Fort Walton Beach — Annual Comprehensive Financial Report, September 30, 2023

For tWal tonBeach,Fl ori da www. fwb. org 850- 833- 9500 AnnualComprehensi ve Fi nanci alReport FY2022- 23 CITYOFFORTWALTONBEACH,FLWITH COMPLIANCEMATTERSANDRESPONSES FISCALYEARENDEDSEPTEMBER30,2023  CITY OF FORT WALTON BEACH, FL City Council Left to right (standing): Travis Smith, Nic Allegretto, Bryce Jeter, and David Schmidt Left to right (seated): Payne Walker, Gloria DeBerry, Mayor Dick Rynearson, and Larry Patrick Council members are elected in odd years for four-year staggered terms. City Council meets on the second and fourth Tuesday of each month at 6:00 p.m. in the City Council Chambers located at 107 Miracle Strip Parkway, Fort Walton Beach, Florida. Appointed Officers Department Directors City Manager – Jeff Peters Finance – Nicole Nabors City Clerk – Kim M. Barnes, MMC Fire Services – Jeremy Morgan, Chief City Attorney – Kimberly Kopp Growth Management – Chris Frassetti Human Resources – Tarey Franxman Police Services – Robert Bage, Chief Public Works & Utility Services – Daniel Payne, PE Recreation & Cultural Services – Tiffiny Corcoran  Core Values Rather than being just words found on the website or located at the top of a letterhead, these core values are the guiding principles by which City Council, Department Directors, and City Staff will conduct themselves, allocate resources, and prioritize goals and objectives. These principles form a non-negotiable code of conduct and will guide our government on who we hire, how we train, and how we reward. These values will define who we are, what we stand for, and influence policies, procedures, and guidelines. Adopted by City Council in May 2011, after a collaborative effort by Department Directors and the City Manager to consolidate employee suggestions, these five core values represent the first milestone in instituting the City’s new Performance Excellence Program. Integrity We will conduct ourselves in an honest, trustworthy, and ethical manner. Accountability We will take full responsibility for our actions, resources, and attitudes. Teamwork We will work together to provide quality services. Customer Service We will be professional, use all available resources, and strive to meet the needs of our customers. Continual Improvement We will promote a culture that seeks to better our organization. Adopted by City Council in September 2011, after a collaborative effort by Department Directors and the City Manager, the updated Vision and Mission for the City are as follows: Vision The City of Fort Walton Beach: a recognized leader in the provision of Community Services. Mission To enhance and protect the Community by providing quality services.  Strategic Plan Adopted in May 2023 City Council’s primary responsibility is to shape public policy to achieve the citizens’ desires for the future. As time passes, the complexion of a community, its residents and leaders change, as do the priorities of the community. There is probably no more daunting a task that any community faces than planning for its future and identifying future priorities. The Strategic Plan is a multiyear plan and the budget process determines which parts of the Plan receive resources each year. Each Objective is in line with the City’s Vision, Mission Statement and Core Values. Throughout this document, Strategic Plan Objectives have been tied to expenses, capital improvement projects, and performance measures – look for the icons below CITY OF FORT WALTON BEACH, FLORIDA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2023 PREPARED BY: THE FINANCE DEPARTMENT City of Fort Walton Beach 107 Miracle Strip Parkway Fort Walton Beach, FL 32548 www.fwb.org  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 Page CITY OFFICIALS I. INTRODUCTORY SECTION Table of Contents i Letter of Transmittal City Manager iv GFOA Certificate of Achievement x Organizational Chart xi II. FINANCIAL SECTION Independent Auditors' Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 4 B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Governmental Funds Balance Sheet 17 Reconciliation of the Balance Sheet to the Statement of Net Position 18 Statement of Revenues, Expenditures and Changes in Fund Balance 19 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 20 Proprietary Funds Statement of Net Position 21 Statement of Revenues, Expenses and Changes in Net Position 23 Statement of Cash Flows 24 Fiduciary Funds Statement of Fiduciary Net Position 26 Statement of Changes in Fiduciary Net Position 27 Notes to the Financial Statements 28 i  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 Page Schedule II. FINANCIAL SECTION – CONTINUED C. REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Budgetary Comparison Information Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund 85 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Community Redevelopment Agency 86 Notes to the Required Supplementary Information 87 Pension and OPEB Schedules Schedules of Changes in Net Pension Liability and Related Ratios 88 Schedule of Changes in Total OPEB Liability and Related Ratios 92 Schedule of Pension Contributions 93 Schedule of Investment Returns 94 Notes to the Schedule of Pension Contributions - General Employees' Retirement Fund 95 Notes to the Schedule of Pension Contributions - Police Officers' Retirement Fund 97 Notes to the Schedule of Pension Contributions - Firefighters' Retirement Fund 99 D. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Non-Major Governmental Funds Combining Balance Sheet 101 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 102 Schedules of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual Law Enforcement Trust Special Revenue Fund 103 Law Enforcement Trust Training Special Revenue Fund 104 Florida Building Code Special Revenue Fund 105 Community Development Block Grant Special Revenue Fund 106 Beal Memorial Cemetery Perpetual Care Special Revenue Fund 107 Debt Service Fund 108 III. STATISTICAL SECTION (UNAUDITED) Net Position by Component 109 1 Changes in Net Position 110 2 Fund Balances – Governmental Funds 112 3 Changes in Fund Balances – Governmental Funds 113 4 Revenues and Other Sources 114 5 Assessed Value of Taxable Property 115 6 Property Tax Rates Per $1,000 of Taxable Value - All Direct and Overlapping Governments 116 7 Principal Taxpayers 117 8 Property Tax Levies and Collections 118 9 ii  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 Page Schedule III. STATISTICAL SECTION (UNAUDITED) – CONTINUED Ratios of Outstanding Debt by Type 119 10 Ratio of Net General Bonded Debt Outstanding 120 11 Pledged Revenue Coverage – Schedule of Revenue Bond Coverage 121 12 Direct and Overlapping Governmental Activities Debt – General Obligations 122 13 Major Employers 123 14 Miscellaneous Demographical Statistics 124 15 Full-Time Equivalent Employees by Function/Program 125 16 Permits, Licenses and Recreational Facilities 126 17 Elections – Okaloosa County Voter Registration 127 18 Special Assessment Billings and Collections 128 19 Major Revenue Sources 129 20 Water and Wastewater Service Rates 130 21 Sanitation and Recycling Service Rates 131 22 Operating Indicators by Function/Program 132 23 Capital Asset Statistics by Function/Program 133 24 Insurance Coverage 134 25 Page IV. COMPLIANCE SECTION Schedule of Receipts and Expenditures of Funds Related to the Deepwater Horizon Oil Spill 137 Independent Auditors' Report on the Schedule of Receipts and Expenditures of Funds Related to the Deepwater Horizon Oil Spill 138 Schedule of Expenditures of Federal Awards and State Financial Assistance 139 Notes to the Schedule of Expenditures of Federal Awards and State Financial Assistance 140 Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 141 Independent Auditors' Report on Compliance for Each Major Federal Program and State Project and Report on Internal Control over Compliance Required by the Uniform Guidance and Chapter 10.550, Rules of the Florida Auditor General 143 Schedule of Findings and Questioned Costs 146 Summary Schedule of Prior Audit Findings 149 Independent Accountants' Report on an Examination of Compliance Requirements in Accordance with Chapter 10.550, Rules of the Florida Auditor General 150 Management Letter 151 iii  City of Fort Walton Beach “The Treasure of the Emerald Coast” 107 Miracle Strip Parkway SW * Fort Walton Beach, FL 32548 (850) 833-9504 * Fax (850) 833-9640 www.fwb.org March 15, 2024 Honorable Mayor, City Council Members, & Citizens of the City of Fort Walton Beach City of Fort Walton Beach 107 Miracle Strip Parkway SW Fort Walton Beach, FL 32548 Ladies and Gentlemen: The Comprehensive Annual Financial Report of the City of Fort Walton Beach, Florida for the fiscal year ended September 30, 2023, is hereby submitted herewith pursuant to Chapter 218.39(1)(d) of the Florida Statutes requiring each local government entity to complete an audit report within nine (9) months after the end of the fiscal year. This report consists of management’s representations concerning the finances of the City of Fort Walton Beach, Florida. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Fort Walton Beach has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformance with GAAP (Generally Accepted Accounting Principles). Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The financial statements of the City of Fort Walton Beach have been audited by Warren Averett, LLC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ending September 30, 2023, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Fort Walton Beach’s financial statements for the fiscal year ending September 30, 2023, are fairly presented in conformity with GAAP. The independent auditor’s report is presented in Section II - Financial Section as the first component of this section of the report. Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Fort Walton Beach’s MD&A can be found immediately following the report of the independent auditor. iv GOVERNMENT PROFILE DATE OF INCORPORATION: June 16, 1941 FORM OF GOVERNMENT: Council & Manager PAVED STREETS: 93.12 miles GEOGRAPHIC AREA: 7.60 square miles SIDEWALKS: 63.67 miles TAXABLE ASSESSED VALUE: $1,887,116,546 WATER & SEWER LINES: 282.82 miles CITY MILLAGE RATE: 4.6116 STORM DRAIN: 43.18 miles POPULATION: 21,120 POLICE STATIONS: 1 FIRE STATIONS: 2 EMPLOYEES: 362 positions, 317.51 FTE’s LIBRARIES: 1 MUSEUMS: 4 SWORN POLICE OFFICERS: 54 18-HOLE GOLF COURSES: 2 FIREFIGHTING PERSONNEL: 44 ACRES OF PARKS: 206 The City of Fort Walton Beach, Florida prides itself on being a small, family-oriented seaside community boasting a downtown area that was home to a significant prehistoric Native American community on the Gulf Coast of Northwest Florida. Situated at the junction of two major highways - US 98 (Miracle Strip Parkway) and SR 85 (Eglin Parkway) - Fort Walton Beach enjoys the benefits of its crossroads location along the coastal portion of the Northwest Florida regional transportation network. The City offers a full- service government providing police and fire protection; cultural and recreational activities including parks, a library, a museum, and two championship golf courses; planning and zoning; public works such as street, sidewalk, right-of-way, and cemetery maintenance; utility services including water, sewer, and stormwater; and garbage and recycling collection to a coastal community of 21,120 full-time residents. The City has an exciting and romantic history. As early as 600 B.C., Indian tribes were attracted to Fort Walton Beach from the Mississippi and Tennessee River Valleys and the Southeast Georgia coast. The beginning for the City occurred following the War Between the States when Alabama war veteran John Brooks selected a site of 111 acres where he built a three-room cabin in 1867. Other settlers soon followed. By 1884, the population of the area required establishment of a small schoolhouse. In 1902, the first hotel, Brooks House, was built along the sound and shortly thereafter the first post office was built in 1906. The Montgomery, Alabama, Maxwell Field military base First Schoolhouse developed an airfield in Fort Walton in 1933 on 137 acres of land and used it as a bombing and gunnery range. The most significant factor in the City's growth was the creation and later expansion, of that airfield, which is now Eglin Air Force Base (the largest military installation in the world) in 1937, the year the City Charter was adopted. Originally chartered as a municipality under the laws of the State of Florida, actual formation of the City was in 1941 when the Florida Legislature officially named it the Town of Fort Walton. In 1953, the Florida Legislature granted the City a new charter at which time the name was changed to Fort Walton Beach. The name Walton originates from Colonel George Walton, who was Secretary of the East-West Florida Territory in 1822-26 and son of George Walton, signer of the Declaration of Independence and Governor of Georgia. The presence of the military base provided the key economic stimulus for the City's early growth, supplemented by the attractiveness of the location. The City enjoyed a substantial population and economic boom from the 1950's through the end of the 1970's. Subsequently, things started to slow down. The military base became less important to the City's economy than the growing tourism industry. In the late 1960’s and early 1970’s Fort Walton Beach began to experience a decline in economic prosperity, some of which can be attributed to the utility and transportation infrastructure getting older and commercial and residential structures becoming deteriorated. New development began to take place in the surrounding communities. The City, having nearly run out of developable land, started to focus attention on finding ways to induce private enterprise investment in the City and thus capturing a greater share of the local and regional market. v The City’s premier gathering place along the Santa Rosa Sound has been the Landing Park since its purchase in 1986. In Spring 2023, the Landing Park renovations commenced with Phase I of this project. Building