Well Care Revises Past Financial Statements To Include Refunds Owed to Florida, Illinois Medicaid Programs
http://www.medicalnewstoday.com/articles/115887.php
Summary
The article that I have chosen to base my blog upon concerns the huge overstatements and understands on the financial statements of Well Care (medical insurance company). During the time period of 2004-2007 Well Care neglected to include refunds owed to Florida and Illinois Medicaid programs and the Florida Healthy Kids programs, amounting to earning being overstated by 28 million and liabilities being understated by 46 million. Since 2007 Well Care had not audited their statements, leading to huge discrepancies and thus ultimately leading to a raid by the FBI. Well Care claims that the incident was caused by the charging of certain ineligible expenses, thus supposedly reducing the amount owed. But what is surprising is that after the incident occurred the current CEO, CFO and general counsel resigned, leaving people to think if the incident was just a mere accident.
Connection
This articles concerning Well Care connects to chapter 15, Analyzing Financial Statements, in two ways. The first connection simply being that both this chapter and this article revolve around financial statements. In retrospect to the users of the financial statements this article can be related to both the insiders and the outsiders. In the case of the “insiders” the owners and management group followed an unethical practice, by not having the statements audited and having ineligible medical expenses recorded in the books, thus leading to their resignations and immense accounting errors. And in the case of the “outsiders” (FBI), by them using the financial statements, they were able to determine the sources of error and now the “victoms” of this error face reimbursement.
Reflection
Firstly after reading this article, it left me thinking about how many well known companies out there have supposed “accounting errors.” Well Care could have avoided this entire incident only if the owners and executives didn’t make the decision to stop auditing their records. For a business to thrive and for the owners and executives to keep their jobs, it’s always key to employ a strong accounting department and to always, always, always audit. If a business ever decides to veer away from an audit, then it is time for employees to question the legality of the operations and the following of the generally accepted accounting principles.
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5 comments:
Recently many companies have understated or overstated their financial statements. Sometimes this is because of careless mistakes the management group has made; but usually, the management understates or overstates the financial statement on purpose. The reasons why they do this are because they want their company to meet revenue growth or to comply with loan covenants. Thus, the shareholders would not sell any interest and the owner would not consider firing staffs. Also, the management understates the statements sometimes because the company has met their budgets and there are no rewards for extra earnings, so they understate the data this year and move them into the next fiscal period. However, once fraud is discovered, they can be put into jail. Thus, keeping an eye on the management is important especially under economic depression nowadays.
William Lin
Block B
I think preparing financial statements are neccessary in every company. People run companies because they want to earn profit, but how would they determine if their net profit is high or low if they do not have any financial statements to clearify it. Also the FBI had the right to exam Well Care's action because the managements may be doing unethical practices. If this happens not only do the company face damages, but also the customers because they may not trust any other medicare after this one if they found out they were doing unethical actions. Well Care should also prepare financial data because it allows the employees to have a better understanding of how the company is doing and also have better trust towards the company.
Melissa Man
Block B
Starting on the bright side, I believe that financial data could be absolutely crucial for the business. From graphs and charts, it allows companies to recognize any potential net gain or loss in a company by comparing trends with the previous years. But however, this company fails to do so. As times interest earned equal to net income divided by interested expense, Well Care artificially increased their ratio by a surprising 61%. This is calculated by its overstatement of 28 million dollars over its understatement of 46 million dollars. Because Well Care neglected to audit their statements, any mistakes present may damage their reputation. Under such circumstances, I believe Well Care should reorganize their accounting department to prevent any criticism from outsiders for their company.
A. Tao
Block A
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