Reporting Practices and Ethics
A major aspect of health care organization operation is that of financial management. Financial management of health care organizations incorporates ethical standards and proper reporting practices. Financial practices and ethical finance concerns are important to the success of any organization, particularly within the health care industry. The four elements of financial management, generally accepted accounting practices (GAAP), and general financial ethics standards are part of ensuring fair and accurate financial reporting from health care organizations. Examining examples of ethical standards of conduct and reporting standards helps to understand the impact of financial reporting on an organization.
Financial management is a vital component to organizational success in health care. Financial management is defined as the planning, directing, monitoring, organizing, and controlling of financial resources within an organization (Business dictionary, 2011). There are four elements or components of financial management. The four components of financial management include planning, controlling, organizing/directing, and decision making (Baker & Baker, 2011). The first element of financial management is planning. Financial planning occurs when one identifies the steps that need to be taken for an organization to reach its objectives or goals. The second element of financial management is control. This includes controlling each area of an organization, making sure there is a plan in place, and making sure that plan is being followed by staff of the organization. The third element of financial planning is organizing and directing. When organizing, one should decide how to use resources most effectively for the financial gain of the organization. Directing allows an individual know everything is running smoothly and effectively. The last element of financial planning is decision making. The decision making process is used at every level of financial planning. Without decisions being made financial planning would be at a stand-still.
Additionally there are two major types of accounting; financial accounting and managerial accounting. Financial accounting focuses on third parties that are outside of an organization such as government ran programs. Financial accounting involves primary dealings with external recipients of financial data. For example, this type of financial reporting would be used for Medicare, Medicaid, Insurance companies, and stock-holders. The reports must adhere to and follow the guidelines set forth by the generally accepted accounting principles (GAAP) and other laws that are applicable to financial reporting. Managerial accounting primarily focuses on the internal aspects of an organization’s financial standing as well as factors that build budgets and financial projections. This is generally used to track daily expenses and transactions. This information is important when trying to determine where a company stands financially (Baker & Baker, 2011).
Generally Accepted Accounting Practices (GAAP)
Generally Accepted Accounting Principles or GAAP are the basis of financial accounting for organizations and are also the reflection of federal financial accounting standards. Generally Accepted Accounting Principles are a collection of processes used to process, prepare, and present financial information. Most GAAP principles are general so that they can be applied to various types of organizations. GAAP is followed by most industries in the United States. Additionally, several different agencies attribute to GAAP guidelines and standards. These agencies include the Financial Accounting Standards Board (FASB). The Financial Accounting Standards Board is an agency that has been granted the authority to establish generally accepted...