upon that with the complete reconstruction of Brooks Street, including the Brooks Bridge Park in 2013, the City’s downtown waterfront was opened to an extent never realized and spurred economic growth downtown. Outside of downtown, the City completed construction of a new recreational complex in 2015 and a new field office complex in 2019, which has added to the attraction of the City. Additionally, a 4,500 square foot Museum addition is currently in progress, a new Beal Cemetery Administration Building, Liza Jackson Park waterfront renovations, as well as a 12-acre Preston Hood Athletic Complex expansion. A “once in a lifetime” project on the horizon, “Around the Mound”, will connect the then newly built Brooks Bridge to Highway 98, around the Heritage Park and Cultural Center. This will allow the City of Fort Walton Beach to have a true “downtown” atmosphere. Fort Walton Beach Landing Rendering The financial reporting entity (the government) includes all the funds and account groups of the City of Fort Walton Beach, Florida, as well as component units. Component units are legally separate entities for which the primary government is financially accountable. Accordingly, the Fort Walton Beach Community Redevelopment Agency is reported as a blended component unit of the City of Fort Walton Beach. The budget process begins in February, which includes Finance staff preparing the new fiscal year's documentation. The City Charter charges the City Manager with the duty of presenting a balanced budget to the City Council. The budget is considered balanced if the total of all available financial resources (either on hand at the beginning of the year or generated during the year) equals or exceeds the total of all financial requirements. In August, the City Manager's proposed budget is presented to City Council for review and discussion. During September, two public hearings to formally adopt the millage (property tax) rate and budget are held per State Statute. The adopted budget is published no later than October 1. In April the City Council, acting as the Legislative Body of the City, holds at least one (1) Strategic Planning Session. The goals set during this meeting are used by staff to formulate the budget that is presented to City Council. In June, the tentative millage rate is set, and staff determines Council’s priorities and position on issues specific to development of the operational and capital budgets for the upcoming fiscal year. City Council’s decisions provide the framework under which the budget is prepared to meet City Council’s programmatic objectives within available fiscal resources. The meeting is open to the public and the public is encouraged to attend and participate. Department Directors are responsible for identifying their staffing needs, operational funding needs within budget development parameters, five-year capital requests, as well as corresponding revenue sources to fund their needs. In addition, they must conduct a comprehensive review of departmental goals, objectives, and metrics. vi  The City Charter charges the City Manager with the duty of presenting a balanced budget to City Council. To accomplish this goal, a Budget Committee is formed comprised of the City Manager, Finance Director, and Budget Analyst. The Committee conducts comprehensive meetings with Department Directors to review their budget requests and a collaborative effort is undertaken to achieve City Council and department goals within fiscal constraints. The Budget Committee enlists assistance for areas of specialized interests, such as the Information Technology Manager for computer issues; the Administrative Services Director for employee benefits, personnel, and risk management issues; and the Fleet Supervisor for vehicle and equipment replacement schedules. Department goals, objectives, and metrics are also evaluated during budget development to determine the effectiveness of program activities and appropriate funding levels. After the departmental meetings, the Budget Committee finalizes the proposed budget given revenue projections, economic conditions, funding requirements, and City Council program priorities and issues previously identified in the budget process. Once a balanced budget is achieved, it is presented to City Council for consideration. The City Council is required by Florida Statutes and the City Charter to hold public hearings on the proposed budget and adopt a final budget no later than September 30 th, the close of the City’s fiscal year. The appropriated budget is prepared by fund, department (e.g., financial services), and division (e.g., purchasing). Department Directors may request transfers of appropriations within a department and between divisions to transfer appropriations between line items, not to increase the total budget or to transfer resources between funds. Transfers of appropriations between funds require the approval of the City Council. The budget may be amended at any time by Resolution of City Council. Budget-to-actual comparisons are provided in the report for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund and the Community Redevelopment Agency Fund, this comparison is presented on pages 85 & 86 as required supplementary information (RSI). For governmental funds with appropriated annual budgets, other than those previously mentioned, this comparison is presented with the combining and individual fund statements and schedules, Section D of this report, which starts on page 101. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is best understood when it is considered from the broader perspective of the specific environment within which the City of Fort Walton Beach operates. Local Economy The FY 2023-2024 budget of $56,300,597 is $2.8M, or 4.78%, less than the adopted FY 2022-2023 budget. The decrease is primarily due to the completion of some capital projects, long-time staffing retirements, and overall streamlining of operating expenditures. The budget is predicated on a millage rate of 4.6116 mills; as a result, ad valorem revenues will increase by 1.59% in the General Fund. Ad valorem revenues in the CRA Fund City and County Original TIF averaged a 2.32% increase, whereas the City and County Expanded TIF averaged a 20.22% increase. Eglin Air Force Base is the world’s largest Department of Defense installation, spanning 724 square miles. Defense contractor companies are established throughout the Northwest Florida region. It is estimated that local military bases currently represent a $9.2B annual economic impact on the area, with 63.3% of the local economy supported by the military. Being located on the Gulf of Mexico in Northwest Florida, tourism is a large part of the regional economy. Regional accolades continue to enhance the area’s image, promote visibility, and generate additional tourism and sales tax dollars. Local tourism has benefited from the national shift to vacation sites accessible by driving instead of flying. The Fort Walton Beach-Destin area is a popular drive destination in Florida, according to a survey of auto visitors by Visit Florida. vii  Long-Term Financial Planning The City undertakes several processes to assist in future planning, such as:  A five-year Capital Improvement Program (CIP) Plan is developed and approved by City Council each year during the annual budget process.  Five-year replacement plans for capital equipment, including vehicles, equipment, and computer hardware and software, are also developed and approved by management each year during the annual budget process.  Annual Strategic Plan, which focuses on a one-to-three-year time period. Relevant Financial Policies The City has several financial policies that are utilized during daily operations, as well as during the budget and financial planning processes. The City utilizes fund balance reserves only for one-time non-recurring expenditures. In addition, the City maintains its fund balance level in the General Fund at 30% of fund expenditures – this policy helps to ensure that the City has sufficient funding in place for emergency and disaster relief. Major Initiatives These financial policies, as well as other indicators, were considered when adopting the City’s budget for FY 2023-2024. The City’s budget for FY 2023-2024 allocates $32.7M to the General Fund, $19.8M to the enterprise funds, and $3.8M to other funds. For the FY 2023-2024 budget, the ad valorem tax rate decreased to a millage rate of 4.6116 mills. The FY 2023-2024 budget includes Year 5 of the five-year utility rate study, which was adopted by City Council on August 11, 2020. The utility rate study included recommendations on rate structures for water and wastewater, stormwater, and solid waste. The fire assessment fee was eliminated in FY 2023-2024. No other significant changes to the City’s various rates and fees are included in the FY 2023-2024 budget. AWARDS AND ACKNOWLEDGMENTS Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Fort Walton Beach for its Comprehensive Annual Financial Report for the fiscal year ended September 30, 2022. This was the 20 th consecutive year that the City received this prestigious award. To be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, satisfying both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one (1) year only. Staff believes the current report continues to meet the Certificate of Achievement Program requirements and will be submitted to the GFOA to determine its eligibility for recertification. In addition, the City also received the GFOA’s Distinguished Budget Presentation Award for its annual budget dated October 1, 2023. This was the 28th consecutive year that the City received this prestigious award. To qualify for the Distinguished Budget Presentation Award, the City’s budget document was judged proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. viii Acknowledgments The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department. I would like to express my appreciation to all members of the Department who assisted and contributed to the preparation of this report. I would also like to thank the Mayor and City Council for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Fort Walton Beach’s finances and for their attention in conducting the financial operations of the City in a responsible and progressive manner. Appreciation is also expressed to the accounting firm of Warren Averett, LLC for their continued assistance and professionalism. Respectfully submitted, Jeff Peters Acting City Manager ix Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Fort Walton Beach Florida For its Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2022 Executive Director/CEO x  Citizens of Fort Walton Beach City Council City Clerk City Manager City Attorney 2 FTE 4 FTE 0400 0200 Public Works Growth Management Financial Fire Services Human Resources Police Services Recreation Services and Utility Services 15.25 FTE Services 44.25 FTE 9 FTE 71.17 FTE 69.62 FTE 81 FTE 15.50 FTE 1200 to 1217 & 2000 0500 & 0520 & 0530 0900 0300 & 0320 0800 1000 to 1080 1220-1240 &1300-1380 Utility Administration Building Inspections Accounting Advanced Life Human Resources Uniform Patrol Athletics – Adult & & Permitting Support Youth Fleet & Facilities Auditing Insurance & Risk K-9 Patrol Code Enforcement Fire Suppression Management Recreation Centers GIS/CAD Budgeting Criminal and Programming CDBG Fire Prevention IT Investigations Sanitation Purchasing Grounds Planning Fire Inspection Community Policing/ Maintenance: Parks, Sewer Collections Debt Service & CRA CRA Management Hazardous Materials Right-Of-Way and Stormwater Response Crime Prevention Cemetery Treasury Streets Fire Education Communications Library Utility Billing Water Distribution Records Museum Contingencies & Water Operations Transfers Support Services Golf Club Operations School Crossing Guards Reserve Officers xi  INDEPENDENT AUDITORS’ REPORT To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Opinions We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fort Walton Beach, Florida (the “City”), as of and for the year ended September 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the budgetary comparison information for the General Fund and Community Redevelopment Agency (special revenue fund), and the schedules related to the pension and OPEB liabilities, contributions, and investment returns, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2 Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements and schedules and the schedule of expenditures of federal awards and state financial assistance, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and Chapter 10.550, Rules of the Florida Auditor General, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules and the schedule of expenditures of federal awards and state financial assistance are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 15, 2024, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Fort Walton Beach, Florida March 15, 2024 3  MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Fort Walton Beach, Florida (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2023. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iv - ix of this report. FINANCIAL HIGHLIGHTS  The assets and deferred outflows of the City exceeded its liabilities and deferred inflows by $87.4 million (total net position). Of this amount, $24.7 million represents unrestricted net position that is available to meet the City’s ongoing obligations to citizens and creditors.  The government’s net position increased by $8.6 million during the fiscal year. In the governmental activities, revenues and transfers exceeded expenses by $7.7 million in fiscal year 2023. This was the result of multiple factors including the sale of surplus property for $4.7 million and investment returns of $1.6 million. In the business-type activities revenues exceeded expenses and transfers by $845,755 in fiscal year 2023. Charges for services in the business- type activities and related expenses were relatively consistent between the current and prior fiscal year.  