAP), are the general rules, regulations and guidelines that are followed in the United States by accountants to ensure their practices are legal and ethical. It sets out the standard for managing accounts, preparing financial statements and accounting methods and techniques. GAAP are issued and governed by the Financial Accounting Standards Board (abbreviated FASB) and the International Accounting Standards Board (IASB) to provide equal and comparable standards around the world. The main principals of GAAP ensure fair and accurate, free from inconsistencies accounting and they are as follows: 1) Regularity: to ensure books and accounts are updated in a timely manner, but more importantly that tax returns and information is provided within the time given. 2) Consistency: accounting methods and techniques must remain the same throughout the financial year to remain consistent. 3) Sincerity: accountants should remain truthful and accurately express the true financial stability of their client(s). 4) Permanence of Methods: financial information and the methods used must be clear and presented coherently. 5) Non-Compensation: all financial information, positive and negative, has to be reported. 6) Prudence: accounts should reflect reality and should not list financial data that is based on probability or assumption. 7) Continuity: over time an assets value changes and it is fair to represent this with depreciation. 8) Periodicity: allocate revenue over the entire span of its income/expenditure and not just on the final date of a transaction. 9) Full Disclosure & Materiality: everything financially related to the business must be in the records (2011 Art Branch Inc). People who are involved with accounting and financial management are obligated to the public, their profession, the organization they serve, and themselves to maintain the highest standards of ethical conduct. The standards include maintaining an appropriate level of professional competency, confidentiality, integrity and objectivity (HFMA Board of Directors, 2011). Competency is when the professional continues their ongoing development of their knowledge and skills, perform duties in accordance with relevant laws, regulations, and technical standards, and prepare complete and clear reports and recommendations after appropriate analyses of relevant and reliable information (HFMA Board of Directors, 2011). Integrity is refraining from disclosing confidential information learned during the course of their work unless authorized to do so, informing and monitoring the work of subordinates to maintain confidentiality, and refraining from using confidential information for unethical or illegal advantage either professionally or through third parties (HFMA Board of Directors, 2011). Objectivity is communicating information fairly and objectively, fully disclosing all relevant information that is required for a user to understand reports, comments, and recommendations (HFMA Board of Directors, 2011). In Mark Janiszewski’s article, “responding to reform & strategies for reinventing the revenue cycle”, Mark discusses prudent ways to reduce payments. Mark talks about finance leaders and the role they play ensuring the revenue cycle departments focus on collecting money faster, more efficiently, while driving revenue cycle costs down. The reduction in Medicare payments resulting in some service lines affected more than other service lines. Mark advises examining service line profit and loss statements, to ensure a strategic and analytical approach to investment decisions. He addresses compliance reform with the need to address the overall documentation practices and procedures. Preparation for compliance initiatives will require three steps, initial evaluation and preparation, tracking and reporting and process improvement. Payment reform rests on the changing ways care is to be paid for. This requires better control of costs associated with care delivery. Finance leaders will need to analyze costs and identify areas where costs are reduced and operations improved. The last would be expansion of insurance coverage. An estimated 11 million Americans are to be added to the ranks of the insured by 2016. The increase in demand for services could include higher operational costs. Revenue cycles will need to adjust to accommodate and manage higher patient volumes, need for more complex duties, and the ability to capture critical insurance verification and eligibility (Janiszewski, 2011). Michael Nugent’s “budget planning under payment reform” examines the challenges ahead for budgets and the relationship with unit reimbursement, volume, payer mix, and collections. Medicaid is going to present of five to 10 percent reimbursement reduction, while Medicare will be switching from a defined benefit/fee for service program to a premium support/defined contribution program. Volume of patients is expected to slow down, while the payer mix will be changing with more people enrolling in Medicare and or Medicaid. Bad debt/collections issues associated with uninsured and or under insured will continue to rise dramatically. Hospital CFO’s need to look into bundling care, where they will use multidisciplinary teams. This reduces the need for patients to see many different people or divisions for the same illness, which may have caused duplication of services all around, such as office visits, or medical tests (Nugent, 2011) There are many changes coming that going to influence how hospital organizations and CFO’s will be handling forecasting and budgets. Steps need to be taken now to review the current revenue cycles, and examine every aspect to anticipate large shifts where revenues come from and where they are going. References 2011 Art Branch Inc. (n.d.). Retrieved from Financial Dictionary: http://www.financialdictionary.net/define/Generally+Accepted+Accounting+Principles+(GAAP)/ Baker, J. J. (2011). Health care finance: Basic tools for nonfiancial managers (3rd ed.). Sudbury, MA: Jones & Bartlett Publishers. Demetriou, A. J. (2011). COMPLIANCE ISSUES FOR GOVERNING BOARDS IN THE ERA OF HEALTHCARE REFORM. Health Lawyer, 23(5), 30-38. Retrieved from https://ehis.ebscohost.com/eds/delivery'sid=b425cc8b-0f48-4460-945a-f0c736b38580%4... ETHICAL BEHAVIOR FOR PRACTITIONERS OF MANAGEMENT ACCOUNTING AND FINANCIAL MANAGEMENT. (n.d.). Retrieved from Ethical Standards - IMA: http://easternct.imanet.org/ethical.html HFMA Board of Directors. (2011, June). HFMA's Code of Ethics. Healthcare Financial Management, 65(6), 30-32. Janiszewski, M. (2011, June). responding to reform 5 stastegies fr reinventing the revenue cycle. Healthcare Financial Management, 106-112. Nugent, M. E. (2011). budget planning under payment reform. Healthcare Financial Management, 38-42. CERTIFICATE OF ORIGINALITY: I certify that the attached paper is my original work and has not previously been submitted by me or anyone else for any class. I further declare I have cited all sources from which I used language, ideas, and information, whether quoted verbatim or paraphrased, and that any assistance of any kind, which I received while producing this paper, has been acknowledged in the References section. I have obtained written permission from the copyright holder for any trademarked material, logos, or images from the Internet or other sources. I further agree that my name typed on the line below is intended to have, and shall have, the same validity as my handwritten signature. Student's signature (name typed here is equivalent to a signature): Maryann Bocak