In order to make financial decisions it is important to understand generally accepted accounting principles, corporate compliance, ethics, fraud and abuse. Generally accepted accounting principles are guidelines, objectives and conventions that have been set up over time to dictate how financial statements are prepared and presented (FASAB, 2010). The GAAP includes standards, conventions and the rules in which the facilities accounting department follow when summarizing reports and preparing financial statements (Baker & Baker, 2011).
Third parties that use these financial reports must then rely on the information to be free from all prejudice and discrepancy without debate. If the information is false then the GAAP standards were not followed and the facility is not in compliance, therefore behaving unethically (All Business, 2011). Facilities have a moral and ethical obligation to comply with GAAP in an effort to prevent outside auditors from having difficulties when examining the facilities financial reports.
Currently healthcare facilities private, public, for-profit and not-for-profit use the generally accepted accounting practices to report their financial information. However, compliance is very difficult because accounts and reporting requirements change frequently. PricewaterhouseCoopers International Limited (2010-2011) states that “Matters will get better-and worse-with the adoption of International Financial Reporting Standards (IFRS), which become mandatory in 2014. Better because IFRS will increase the sophistication of financial reporting. Worse because converting to IFRS is a daunting undertaking. What this means is that there will be major changes in how health care facilities run their day-to-day operations because of the new requirements for reporting profitability. The transition to IFRS will benefit healthcare facilities by increasing the sophistication of financial accounting and reporting practices (PricewaterhouseCoopers International Limited, 2010-2011). According to eHow (1999-2011), “An accounting code of ethics that is enforced at public accounting firms or company accounting departments can ensure that individuals working with financial information act in the highest ethical manner possible”.
This means that accountants share their ethics policies with potential clients and employees so that there is no chance of misrepresentations in regards to ethical standards at any given time. These ethics codes show that current employees understand and agree to uphold the ethical standards set forth by the facility no matter what the scenario (eHow, 1999-2011). Ethics committees comprised of employees from different departments all work together in order to decide the ethic policies of the facility.
Since all facilities are unique there is not a set of universal ethical guidelines, but each facility bases its ethics on the ideas and morals of the facility. For example, one facility might think that spending a certain amount of money on a piece of medical equipment will have a positive impact on patient outcomes and will be beneficial not only for the patient’s well being, but the facility as a whole. The second facility may have opposing views on the matter, since the piece of equipment costs more than the budget will allow, and money will have to be taken from another area of the facility.
Patients may base their opinions about a facility according to their ethics and choose whether or not they want to give their patronage to a specific facility (Corporate Governance, 2010). Health care facilities are faced with many challenges with duties and compliance measures that must be met. State and federal guideline must be met and followed by all health care providers in order for them to receive state and federal funding (Corporate Governance, 2010). The health care industry is full of risk, which vary from patient risk to financial risk and consequences.
Federal and state guidelines have been developed that health care facilities must follow to ensure the prevention of negative outcomes from the risk that they have taken. Policies and procedures include operating guidelines such as, having qualified staff made up of licensed individuals who provide first rate care to the facilities patients. In order to be in compliance with the governments guidelines the facility must exhibit the appropriate responsibilities (Corporate Governance, 2010). In conclusion, health care facilities must act in accordance with the four elements of financial management.
These elements are related to compliance in that they comply with all of the guidelines set forth by the general accepted accounting principles. The ethics element is dictated by the facility in that their ethics policies are related to the ideals morals of the facility. Abuse and fraud are elements that pertain to being truthful and doing things that are ethically correct in regards to all parties involved. The last element is compliance and this can be achieved by using the general accepted accounting guidelines or GAAP.
The GAAP guidelines are in compliance with the facilities ethical policies giving the facility the means to diminish the possibility of abuse and fraud from happening within the facility. References All Business. (2010). What Are Generally Accepted Accounting Principles? Retrieved July 17, 2011 from website: www. allbusiness. com Baker, J. J. , & Baker, R. W. (2011). Health care finance: Basic tools for nonfinancial managers. Retrieved from The University of Phoenix eBook Collection database. eHow. (1999-2011).