As of the close of the fiscal year, the City’s governmental funds have combined ending fund balances of $45.3 million, an increase of $8.0 million from the prior year. This increase is primarily attributable to delays in the commencement of planned capital projects, which is consistent with $8.9 million of encumbrances and special projects appropriated into the subsequent fiscal year.  As of September 30, 2023, committed, assigned, and unassigned fund balance of the General Fund totaled $26.1 million, or 88.4% of total expenditures in the General Fund.  The City’s total debt decreased by $1.1 million or 2.8%, during the fiscal year. This decrease is consistent with scheduled principal payments on existing long-term obligations. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The focus of financial statements prepared in accordance with the Governmental Accounting Standards Board (GASB) Statement No. 34 is on both the City as a whole (government-wide) and on major individual funds. Both perspectives (government-wide and major funds) allow the user to address relevant questions, broaden a basis for comparison (year-to-year or government-to- government), and enhance the City’s accountability. 4 Government-Wide Financial Statements Designed to be corporate-like, the government-wide financial statements consolidate governmental and business-type activities into two columns, which sum to a total for Primary Government. This provides readers with a broad overview of the City’s finances in a manner similar to a private-sector business. Two statements, the statement of net position and the statement of activities, are utilized to provide information on a government-wide basis. The statement of net position presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. This statement combines and consolidates the governmental funds’ current financial resources (short-term available resources) with capital assets and long-term obligations. Over time, increases or decreases in net position may serve as a useful indicator of the financial position of the City. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flow in future fiscal periods. Both government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government (city clerk, city council, city manager, human resources, finance, purchasing, fleet maintenance, service maintenance, and non-departmental expenses), public safety (police, fire, building, and code enforcement services), physical environment (cemetery), transportation (engineering, streets, public works, and right-of-way), economic development (Community Development Block Grant Program, and community redevelopment agency), culture and recreation (parks, golf, library, and museum), and debt service interest. The business-type activities of the City include utilities (water, sewer, and storm water), and sanitation. The government-wide financial statements include not only the City itself (known as the primary government), but a component unit, the Community Redevelopment Agency (CRA), which is a legally separate entity for which the City is financially accountable. The CRA is considered a blended component unit of the City and is presented as a special revenue fund as part of the primary government. The government-wide financial statements are found on pages 15-16 of this report. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been separated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. 5 FUNDS Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements are reported using an accounting method called modified accrual accounting, the focus of which is on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial requirements. The basic governmental fund financial statements are on pages 17-20 of this report. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains eight individual governmental funds (General Fund, Community Redevelopment Agency Fund, Florida Building Code Fund, Law Enforcement Trust Fund, Law Enforcement Training Fund, Debt Service Fund, Community Development Block Grant Fund, and Beal Memorial Cemetery Perpetual Care Fund). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund and the Community Redevelopment Agency Fund. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The Community Redevelopment Agency Fund is considered a major fund for reporting purposes. The City of Fort Walton Beach adopts an annual appropriated budget for its General Fund, as well as each of the other governmental funds. Budgetary comparison schedules are provided for the General Fund and the CRA Fund on pages 85-86 of this report. Proprietary Funds All proprietary funds of the City are maintained as enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the statement of net position and the statement of activities. The City uses enterprise funds to account for its utility operations (water operations and distribution, sewer collections and treatment, and stormwater management), and sanitation operations (garbage). Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information on utilities operations, sanitation operations, and stormwater operations, all of which are presented as major funds of the City. The basic proprietary fund financial statements are found on pages 21-25 of this report. 6  Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. The City’s fiduciary funds include the Pension Trust Funds (general employees, police officers, and firefighters). Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements are found on pages 26-27 of this report. NOTES TO THE FINANCIAL STATEMENTS The notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 28 of this report. OTHER INFORMATION In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension and other post-employment benefits (OPEB) to its employees. This required supplementary information is found on pages 88-100 of this report. The combining and individual fund statements, referred to earlier in connection with non-major governmental funds, immediately follow the required supplementary information on pension and OPEB plans and can be found beginning on page 101 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. Assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources by $87.4 million, as reported in Table 1 below. The City’s net position increased by $8.6 million for the fiscal year ended September 30, 2023. The governmental activities reported an increase of $7.7 million and the business-type activities reported an increase of $845,755. Table 1 Statement of Net Position As of September 30 (In Thousands of Dollars) Governmental Business-Type Activities Total Activities 2023 2022 2023 2022 2023 2022 Assets Current & Other $52,187 $51,477 $21,300 $21,236 $73,487 $72,713 Capital Assets 52,817 50,802 31,055 30,172 83,872 80,974 Total Assets 105,004 102,279 52,355 51,408 157,359 153,687 Deferred Outflow of Resources 13,569 7,687 2,663 653 16,232 8,340 Liabilities Long-Term Liabilities 49,741 39,098 17,692 17,157 67,433 56,255 Other Liabilities 5,162 8,246 5,972 2,593 11,134 10,839 Total Liabilities 54,903 47,344 23,664 19,750 78,567 67,094 Deferred Inflow of Resources 6,836 13,514 766 2,568 7,602 16,082 Net Position Net Investment in Capital Assets 31,499 28,661 15,557 13,423 47,056 42,084 Restricted 15,056 12,376 592 621 15,648 12,997 Unrestricted 10,279 8,071 14,439 15,699 24,718 23,770 Total Net Position $56,834 $49,108 $30,588 $29,743 $87,422 $78,851 7 By far, the largest portion of the City’s assets, $47.1 million or 53.8%, reflects its investment in capital assets (e.g., land, infrastructure, buildings, machinery, and equipment) less any related debt still outstanding that was used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City reports the investment in its capital assets net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position of $15.6 million, or 17.9%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $24.7 million is unrestricted and may be used to meet the government’s ongoing obligations to citizens and creditors. Reported in Table 2 are the key elements of the changes in net position for the current year. Table 2 Statement of Changes in Net Position Governmental Activities Business-Type Activities Total Activities 2023 2022 2023 2022 2023 2022 Revenues Program Revenue: Charges for Services $6,397,859 $6,218,093 $17,845,146 $17,806,191 $24,243,005 $24,024,284 Operating Grants & Contributions 1,866,820 1,460,346 - - 1,866,820 1,460,346 Capital Grants & Contributions 1,251,331 125,832 122,670 46,063 1,374,001 171,895 General Revenue: Property Taxes 7,618,352 7.025.573 - - 7,618,352 7.025.573 Other Taxes 10,657,820 10,695,470 - - 10,657,820 10,695,470 Tax Increments for Redevelopment 2,668,386 2,404,122 - - 2,668,386 2,404,122 Other Revenue (Losses) 10,275,728 2,355,131 422,242 (872,436) 10,697,970 1,482,695 Total Revenues 40,736,296 30,284,567 18,390,058 16,979,818 59,126,354 47,264,385 Expenses Primary Government General Government 5,321,980 4,318,011 - - 5,321,980 4,318,011 Public Safety 19,077,377 14,020,586 - - 19,077,377 14,020,586 Physical Environment 531,784 531,268 - - 531,784 531,268 Transportation 1,385,178 1,401,797 - - 1,385,178 1,401,797 Economic Environment 1,217,467 1,194,625 - - 1,217,467 1,194,625 Culture & Recreation 6,545,449 6,103,857 - - 6,545,449 6,103,857 Debt Service Interest 728,062 716,930 - - 728,062 716.930 Business-Type Expenses Utilities - - 10,003,984 10,480,961 10,003,984 10,480,961 Sanitation - - 4,774,632 4,142,106 4,774,632 4,142,106 Other - - 967,922 1,035,826 967,922 1,035,826 Total Expenses 34,807,297 28,287,074 15,746,538 15,658,893 50,553,835 43,945,967 Increase in Net Position 5,928,999 1,997,493 2,643,520 1,320,925 8,572,519 3,318,418 before Transfers Transfers 1,797,765 1,797,083 (1,797,765) (1,797,083) - - Increase/(Decrease) in Net Position 7,726,764 3,794,576 845,755 (476,158) 8,572,519 3,318,418 Net Position – Beginning 49,107,459 45,312,883 29,742,514 30,218,672 78,849,973 75,531,555 Net Position – Ending $56,834,223 $49,107,459 $30,588,269 $29,742,514 $87,422,492 $78,849,973 Current Year Impacts – Governmental Activities Governmental activities increased the City’s net position by $7.7 million for the fiscal year ended September 30, 2023. Key elements of this change are as follows:  Total revenues increased by $10.5 million, which is primary attributable to the sale of surplus property for $4.7 million and a $3.1 million increase in investment returns as the result of improved market performance for the City’s investments during the fiscal year. Additional information on the City’s investments can be found in Notes 3 and 4 to the financial statements. 8  Total expenses increased $6.5 million, or 23.1%. This is primarily attributable to increases in payroll and related employee benefit costs, most notably a significant increase in actuarial pension expense.  Capital grants and contributions increased $1.1 million. This is primarily due to expending state financial assistance from the Restoration Deepwater Horizon oil spill grant of $1.1 million on a capital restoration project at the Fort Walton Beach Landing. Chart 1 Revenues and Expenses - Governmental Activities (in millions) General government Public safety Physical environment Transportation Economic environment Culture and recreation Debt service interest $0 $5 $10 $15 $20 Revenues Expenses Chart 2 Revenues by Source - Governmental Activities Interest and investment Charges for services, earnings , $1,638,716 $6,397,859 Miscellaneous, $72,967 Operating grants and contributions, $1,866,820 Gain on sale of assets, $4,740,578 Capital grants and contributions, $1,251,331 Intergovernmental, unrestricted, $1,407,882 Franchise fees, $2,415,585 Property taxes, $7,618,352 Tax increments for redevelopment, $2,668,386 Utility service taxes, Sales taxes, $6,142,151 $4,515,669 9 Current Year Impacts – Business-Type Activities Business-type activities decreased the City’s net position by $845,755 for the fiscal year ended September 30, 2023. Key elements of this change are as follows:  Other revenues increased by $1.3 million, which is primarily attributable to a $1.2 million increase in investment earnings as the result of improved market performance for the City’s investments during the fiscal year. Additional information on the City’s investments can be found in Notes 3 and 4 to the financial statements.  Total expenses for the business-type activities increased by $87,645, or 0.6%, primarily due to an increase in payroll and related employee benefit costs. Chart 3 Program Revenues and Expenses - Business-Type Activities (in millions) $12 $10 $8 $6 $4 $2 $0 Utilities Sanitation Stormwater Revenues Expenses Chart 4 Revenues by Source - Business-Type Activities Charges for services, $17,845,146 Interest and investment earnings , $370,227 Miscellaneous, $52,015 Capital grants and contributions, $122,670 10 FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of available resources. Such information is useful in assessing the City’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of September 30, 2023, the City’s governmental funds have combined ending fund balances of $45.3 million, an increase of $8.0 million from the prior year. Approximately 66.1% of this amount, or $29.9 million, is restricted, committed, or assigned for specific purposes. Unassigned and assigned fund balance of $14.6 million is available for spending at the discretion of the City Council. Details of the fund balance classifications can be found in Note 17 to the financial statements. The General Fund is the chief operating fund of the City. At the end of the fiscal year, assigned and unassigned fund balance of the General Fund was $14.6 million, while total fund balance reached $33.7 million. As a measure of the General Fund’s liquidity, it may be useful to compare both assigned and unassigned fund balance and total fund balance to total expenditures. Total assigned and unassigned fund balance represents 49.3% of the total General Fund expenditures, while total fund balance represents 114.0% of that same amount. During the fiscal year, the fund balance of the City’s General Fund increased by $6.4 million. This increase is primarily attributable to the sale of surplus real estate totaling $4.7 million and investment earnings of $1.1 million. The CRA’s fund balance increased by $991,665. This is primarily attributable to a special assessment being repaid in full during the fiscal year as well as a decrease in total expenditures. Proprietary Funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds totaled $14.4 million on September 30, 2023, of which the Utilities Fund reported $10.6 million, the Sanitation Fund reported $2.5 million, and the Stormwater Utility Fund reported $1.3 million. The factors concerning the finances of these funds have already been addressed in the discussion of the City’s business-type activities. Fiduciary Funds The General Employees’ Retirement Fund’s net position as a percentage of the total pension liability, an indicator of the sustainability of the Plan, was 89.5%, a decrease of 21.3% from the prior year. Employees contribute 5% of pay to the Plan and the City contributed $314,371, which was a decrease of $266,476 compared to the previous fiscal year. The Police Officers’ Retirement Fund’s net position as a percentage of the total pension liability was 72.0%, a decrease of 14.2% from the previous fiscal year. Employees contribute 5% of pay to the Plan and the City and State contributed $1.5 million, an increase of $143,093 compared to the previous fiscal year. 11  The Firefighters’ Pension Trust Fund’s net position as a percentage of the total pension liability was 59.8%, a decrease of 14.7% from the previous fiscal year. Employees contribute 8.0% of pay to the Plan and the City and State contributed $1.7 million, an increase of $59,495 compared to the previous fiscal year. Additional information on the pension plans can be found on pages 51-67 of this report. The General Employees’ Retirement Fund was closed to new entrants in January 2010, and all new hires are required to participate in a defined contribution plan, which is administered by the International City Managers Association Retirement Corporation. Additional information on the defined contribution plan can be found on page 68 of this report. GENERAL FUND BUDGETARY HIGHLIGHTS A schedule showing the original budget, the final budget, the actual results, and the variance from the final budget to the actual results is included for the General Fund on page 85 of the financial statements. The difference between the original budget and the final budget for expenditures was an increase of $7.5 million. Significant information related to this difference is summarized as follows:  Increase of $3.0 million for construction of traffic improvements on Lewis Turner Blvd.  Increase of 1.5 million to establish appropriations for workforce housing initiative fund.  Increase of $757,329 for the purchase of a pumper fire truck.  Increase of $702,832 for construction of the Heritage Park and Cultural Center addition.  Increase of $500,000 for a portion of the City’s share of costs of the Around the Mound PD&E study.  Increase of $500,000 for the purchase of fire vessel awarded through a Port Security grant. Actual results, when compared to the final budget, show a variance of $8.6 million for expenditures. This variance is primarily due to amending the budget for capital project expenditures planned, but not yet commenced or completed. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities, as of September 30, 2023, was $83.9 million (net of accumulated depreciation and related debt). This represents a net increase of $2.9 million, or 3.6%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City expended $1.4 million to replace the golf irrigation system.  The kitchen was renovated at Fire Station #6 for a total cost of $58,479.  The replaced 11 Police Department vehicles for a total cost of $368,012. 12  Table 3 below highlights the overall changes in this category. Table 3 Total Capital Assets Net of Accumulated Depreciation Governmental Activities Business-Type Activities Total Activities 2023 2022 2023 2022 2023 2022 Land $11,303,138 $11,131,840 $709,678 $709,678 $12,012,816 $11,841,518 Buildings 20,522,481 21,475,978 69,367 73,487 20,591,848 21,549,465 Improvements other than Buildings 10,606,744 10,593,661 26,322,817 26,274,574 36,929,561 36,868,235 Machinery & Equipment 5,409,346 5,710,368 2,698,562 2,864,717 8,107,908 8,575,085 Easements - - 39,742 39,742 39,742 39,742 Right-of-use assets 182,542 378,049 161,073 188,083 343,615 566,132 Subscription assets 1,834,991 1,281,392 - - 1,834,991 1,281,392 Construction in Progress 2,957,362 231,143 1,053,910 22,113 4,011,272 253,256 $52,816,604 $50,802,431 $31,055,149 $30,172,394 $83,871,753 $79,693,433 Additional information on the capital assets of the City can be found in Note 6 of this report on pages 47-49. Long-Term Debt As shown in the following table, as of September 30, 2023, the City had total outstanding long-term debt of $36.9 million. All the City’s debt represents notes and bonds secured solely by specified revenue sources (i.e., revenue notes), financing contracts, lease obligations, and subscription liabilities. The City has no general obligation or special assessment debt. The State of Florida does not place a legal limit of debt on municipalities. For general obligation debts greater than one year, the City is required to conduct a voter referendum. Table 4 Outstanding Debt Governmental Assets Business-Type Activities Total Activities 2023 2022 2023 2022 2023 2022 Revenue Notes & Bonds $18,873,566 $20,253,795 $5,683,000 $6,167,000 $24,556,566 $26,420,795 State Revolving Fund - - 9,704,126 10,452,433 9,704,126 10,452,433 Financing Contracts 536,581 600,745 - - 536,581 600,745 Lease Obligations 193,047 393,186 166,017 190,610 359,064 583,796 Subscription Liabilities 1,714,631 1,281,392 - - 1,714,631 1,281,392 $21,317,825 $22,529,118 $15,553,143 $16,810,043 $36,870,968 $39,339,161 Additional information on the City’s long-term debt can be found in Notes 13 to 15 of this report on pages 73-79. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES Economic indicators and factors that are useful for evaluating the framework within which the City operates are discussed below.  The Consumer Price Index (CPI) is 4.2% higher than a year ago for the Southern Region. This indicator is a widely used gauge of inflation and translates into a higher cost of providing services to residents. 13   The local unemployment rate was 2.7%, which represents an approximate 0.5% increase from September 2022. The State of Florida’s unemployment rate was 3.0%, which represents an approximate 0.5% increase from September 2022. The unemployment rate will impact the City’s fee and usage-based revenues, and shared portions of the State of Florida’s usage- based taxes.  The published state revenue sharing distribution estimate is up by 1.0% over the prior year, the half-cent sales tax distribution estimate is up by 7.9% over the prior year, and the communication services tax distribution estimate is up by 5.8% compared to the prior year.  The military has a significant presence in our community with Eglin Air Force Base, Hurlburt Field, and Duke Field. Combined, these three installations employ over 72,000 military and civilian personnel. The military and defense-related industries have a $22 billion annual impact on Northwest Florida’s economy, according to the Florida Defense Industry Economic Impact Analysis. These financial policies, as well as other indicators, were considered when adopting the City’s budget for fiscal year 2023. The City’s budget for fiscal year 2023 totals $56.3 million, which is $466,854 less than the fiscal year 2023 adopted budget. The 2024 budget allocates $28.5 million to the General Fund, a 3.0% increase as compared to the fiscal year 2022 budget, $20.8 million to the enterprise funds, and $7.5 million to other funds. For the fiscal year 2024 budget, the City Council adopted the millage rate of 4.6116 mills, which is down 7.8% from the previous fiscal year. Personnel expenses account for approximately 49.3% of the City’s budget. The City’s fiscal year 2024 budget remains relatively stable in this category, at 317.51 full time equivalent (FTE’s) positions, a increase of only 5.7 FTE’s from the prior year. REQUESTS FOR INFORMATION This financial report is designed to provide citizens, taxpayers, customers, and creditors with a general overview of the City of Fort Walton Beach’s finances and to demonstrate the City’s accountability for the money it receives. Questions concerning any of the information provided in this report, or requests for additional information, should be addressed to the City Manager, 107 Miracle Strip Parkway S.W., City of Fort Walton Beach, Florida, 32548. This document and other financial information are available on the City’s website at www.fwb.org. Inquiries may also be sent via email to the Finance Department at finance@fwb.org. 14  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2023 Primary Government Governmental Business-Type Activities Activities Total ASSETS Cash and cash equivalents $ 20,478,729 $ 3,110,074 $ 23,588,803 Investments 24,376,961 15,721,157 40,098,118 Receivables, net 407,980 1,278,663 1,686,643 Internal balances (54,574) 54,574 - Due from other governments 2,174,091 110,746 2,284,837 Inventory, at cost 311,357 22,832 334,189 Prepaid items - 4,534 4,534 Restricted assets Cash and cash equivalents 162,313 925,901 1,088,214 Other assets Other receivables, net 4,330,923 71,819 4,402,742 Capital assets Non-depreciable/amortizable 14,260,500 1,803,330 16,063,830 Depreciable/amortizable, net 38,556,104 29,251,819 67,807,923 TOTAL ASSETS 105,004,384 52,355,449 157,359,833 DEFERRED OUTFLOWS OF RESOURCES 13,569,090 2,663,125 16,232,215 LIABILITIES Accounts payable 758,168 306,490 1,064,658 Accrued liabilities 940,443 163,245 1,103,688 Due to other governments 609,636 8,863 618,499 Unearned revenues 31,931 3,717,197 3,749,128 Payable from restricted assets Accrued interest 203,506 64,533 268,039 Customer deposits - 333,849 333,849 Non-current liabilities Due within one year Compensated absences 256,432 53,995 310,427 Lease obligations payable 161,945 63,549 225,494 Subscription liabilities 495,932 - 495,932 Financing contracts payable 313,797 - 313,797 Revenue bonds and notes payable 1,390,608 498,000 1,888,608 State revolving fund loans payable - 762,594 762,594 Due in more than one year Compensated absences 769,294 161,980 931,274 Lease obligations payable 31,102 102,468 133,570 Subscription liabilities 1,218,699 - 1,218,699 Financing contracts payable 222,784 - 222,784 Revenue bonds and notes payable 17,482,958 5,185,000 22,667,958 State revolving fund loans payable - 8,941,532 8,941,532 Total OPEB liability 3,709,141 994,387 4,703,528 Net pension liability 26,307,112 2,306,672 28,613,784 TOTAL LIABILITIES 54,903,488 23,664,354 78,567,842 DEFERRED INFLOWS OF RESOURCES 6,835,763 765,951 7,601,714 NET POSITION Net investment in capital assets 31,498,779 15,556,733 47,055,512 Restricted Debt service 21,156 157,228 178,384 System improvements - 434,824 434,824 Improvement districts 6,225,881 - 6,225,881 Public safety 1,566,532 - 1,566,532 Other purposes 7,243,110 - 7,243,110 Unrestricted 10,278,765 14,439,484 24,718,249 TOTAL NET POSITION $ 56,834,223 $ 30,588,269 $ 87,422,492 See notes to the financial statements. 15  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2023 Net (Expense) Revenue and Changes in Net Position Program Revenues Primary Government Charges for Operating Grants Capital Grants and Governmental Business-Type Function/program activities Expenses Services and Contributions Contributions Activities Activities Total Governmental activities General government $ 5,321,980 $ 291,558 $ 277,993 $ - $ (4,752,429) $ - $ (4,752,429) Public safety 19,077,377 2,296,942 1,140,944 151,191 (15,488,300) - (15,488,300) Physical environment 531,784 486,857 - - (44,927) - (44,927) Transportation 1,385,178 198,547 47,072 - (1,139,559) - (1,139,559) Economic environment 1,217,467 47,806 251,792 1,100,140 182,271 - 182,271 Culture and recreation 6,545,449 3,076,149 149,019 - (3,320,281) - (3,320,281) Debt service interest 728,062 - - - (728,062) - (728,062) Total governmental activities 34,807,297 6,397,859 1,866,820 1,251,331 (25,291,287) - (25,291,287) Business-type activities Utilities 10,003,984 11,790,008 - 26,942 - 1,812,966 1,812,966 Sanitation 4,774,632 5,018,548 - - - 243,916 243,916 Stormwater 967,922 1,036,590 - 95,728 - 164,396 164,396 Total business-type activities 15,746,538 17,845,146 - 122,670 - 2,221,278 2,221,278 Total primary government $ 50,553,835 $ 24,243,005 $ 1,866,820 $ 1,374,001 (25,291,287) 2,221,278 (23,070,009) General revenues Taxes Property taxes 7,618,352 - 7,618,352 Sales taxes 6,142,151 - 6,142,151 Utility service taxes 4,515,669 - 4,515,669 Tax increments for redevelopment districts 2,668,386 - 2,668,386 Franchise fees 2,415,585 - 2,415,585 Intergovernmental, unrestricted 1,407,882 - 1,407,882 Gain on sale of assets 4,740,578 50,435 4,791,013 Miscellaneous 72,967 1,580 74,547 Interest and investment earnings 1,638,716 370,227 2,008,943 Transfers 1,797,765 (1,797,765) - Total general revenues and transfers 33,018,051 (1,375,523) 31,642,528 CHANGE IN NET POSITION 7,726,764 845,755 8,572,519 NET POSITION AT BEGINNING OF YEAR 49,107,459 29,742,514 78,849,973 NET POSITION AT END OF YEAR $ 56,834,223 $ 30,588,269 $ 87,422,492 See notes to the financial statements. 16  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS BALANCE SHEET SEPTEMBER 30, 2023 Community Other Total Redevelopment Governmental Governmental General Agency Funds Funds ASSETS Cash and cash equivalents $ 16,150,893 $ 2,511,131 $ 1,816,705 $ 20,478,729 Investments 18,017,987 2,701,901 3,657,073 24,376,961 Receivables 4,738,873 - 30 4,738,903 Due from other funds 67,451 - - 67,451 Due from other governments 833,767 1,245,367 94,957 2,174,091 Inventory, at cost 311,357 - - 311,357 Restricted assets Cash and cash equivalents 141,157 - 21,156 162,313 TOTAL ASSETS $ 40,261,485 $ 6,458,399 $ 5,589,921 $ 52,309,805 LIABILITIES Accounts payable $ 507,384 $ 213,294 $ 37,490 $ 758,168 Accrued liabilities 818,661 19,224 102,558 940,443 Due to other funds - - 67,451 67,451 Due to other governments 609,636 - - 609,636 Advance from other funds 54,574 - - 54,574 Unearned revenues 31,931 - - 31,931 Total liabilities 2,022,186 232,518 207,499 2,462,203 DEFERRED INFLOW OF RESOURCES Unavailable revenue 4,553,510 - - 4,553,510 FUND BALANCE Nonspendable 311,357 - - 311,357 Restricted 7,243,110 6,225,881 1,587,688 15,056,679 Committed 11,556,463 - 3,814,516 15,370,979 Assigned 9,590,863 - - 9,590,863 Unassigned 4,983,996 - (19,782) 4,964,214 Total fund balance 33,685,789 6,225,881 5,382,422 45,294,092 TOTAL LIABILITIES, DEFERRED INFLOW OF RESOURCES, AND FUND BALANCE $ 40,261,485 $ 6,458,399 $ 5,589,921 $ 52,309,805 See notes to the financial statements. 17  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2023 Fund balance, total governmental funds (page 17) $ 45,294,092 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Governmental non-depreciable/amortizable assets 14,260,500 Governmental depreciable/amortizable assets 95,210,994 Less accumulated depreciation/amortization (56,654,890) 52,816,604 Unavailable revenues in governmental funds is susceptible to full accrual on the entity-wide statements. Special assessments 32,217 Receivable related to sale of capital asset 478,517 510,734 Deferred inflows of resources and deferred outflows of resources are not available/receivable or due/payable, respectively, in the current period and therefore are not reported in the governmental funds. Deferred outflows of resources related to pension plans 12,481,185 Deferred outflows of resources related to OPEB plan 1,087,905 Deferred inflows of resources related to pension plans (249,989) Deferred inflows of resources related to OPEB plan (2,542,998) 10,776,103 Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Notes payable (18,873,566) Accrued interest (203,506) Lease obligations payable (193,047) Subscription liabilities (1,714,631) Financing contracts payable (536,581) Compensated absences (1,025,726) Total OPEB liability (3,709,141) Net pension liability (26,307,112) (52,563,310) Net position of governmental activities (page 15) $ 56,834,223 See notes to the financial statements. 18  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2023 Community Other Total Redevelopment Governmental Governmental General Agency Funds Funds REVENUES Taxes $ 13,833,548 $ 1,510,607 $ - $ 15,344,155 Permits and fees 3,707,886 210,673 804,189 4,722,748 Intergovernmental 7,636,947 2,257,919 274,702 10,169,568 Charges for services 3,743,367 - - 3,743,367 Fines 190,708 - 46,353 237,061 Investment income 699,261 51,201 352,299 1,102,761 Miscellaneous 875,077 112,761 20,655 1,008,493 Total revenues 30,686,794 4,143,161 1,498,198 36,328,153 EXPENDITURES Current General governmental services 4,407,665 - - 4,407,665 Public safety 13,905,764 333,462 628,488 14,867,714 Physical environment 434,119 - 11,098 445,217 Transportation 938,417 - - 938,417 Economic environment 19,500 755,547 251,792 1,026,839 Culture and recreation 5,170,888 - - 5,170,888 Capital outlay 3,916,725 2,062,487 39,739 6,018,951 Debt service Principal 738,804 - 1,749,218 2,488,022 Interest 25,273 - 657,643 682,916 Total expenditures 29,557,155 3,151,496 3,337,978 36,046,629 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,129,639 991,665 (1,839,780) 281,524 OTHER FINANCING SOURCES (USES) Sale of general capital assets 4,668,757 - - 4,668,757 Issuance of financing contracts 304,825 - - 304,825 Issuance of subscription liabilities 971,904 - - 971,904 Transfers in 1,797,765 - 2,441,479 4,239,244 Transfers out (2,441,479) - - (2,441,479) Total other financing sources (uses) 5,301,772 - 2,441,479 7,743,251 NET CHANGE IN FUND BALANCE 6,431,411 991,665 601,699 8,024,775 FUND BALANCE AT BEGINNING OF YEAR 27,254,378 5,234,216 4,780,723 37,269,317 FUND BALANCE AT END OF YEAR $ 33,685,789 $ 6,225,881 $ 5,382,422 $ 45,294,092 See notes to the financial statements. 19  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2023 Net change in fund balance – governmental funds (page 19) $ 8,024,775 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds do not report capital assets on the balance sheet; however, they are reported in the government-wide financial statements. Governmental funds report capital outlays as expenditures; however, in the statement of activities, the cost of those assets is depreciated/amortized over the estimated useful lives of the assets. Expenditures for capital assets 6,018,951 Less current year depreciation/amortization (3,969,668) 2,049,283 Governmental funds do not report capital assets on the balance sheet; however, they are reported in the government-wide financial statements. Accordingly, proceeds received for disposals of capital assets are shown as income in the governmental financial statements and a gain or loss is reported in the statement of activities. In addition, capital asset reassignments are reported as transfers on the statement of activities. Disposals and transfers of capital assets (397,439) Accumulated depreciation/amortization – disposals and transfers 362,329 (35,110) Special assessment revenue in the governmental funds is recognized when due; however, the revenue was recognized in the statement of activities when it was earned (when levied). Payments received from special assessments (211,141) Special assessment for interest and penalties 1,756 Seller financed sales of capital assets with promissory note 40,400 Payments received on receivable related to the sale of capital assets (56,519) (225,504) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. In addition, long- term debt reassignments are reported as transfers on the statement of activities. Proceeds from issuance of financing contracts and subscription liabilities (1,276,729) Principal payments on long-term liabilities 2,488,022 Change in accrued interest on long-term debt (45,146) 1,166,147 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Change in net pension liability and related deferred inflows and deferred outflows of resources (3,145,696) Change in other post-employment benefits liability and related deferred inflows and deferred outflows of resources (40,270) Change in long-term compensated absences (66,861) (3,252,827) Change in net position of governmental activities (page 16) $ 7,726,764 See notes to the financial statements. 20  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF NET POSITION SEPTEMBER 30, 2023 Sanitation Stormwater Utilities Fund Fund Fund Total ASSETS Current assets Cash and cash equivalents $ 2,028,838 $ 595,066 $ 486,170 $ 3,110,074 Restricted assets – cash and cash equivalents 920,421 5,480 - 925,901 Investments 12,390,703 2,516,529 813,925 15,721,157 Receivables, net 894,878 315,290 68,495 1,278,663 Advance to other funds - 54,574 - 54,574 Due from other governments - - 110,746 110,746 Inventory – at cost 22,832 - - 22,832 Prepaid assets - - 4,534 4,534 Total current assets 16,257,672 3,486,939 1,483,870 21,228,481 Other assets Advance to other funds - - - - Other receivables, net 3,827 - - 3,827 Lease obligation receivable 67,992 - - 67,992 Total other assets 71,819 - - 71,819 Capital assets, net Non-depreciable/amortizable 1,621,841 - 181,489 1,803,330 Depreciable/amortizable, net 25,151,574 1,175,639 2,924,606 29,251,819 Total capital assets 26,773,415 1,175,639 3,106,095 31,055,149 Total non-current assets 26,845,234 1,175,639 3,106,095 31,126,968 TOTAL ASSETS 43,102,906 4,662,578 4,589,965 52,355,449 DEFERRED OUTFLOWS OF RESOURCES 1,554,367 842,239 266,519 2,663,125 See notes to the financial statements. 21  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF NET POSITION – CONTINUED SEPTEMBER 30, 2023 Sanitation Stormwater Utilities Fund Fund Fund Total LIABILITIES Current liabilities Accounts payable $ 142,503 $ 154,537 $ 9,450 $ 306,490 Accrued liabilities Compensated absences 32,570 18,274 3,151 53,995 Wages 95,835 54,350 13,060 163,245 Interest 64,533 - - 64,533 Due to other governments - 8,863 - 8,863 Lease obligations payable 22,249 - 41,300 63,549 Revenue note payable 498,000 - - 498,000 State revolving loan payable 762,594 - - 762,594 Payable from restricted assets Customer deposits 328,369 5,480 - 333,849 Unearned revenues 3,717,197 - - 3,717,197 Total current liabilities 5,663,850 241,504 66,961 5,972,315 Non-current liabilities Accrued liabilities Compensated absences 97,708 54,820 9,452 161,980 Lease obligations payable 40,942 - 61,526 102,468 Revenue note payable 5,185,000 - - 5,185,000 State revolving loan payable 8,941,532 - - 8,941,532 Other post-employment benefits 515,695 343,455 135,237 994,387 Net pension liability 1,230,881 940,727 135,064 2,306,672 Total non-current liabilities 16,011,758 1,339,002 341,279 17,692,039 TOTAL LIABILITIES 21,675,608 1,580,506 408,240 23,664,354 DEFERRED INFLOWS OF RESOURCES 437,675 235,405 92,871 765,951 NET POSITION Net investment in capital assets 11,377,825 1,175,639 3,003,269 15,556,733 Restricted Debt service 157,228 - - 157,228 System improvements 434,824 - - 434,824 Unrestricted 10,574,113 2,513,267 1,352,104 14,439,484 TOTAL NET POSITION $ 22,543,990 $ 3,688,906 $ 4,355,373 $ 30,588,269 See notes to the financial statements. 22  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2023 Sanitation Stormwater Utilities Fund Fund Fund Total OPERATING REVENUES Charges for services $ 11,773,115 $ 5,018,548 $ 1,036,590 $ 17,828,253 OPERATING EXPENSES Personal services 2,301,169 1,575,744 184,297 4,061,210 Operating 5,525,200 2,924,858 330,927 8,780,985 Depreciation/amortization expense 1,817,841 274,030 447,121 2,538,992 Total operating expenses 9,644,210 4,774,632 962,345 15,381,187 OPERATING INCOME 2,128,905 243,916 74,245 2,447,066 NON-OPERATING REVENUES (EXPENSES) Rental income 16,893 - - 16,893 Interest expense (353,763) - (5,577) (359,340) Amortization (5,613) - - (5,613) Gain on disposal of capital assets 50,435 - - 50,435 Investment earnings 63,007 16,202 3,601 82,810 Interest income 196,625 66,692 24,100 287,417 Grants in aid (398) - - (398) Miscellaneous 140 1,440 - 1,580 Total non-operating revenues (expenses) (32,674) 84,334 22,124 73,784 INCOME BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 2,096,231 328,250 96,369 2,520,850 CAPITAL CONTRIBUTIONS AND TRANSFERS Capital grants and contributions - - 95,728 95,728 Impact fees 26,942 - - 26,942 Transfers out (1,239,251) (360,348) (198,166) (1,797,765) Total capital contributions and transfers (1,212,309) (360,348) (102,438) (1,675,095) CHANGE IN NET POSITION 883,922 (32,098) (6,069) 845,755 NET POSITION AT BEGINNING OF YEAR 21,660,068 3,721,004 4,361,442 29,742,514 NET POSITION AT END OF YEAR $ 22,543,990 $ 3,688,906 $ 4,355,373 $ 30,588,269 See notes to the financial statements. 23  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2023 Sanitation Stormwater Utilities Fund Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 15,471,406 $ 5,057,493 $ 1,044,438 $ 21,573,337 Payments to suppliers (5,806,417) (2,926,687) (346,473) (9,079,577) Payments to employees (2,315,126) (1,304,202) (247,310) (3,866,638) Miscellaneous income 17,033 1,440 - 18,473 Net cash provided by operating activities 7,366,896 828,044 450,655 8,645,595 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Repayments on interfund loan - 53,502 - 53,502 Grants in aid (398) - - (398) Transfers out (1,239,251) (360,348) (198,166) (1,797,765) Net cash used in non-capital financing activities (1,239,649) (306,846) (198,166) (1,744,661) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Impact fee receipts 26,942 - - 26,942 Acquisitions of capital assets (3,255,569) (8,920) (157,258) (3,421,747) Proceeds from sale of capital assets 50,435 - - 50,435 Proceeds from issuance of leases 35,644 - - 35,644 Principal paid on revenue note (484,000) - - (484,000) Principal paid on state revolving loan (748,307) - - (748,307) Principal paid on lease obligations (20,800) - (39,437) (60,237) Interest paid on long-term debt and leases (359,073) - (5,577) (364,650) Net cash used in capital and related financing activities (4,754,728) (8,920) (202,272) (4,965,920) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments (3,105,947) (808,292) (185,310) (4,099,549) Proceeds from sales and maturities of investments 2,852,103 733,398 162,978 3,748,479 Interest and investment earnings, net 259,632 82,894 27,701 370,227 Net cash provided by investing activities 5,788 8,000 5,369 19,157 NET CHANGE IN CASH AND CASH EQUIVALENTS 1,378,307 520,278 55,586 1,954,171 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,570,952 80,268 430,584 2,081,804 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,949,259 $ 600,546 $ 486,170 $ 4,035,975 See notes to the financial statements. 24  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS – CONTINUED FOR THE YEAR ENDED SEPTEMBER 30, 2023 Sanitation Stormwater Utilities Fund Fund Fund Total CASH AND CASH EQUIVALENTS AT END OF YEAR CONSIST OF Current assets $ 2,028,838 $ 595,066 $ 486,170 $ 3,110,074 Restricted assets 920,421 5,480 - 925,901 Total cash and cash equivalents $ 2,949,259 $ 600,546 $ 486,170 $ 4,035,975 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 2,128,905 $ 243,916 $ 74,245 $ 2,447,066 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,817,841 274,030 447,121 2,538,992 Miscellaneous revenue 17,033 1,440 - 18,473 Decrease (increase) in assets: Accounts receivable 95,015 34,345 7,848 137,208 Inventory 238 - - 238 Decrease in deferred outflows of resources (1,178,228) (644,119) (193,530) (2,015,877) Increase (decrease) in liabilities: Accounts payable (280,740) (1,003) (15,546) (297,289) Compensated absences payable (2,428) 8,483 7,131 13,186 Wages 4,520 8,485 3,702 16,707 Other liabilities (715) (826) - (1,541) Customer deposits (26,855) 4,600 - (22,255) Unearned revenue 3,646,386 - - 3,646,386 Net pension liability 2,485,701 1,616,489 350,026 4,452,216 Total OPEB liability (251,769) (167,693) (66,158) (485,620) Increase in deferred inflows of resources (1,088,008) (550,103) (164,184) (1,802,295) Net cash provided by operating activities $ 7,366,896 $ 828,044 $ 450,655 $ 8,645,595 SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITES Capital grants receivable $ - $ - $ 110,746 $ 110,746 SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS Amortization of deferred loss on refunding $ 5,613 $ - $ - $ 5,613 See notes to the financial statements. 25  CITY OF FORT WALTON BEACH, FLORIDA FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2023 Employee Retirement Funds ASSETS Cash and cash equivalents $ 1,743,683 Investments, at fair value U.S. Government and Agency obligations 12,805,127 Corporate obligations 1,995,251 Corporate equity - Mutual funds and exchange-traded funds 64,471,296 Infrastructure investment funds 5,432,868 Real estate investment funds 11,368,580 Total investments 96,073,122 Accounts receivable 48,142 Due from other governments 606,529 TOTAL ASSETS 98,471,476 LIABILITIES Accounts payable 247,906 NET POSITION RESTRICTED FOR PENSIONS $ 98,223,570 See notes to the financial statements. 26  CITY OF FORT WALTON BEACH, FLORIDA FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2023 Employee Retirement Funds ADDITIONS Contributions Employer $ 3,249,012 Plan members 547,136 State of Florida 606,529 Total contributions 4,402,677 Investment income 9,213,525 Less investment expense (272,939) Net investment income 8,940,586 Miscellaneous revenue 1,815 TOTAL ADDITIONS 13,345,078 DEDUCTIONS Benefits and refunds paid Retirement payments 6,939,692 Disability payments 196,351 Refunds 84,606 Total benefits and refunds paid 7,220,649 Administrative expenses Legal 34,174 Contractual services 224,792 Other 127,004 Total administrative expenses 385,970 TOTAL DEDUCTIONS 7,606,619 CHANGE IN FIDUCIARY NET POSITION 5,738,459 NET POSITION RESTRICTED FOR PENSIONS Beginning of year 92,485,111 End of year $ 98,223,570 See notes to the financial statements. 27  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY Description of the City The City of Fort Walton Beach, Florida, (the City) was originally chartered as a municipality under laws of the State of Florida Special Act of the Florida Legislature in 1937. The City Manager – Council form of government was established in 1953. As authorized by its charter, the City provides the following services: public safety (police, fire, and inspection), highways and streets, water and sewer, sanitation, stormwater, culture and recreation, public improvements, planning and zoning, and general administrative services. The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), as applicable to governmental units and the Uniform Accounting System mandated by Chapter 218.33, Florida Statutes. The Governmental Accounting Standards Board (GASB) is the standard–setting body for governmental accounting and financial reporting. The following is a summary of the more significant accounting policies of the City: The Reporting Entity A seven-member City Council and a Mayor govern the City, each elected at-large for four-year terms. The Council has no powers other than those expressly vested in it by State Statute and the City Charter, and their governmental powers cannot be delegated. As required by U.S. GAAP, these financial statements present the City of Fort Walton Beach (the primary government) and its blended component unit. In evaluating the City as a reporting entity, management has considered all potential component units for which the City may or may not be financially accountable and, as such, be included within the City's financial statements. Management utilized criteria set forth in the GASB literature for determining financial accountability of potential component units in evaluating all potential component units. In accordance with GASB guidance, the City (primary government) is financially accountable if it appoints a voting majority of the potential component unit's governing board and 1) it is able to impose its will on the organization or 2) there is a potential for the organization to provide specific financial benefit to or impose specific financial burden on the City. In addition, component units can be other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. As of September 30, 2023, the City had one component unit, which has been presented in the financial statements of the primary government using the blended presentation method and is presented as a governmental fund type with a fiscal year end of September 30. The Fort Walton Beach Community Redevelopment Agency (the CRA) was formed in 1977 under the provisions of Chapter 163, Florida Statutes, to prepare a community redevelopment plan for a designated geographic area within the City of Fort Walton Beach, Florida. All the City's council members serve as the CRA’s Board of Directors. Therefore, the CRA’s governing body is the same as the governing body of the City. The CRA functions as a department of the City. City management has operational and fiscal responsibility for the CRA’s activities. The CRA has a separate standalone audit report that can be obtained by contacting the Growth Management Department, City Hall Annex, 105 Miracle Strip Parkway S.W., Fort Walton Beach, Florida 32548 or online at www.fwb.org. 28  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED The Reporting Entity – Continued The Fort Walton Beach Housing Authority (the Authority) is considered a related organization to the City rather than a component unit. The City Council appoints the board members of the Authority. However, the Authority's board operates independently of the City Council and does not create a financial burden or benefit to the City. Government-Wide and Fund Financial Statements The basic financial statements include both government-wide (based on the City as a whole) and fund financial statements. The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government and its component unit. For the most part, the effects of interfund activity have been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate fund financial statements are provided for the governmental and proprietary funds. Major individual governmental funds and major enterprise funds are reported as separate columns in the fund financial statements. Separate fund financial statements for the fiduciary funds are disclosed within Note 8 of these financial statements. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Pension plans recognize revenue when contributions are due as there is a statutory requirement to make the contribution. Property taxes are recorded as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within six months of the end of the current fiscal period, except for property taxes, for which the period is 60 days. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. 29  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Measurement Focus and Basis of Accounting – Continued Franchise fees, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments and other receivables within the current fiscal period are considered to be susceptible to accrual as revenue of the current period. Sales taxes, gasoline taxes, and other intergovernmental revenues collected and held by the state at year-end on behalf of the City, are also recognized as revenue. All other revenue items are considered to be measurable and available only when cash is received by the government. The Okaloosa County Tax Collector bills and collects property taxes for the City in accordance with the laws of the State of Florida. Property taxes attach as an enforceable lien on property as of the date of assessment and remain in effect until discharge by payment. Taxes are payable when levied (on November 1st, or as soon thereafter as the assessment roll becomes available to the Tax Collector). The following is the current property tax calendar: Lien Date January 1st Levy Date November 1st Due Date November 1st Delinquent Date April 1st Discounts of 1% for each month taxes are paid prior to March 1st are granted. Revenue recognition criteria for property taxes requires that property taxes expected to be collected within 60 days of the current period be accrued. No accrual has been made for 2023 ad valorem taxes because property taxes are not legally due until subsequent to the end of the fiscal year. Current year taxes, which are uncollected as of the end of the fiscal year, are generally immaterial in amount and highly susceptible to uncollectibility and, therefore, are not recorded as a receivable on the balance sheet date. Basis of Presentation The financial transactions of the City are recorded in individual funds. Each fund is a separate accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. Generally, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are other charges between the government's utility function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 30  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Basis of Presentation – Continued Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Any portion of franchise fees that is not based on gross receipts are reported as a charge for service in the function or activity that generates the fee. During fiscal year 2023, franchise fees were all based on gross receipts and thus recorded as general revenues. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. The City considers all impact fee revenue as capital contributions for the water and sewer system; therefore, no amount from the impact fees are included in operating revenue. Operating expenses for enterprise funds include the cost of sales and service, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The following three broad classifications are used to categorize the fund types used by the City: Governmental Governmental funds focus on the determination of financial position and changes in financial position (sources, uses, and balances of financial resources) and not net income. The City has the following major governmental funds: General Fund – This is the City's primary operating fund and is used to account for all financial resources except those required to be accounted for in another fund. Community Redevelopment Agency Fund – The Community Redevelopment Agency Fund is the operating fund of the Fort Walton Beach Community Redevelopment Agency (the "Agency"). It is used to account for the activities of the Agency. Revenue sources for this fund include tax increment financing proceeds from ad valorem taxes as well as investment income. Proprietary Proprietary funds focus on the determination of net income, changes in net position, financial position, and cash flows. All of the City's proprietary funds are enterprise funds, as fees are charged to external users for services. The following is a description of the major proprietary funds of the City: Utilities Fund – Used to account for the operations of the City, which provides distribution of potable water, sales and service and sanitary wastewater collection, treatment and disposal. Sanitation Fund – Accounts for the operation of the City that provides for solid waste collection and disposal. 31  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Basis of Presentation – Continued Proprietary – Continued Stormwater Fund – Used to account for the revenues and expenses associated with operating the City’s stormwater utility system. Fiduciary Fiduciary funds are used to account for the assets held on behalf of outside parties, including other governments, or on behalf of other funds within the City. The City has the following type of fiduciary fund: Pension Trust Funds – Used to report the resources that are required to be held in trust for the members and beneficiaries of the three defined benefit pension plans administered by the City: General Employees' Retirement Fund, Police Officers' Retirement Fund, and Firefighters' Retirement Fund. Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance Cash and Cash Equivalents The City defines cash and cash equivalents as cash held at a depository and cash on hand for operating purposes and those investments which are short term and highly liquid. Generally, those investments have maturities of three (3) months or less from the date of acquisition. The City maintains an equity in pooled cash fund. The City’s cash deposits are held by banks that qualify as public depositories under the Florida Security for Public Deposits Act as required by Chapter 280, Florida Statutes. The City’s cash deposits are fully insured by the Public Deposits Trust Fund. Investments Investments for the City are reported at fair value (generally based on quoted market prices). Investments are pooled together for investment purposes while each individual fund and/or account is maintained on a daily transaction basis. Investment earnings are distributed in accordance with the participating funds’ relative equity. Allowable investments, with the appropriate minimum rating requirements, can consist of certificates of deposit, local government surplus trust fund, intergovernmental investment pool, SEC registered money market funds, United States government securities, repurchase agreements, banker’s acceptances, commercial paper, United States government agencies, federal instruments, securitized issues, corporate notes and state or local government taxable or tax-exempt debt. In addition, the Beal Memorial Cemetery Perpetual Care special revenue fund and the pension trust funds maintain separate investment accounts that are governed by separate investment policies. The Beal Memorial Cemetery investment policy allows for investments in domestic equities, international equities, real estate investment trusts, inflation hedges, fixed income securities, and cash equivalents within allowable ranges, ratings, and consideration of target asset allocations by asset class. The pension trust funds’ investment policies allow for investments in domestic and international equities, fixed income securities, mutual funds, exchange-traded funds, commingled funds, money market funds, and value add real estate within allowable ranges, ratings, and considerations of target asset allocations by range; however allowable asset classes, targets, ranges, and benchmarks vary by each individual policy. These investments are also reported at fair value. 32  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Receivables and Payables Interfund transactions are reflected as loans, services provided, reimbursements, or transfers. Loans between funds outstanding at the end of the fiscal year are referred to as either "due to other funds" or "due from other funds" (i.e., the current portion of interfund loans) or "advances" (i.e., the non- current portion of interfund loans). Any residual balances outstanding between governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a nonspendable fund balance account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable and available financial resources. Services provided, deemed to be at market, or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide columnar presentation. All proprietary fund receivables are shown net of an allowance for uncollectible accounts. The allowance is computed by considering 100% of receivables in excess of 90 days, past trends on collections of accounts, and current year account write–offs. Inventory Inventory is valued at cost (first-in, first-out). The consumption method is used to account for inventory. Under the consumption method, inventory items are recorded as expenditures during the period the inventory is used. The General Fund inventory balance is considered nonspendable in the fund financial statements to indicate that it is not available for appropriation. Restricted Assets Certain resources in the following funds are restricted for specific purposes: in the Debt Service Fund for repayment of long-term debt; in the General Fund for unspent proceeds related to the Capital Improvement Revenue Note, Series 2018 and the Golf Course Irrigation System Revenue Note, 2021; and in the Utilities Fund customer deposits, impact fees, and repayment of Utility System Revenue Refunding Note, Series 2015. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (roads, bridges, curbs and sidewalks, drainage systems, lighting systems and similar items) are reported in the applicable governmental or business-type activities columns in the government–wide financial statements. 33  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Capital Assets – Continued Capital assets are defined by the City as assets with an initial cost more than the following: Land All Buildings and improvements / infrastructure $ 10,000 Improvements – other $ 10,000 Equipment, vehicles, computers $ 1,000 Library books All In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the government chose to include all such items regardless of their acquisition date or amount. The government was able to estimate the historical cost for the initial reporting of these assets through various allowable estimating techniques. As the government constructs or acquires additional capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. Donated capital assets are recorded at their acquisition value on the date of donation. Major outlays for capital assets and improvements are capitalized in proprietary funds as projects are constructed. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until the completion of the project with interest earned on the invested proceeds over the same period. Property, plant, and equipment of the primary government are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 20-50 Years Improvements other than buildings / system infrastructure 7-40 Years System infrastructure 20-40 Years Machinery and equipment 3-10 Years 34  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. See Note 7 for additional information on the City’s deferred outflows of resources. In addition to liabilities, the statement of financial position will report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. See Note 7 for additional information on the City’s deferred inflows of resources. Compensated Absences It is the City's policy to permit employees to accumulate earned, but unused, vacation and sick leave based on the length of service to the City. All vacation leave is accrued when incurred in the government-wide and proprietary fund financial statements. Sick leave is accrued in the government-wide and proprietary fund financial statements based on a ratio of the sum of sick leave paid over the last several years to the total balance of sick leave at the end of each fiscal year. A liability for the amounts of vacation and sick leave is reported in the governmental fund financial statements only if they have matured, for example, as a result of employee resignations and retirements. Compensated absences of the governmental activities are primarily paid from the General Fund. Long-Term Obligations In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective and straight-line interest methods. Bond issuance costs are expensed as they are incurred. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 35  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Other Postemployment Benefits (OPEB) Liability For the purposes of measuring the total OPEB Liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the total OPEB liability of the Fort Walton Beach's Retiree Health Care Plan and additions to/deductions from the plan's total OPEB liability have been determined on the same basis as they are reported by the plan. For this purpose, the plan recognizes benefit payments when due and payable in accordance with the benefit terms. Typically, OPEB liabilities for governmental activities have been liquidated by the General Fund. See Note 11 for additional information about the City’s other postemployment benefit plan. Net Pension Liability For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of each plan, and additions to/deductions from the fiduciary net position of each plan have been determined on the same basis as they are reported by the Plans. For this purpose, benefit payments (including refunds of employee contributions, if any) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. Administrative costs are financed from each respective fund’s investment earnings. Typically, pension liabilities for governmental activities have been liquidated by the General Fund. GASB Statement No. 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: Valuation Date (VD) October 1, 2021 Measurement Date (MD) September 30, 2022 Measurement Period (MP) October 1, 2021 to September 30, 2022 Classification of Fund Balance GASB guidance establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications are comprised of the following: Nonspendable – Includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example: inventories, deposits, prepaid items, and advances from other funds. Restricted – Includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. 36  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Classification of Fund Balance – Continued Committed – Includes fund balance amounts that can be used only for the specific purposes that are internally imposed by the formal action (an Ordinance) of the government’s highest level of decision- making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action (an Ordinance) that imposed the constraint initially. Contractual obligations are included to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual obligations. Assigned – Includes spendable fund balance amounts that are intended to be used for specific purposes that are neither considered restricted nor committed. Intent is expressed by (a) the City Council or (b) a body (for example: a budget or finance committee) or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes. This indicates that resources in these funds are, at a minimum, intended to be used for the purposes of that fund. The City Council has delegated authority to the City Manager and Finance Director in accordance with the City's fund balance policy. Unassigned – Includes residual positive fund balance within the General Fund which has not been classified within the other aforementioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. These classifications reflect not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of restraint, such as external versus internal compliance requirements. Unassigned fund balance is a residual classification within the General Fund. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. The City's formal fund balance policy establishes a targeted minimum reserve balance in the General Fund for committed fund balance equal to 30% of annual budgeted expenditures, which constitutes the City’s minimum fund balance policy. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. Net Position When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first and then unrestricted resources, as they are needed. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 37  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Change in Accounting Principle In 2023, the City implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements. GASB Statement No. 96 enhances the relevance and consistency of information on the government’s software subscription activities. In accordance with the new guidance, the City is required to recognize a subscription asset and a subscription liability equal to the present value of subscription payments during the subscription term. These changes were incorporated in the City’s 2023 financial statements but had no effect on the beginning fund balances or net position since the carrying amount of subscription assets was equal to the subscription liabilities recorded upon implementation as of October 1, 2022. Reclassifications Certain amounts presented in the prior year have been reclassified in order to be consistent with the current year presentation. Such reclassifications have no effect on total fund balance or net position previously reported. Subsequent Events The City has evaluated events and transactions that occurred between September 30, 2023, and March 15, 2024, which is the date the financial statements were available to be issued, for possible recognition or disclosure in the financial statements. 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgets Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. Annual appropriated budgets are adopted by resolution for all governmental and proprietary funds. However, budgets for proprietary funds are not legally required to be reported on and are not included in these financial statements. All appropriations lapse at fiscal year-end except for appropriations related to multi-year capital projects. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting is a form of budgetary control to ensure that appropriations are not exceeded. Encumbrances outstanding at year-end are reported as assignments of fund balance in the governmental fund types. 38  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 3. DEPOSITS AND INVESTMENTS The City maintains a cash and investment management pool in which each major governmental and enterprise fund participates on a dollar equivalent and daily transaction basis. The City's cash and investment management pool includes pooled cash maintained in interest-bearing demand deposit accounts, and pooled investments managed by a financial institution. Interest income (which includes unrealized gains and losses) is distributed monthly based on the average balances. Deposits Custodial Credit Risk – It is the City's policy to maintain its deposits only with "Qualified Public Depositories" as defined in Chapter 280, Florida Statutes. The provisions of this statute allow Qualified Public Depositories to participate in a multiple financial institution collateral pool to ensure the security for public deposits. All Qualified Public Depositories must place with (or in the name of) the Chief Financial Officer of the State of Florida, collateral in the amount of the average daily balance of public deposits multiplied by the average monthly balance of public deposits or 125 percent of the average daily balance of public deposits greater than capital. In the event of default by a Qualified Public Depository, excess losses over insurance and collateral will be recovered through assessments to all Qualified Public Depositories of the same type as the depository in default. Under this method, all City deposits, including certificates of deposit, are considered fully insured. As of September 30, 2023, the value of the City's deposits was $25,374,566, all of which was held by Qualified Public Depositories under Florida Statutes. Investments As of September 30, 2023, the City's investments consist of the pooled investments held by each fund to maximize earnings on surplus cash, those held in the various pension trust funds and the Beal Memorial Cemetery Perpetual Care special revenue fund. The types of investments, which can be made by the City, are restricted by state statutes, retirement fund plan documents, and other contractual agreements. A description of the requirements and the types of investments allowed can be found in Note 1. 39  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued As of September 30, 2023, the City held the following investments and related maturities: INVESTMENT MATURITIES (YEARS) Fair Value <1 1-5 5-10 10-15 15-20 20-25 25-30 >30 Investments subject to interest rate risk: Corporate debt $ 16,229,950 $ - $ 14,234,699 $ 1,995,251 $ - $ - $ - $ - $ - Municipal debt 2,110,060 130,125 1,979,935 - - - - - - U.S. Treasury 15,535,668 71,470 9,554,836 3,945,997 - 701,063 1,262,302 - - U.S. Government Agencies 1,475,788 198,804 1,276,984 - - - - - - U.S. Government Agency Pools 6,895,765 - - 19,331 142,376 1,588,629 - 5,145,429 - 42,247,231 $ 400,399 $ 27,046,454 $ 5,960,579 $ 142,376 $ 2,289,692 $ 1,262,302 $5,145,429 $ - Investments not subject to interest rate risk: Money market funds 415,395 Mutual and exchange- traded funds 68,118,821 Real estate investment funds 11,368,580 Infrastructure investment funds 5,432,868 External investment pools 8,588,345 Total $ 136,171,240 Interest Rate Risk – The City's investment policy encourages matching investment maturities with known cash needs and anticipated cash flow requirements in order to manage interest rate risk. Investments of current operating funds shall have maturities of no longer than 24 months. Investments of bond reserves, construction funds, and other non-operating funds shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall the investment duration of these funds exceed five years. The investment policies for the pension trust funds do not specifically address interest rate risk. 40  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Credit Rate Risk – State law limits investments of surplus public funds to those investments described on the previous page. The table below outlines the authorized investments of the pension trust funds. General Police Employees' Officers' Firefighters' Retirement Retirement Retirement Investment Type Fund Fund Fund Money Market or short- Minimum rating of Limited to obligations Minimum rating of term investment fund A1 by S&P or backed by full faith & A1 by S&P or (STIF) options P1 by Moody's credit of US government P1 by Moody's Minimum rating in one Minimum rating of Minimum rating in one of Fixed-income securities of the four highest "investment grade" or the four highest classifications by a higher by a major rating classifications by a major major rating service service rating service 1 (1) No more than 5% of the total portfolio may be invested in securities that fall below these rating guidelines. All pension trust funds were in compliance with respective investment policies regarding credit rate risk as of September 30, 2023. The Moody's rating ranges of the different investment classes held by each respective plan at September 30, 2023, are as follows: General Pension Police Pension Plan Plan Fire Pension Plan Corporate debt A1-A3 A1-A3 A1-A3 U.S. Treasury Aaa Aaa Aaa U.S. government agency pools N/A N/A N/A The Beal Memorial Cemetery investment policy does not limit investments to those with specific credit ratings for domestic or international equities. The overall rating of fixed income investments shall be at least investment grade based on the rating of two of the three Nationally Recognized Statistical Rating Organizations (NRSRO). 41  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Concentration of Credit Risk – The City limits the amount that may be invested in any one issuer based on the type of investment. Investments issued by or explicitly guaranteed by the U.S. Government and investments in mutual funds, external investment pools, and other pooled investments are exempt from concentration of credit risk disclosures. The General Employees’ Retirement Fund and the Firefighters’ Retirement Fund investment policies limit investment concentration as follows:  Equities – No more than 5% of the Plan’s assets, at the time of purchase, shall be invested in the common stock, capital stock, or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company.  Fixed Income – The value of bonds issued by any single corporation shall not exceed 10% of the Plan’s total fair value.  Other Limitations – Investments in corporate common stock and convertible bonds shall not exceed 75% of the Plan’s assets at fair value, and foreign securities shall not exceed 25% of the Plan’s fair value. The Police Officers’ Retirement Fund investment policy limits investment concentration as follows:  Equities – No more than 5% of the Plan’s assets, at the time of purchase, shall be invested in the common stock, capital stock, or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company.  Fixed Income – The value of bonds issued by any single corporation shall not exceed 3% of the Plan’s total fair value.  Other Limitations – Investments in corporate common stock and convertible bonds shall not exceed 70% of the Plan’s assets at fair value, and foreign securities shall not exceed 25% of the Plan’s fair value. All pension trust fund plans were in compliance with respective investment policies regarding concentration of credit risk as of September 30, 2023. 42  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Concentration of Credit Risk – Continued The Beal Memorial Cemetery investment policy limits investment concentrations as follows:  Domestic Equities – No more than 5% of the fair value of the total equity portfolio may be invested in the equity of any one corporation; ownership of the shares of one company shall not exceed 2% of those outstanding and not more than 25% of equity at fair value may be held in any one sector.  International Equities – No more than 5% of the fair value of the total equity portfolio may be invested in the common equity of any one corporation; ownership of the shares of one company shall not exceed 2% of those outstanding and not more than 25% of equity at fair value may be held in any one sector.  Fixed Income Investments – Securities of any one issuer shall not exceed 5% of a total bond portfolio at time of purchase. Investments in Entities That Calculate Net Asset Value (NAV) per Share The fair values of investments in real estate funds and external investment pools held by the pension trust funds are based on the investments’ NAV per share, as provided by the investee. Unfunded Redemption Redemption Fair Value Commitments Frequency Notice Period Real estate funds $ 11,368,580 None Quarterly 0 - 90 days Infrastructure funds 5,432,868 None Quarterly 0 - 90 days The real estate funds consist of three open-ended commingled funds that invest in office, industrial, retail, and multi-family real estate assets throughout the United States. Although the funds are private investments, they can be redeemed on a quarterly basis, subject to available liquidity. The infrastructure funds consist of three open-ended funds that invest in long-duration core infrastructure assets throughout North America, Europe, and Australia. Although the funds are private investments, they can be redeemed on a quarterly basis, subject to available liquidity. 43  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 4. FAIR VALUE OF INVESTMENTS The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follow:  Level 1 – Quoted prices (unadjusted) for identical assets in active markets that a government can access at the measurement date.  Level 2 – Inputs other than quoted prices included within Level 1 that are observable for an asset, either directly or indirectly.  Level 3 – Unobservable inputs for an asset. The following table presents the investments carried at fair value on September 30, 2023: Fair Value Level 1 Level 2 Level 3 Money market funds $ 415,395 $ - $ 415,395 $ - Debt securities U.S. Treasury bonds 15,535,668 15,535,668 - - U.S. Government Agency obligations 1,475,788 - 1,475,788 - U.S. Government Agency collateralized mortgage obligations (CMO's) 6,895,765 - 6,895,765 - Corporate bonds 16,229,950 - 16,229,950 - Municipal bonds 2,110,060 - 2,110,060 - Total debt securities 42,247,231 15,535,668 26,711,563 - Equity securities Mutual funds and exchange-traded funds 68,118,821 415,395 67,703,426 - Total equity securities 68,118,821 415,395 67,703,426 - * Infrastructure investment funds 5,432,868 - - - * Real estate investment funds 11,368,580 - - - Total investments measured at fair value 127,582,895 $ 15,951,063 $ 94,830,384 $ - Total investments measured at amortized cost 8,588,345 Total investments at September 30, 2023 $ 136,171,240 * In accordance with GASB 72, certain investments that were measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. Money market funds, debt securities, and equity securities classified in Level 2 are determined by broker quotes that utilize matrix pricing models and other observable market inputs. 44  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 5. RECEIVABLES Receivables on September 30, 2023, were as follows: Governmental Activities Business-Type Activities Other Govt General Funds Utilities Sanitation Stormwater Total Taxes $ 30,934 $ - $ - $ - $ - $ 30,934 Accounts 154,429 - 1,022,420 356,797 78,536 1,612,182 Less allowance for doubtful accounts - - (146,154) (41,507) (10,041) (197,702) Assessments 32,217 - 2,358 - - 34,575 Notes 478,517 - - - - 478,517 Leases receivble 4,042,776 - 84,246 - - 4,127,022 Other - 30 3,827 - - 3,857 Total receivables, net $ 4,738,873 $ 30 $ 966,697 $ 315,290 $ 68,495 $ 6,089,385 During fiscal year 2015, the City sold a building for $462,000 and will receive $442,000 of the proceeds over twelve years ($2,917 monthly payments started November 2014). This note receivable bears interest at 5% per year and includes a balloon payment of $250,065 due to the City in October 2026. The balance of this note receivable is $310,117 as of September 30, 2023. During fiscal year 2014, the City sold a recreational center for $425,000 and will receive the proceeds over twelve years ($3,000 monthly principal only payments started October 2015). The City has calculated imputed interest on the receivable, but it has not been recorded as the imputed amount was deemed to be immaterial to the financial statements. The balance of this note receivable is $128,000 as of September 30, 2023. During fiscal year 2023, the City sold a building for $165,400 and received $125,000 from the buyer at closing. The remaining balance of $40,400 is due in January 2030. The promissory note gives the buyer the option to make specified in-kind building improvements to satisfy the note in lieu of repayment. The balance of the note receivable is $40,400, as of September 30, 2023. Since these receivables will be collected outside the periods of availability, they are reflected in the General Fund’s balance sheet as unavailable revenues as of September 30, 2023. 45  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 5. RECEIVABLES – CONTINUED Leases Receivable The City leases real property to various unrelated parties. The real property is used by the lessees for the following purposes: retail business space, office space, parking lots, cellular and radio communications towers, a restaurant, a fitness center, an art gallery, and an elementary school. Under the provisions of GASB Statement No. 87, the City is a lessor under 13 real property leases. The City’s lease receivable is measured at the present value of lease payments expected to be received during the lease term, including options reasonably certain to be exercised. The lease terms range from 2 to 69 years, and the discount rate used to calculate the present value of the lease payments range from 2.50% to 6.50%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 5.13%, which is the City’s estimated incremental borrowing rate for real property. The total amount of inflows of resources recognized and reflected in the financial statements were as follows: General Utilities Fund Fund Total Lease revenue $ 149,247 $ 16,880 $ 166,127 Interest 190,299 5,759 196,058 Total inflows of resources - leases $ 339,546 $ 22,639 $ 362,185 Due from Other Governments As of September 30, 2023, the City's receivables from other governments for governmental activities were $2,174,091. Amounts due from other governments for governmental activities consists primarily of amounts due from federal and state grant funding agencies for eligible grant expenditures incurred prior to September 30, 2023. As of September 30, 2023, the City’s receivables from other governments for business-type activities were $110,746, which is consists entirely of amounts due from the Florida Department of Environmental Protection for eligible grant expenses incurred prior to September 30, 2023. 46  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 6. CHANGES IN CAPITAL ASSETS Capital asset activity for the year ended September 30, 2023, was as follows: Beginning Adjustments/ Ending Balance Increases Decreases Transfers Balance Governmental activities Capital assets not being depreciated/amortized Land $ 11,131,840 $ 171,298 $ - $ - $ 11,303,138 Construction in progress 231,143 3,105,316 - (379,097) 2,957,362 Total capital assets not being depreciated/amortized 11,362,983 3,276,614 - (379,097) 14,260,500 Capital assets being depreciated/amortized Buildings 36,561,098 130,439 (218,663) - 36,472,874 (1) Improvements other than buildings 36,013,086 611,226 (50,678) 336,449 36,910,083 Software 574,366 - - - 574,366 Machinery and equipment 16,150,984 714,443 (76,111) (60,544) 16,728,772 Financed equipment 1,108,124 304,825 - 51,205 1,464,154 Right-of-use assets 797,949 - - - 797,949 Subscription assets (2) 1,281,392 981,404 - - 2,262,796 Total capital assets being depreciated/amortized 92,486,999 2,742,337 (345,452) 327,110 95,210,994 Less accumulated depreciation/amortization Buildings (15,085,120) (1,083,936) 218,663 - (15,950,393) (1) Improvements other than buildings (25,419,425) (977,240) 50,678 42,648 (26,303,339) Software (571,615) (210) - - (571,825) Machinery and equipment (11,551,491) (1,284,970) 41,001 9,339 (12,786,121) Right-of-use assets (419,900) (195,507) - - (615,407) Subscription assets - (427,805) - - (427,805) Total accumulated depreciation/amortization (53,047,551) (3,969,668) 310,342 51,987 (56,654,890) Total capital assets being depreciated/amortized, net 39,439,448 (1,227,331) (35,110) 379,097 38,556,104 Governmental activities, net $ 50,802,431 $ 2,049,283 $ (35,110) $ - $ 52,816,604 (1) Includes infrastructure assets (2) Beginning balances were the result of implementing GASB Statement No. 96 as of October 1, 2022. These subscription assets were offset by a related subscription liability associated with them. See Note 14 for further details. 47  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 6. CHANGES IN CAPITAL ASSETS – CONTINUED Beginning Adjustments/ Ending Balance Increases Decreases Transfers Balance Business-type activities Capital assets not being depreciated/amortized Land $ 709,678 $ - $ - $ - $ 709,678 Construction in progress 22,113 1,031,797 - - 1,053,910 Easements 39,742 - - - 39,742 Total capital assets not being depreciated/amortized 771,533 1,031,797 - - 1,803,330 Capital assets being depreciated/amortized Buildings 183,322 - - - 183,322 Improvements other than buildings 51,530,151 1,749,855 - - 53,280,006 Software 120,031 - - - 120,031 Machinery and equipment 11,378,277 604,451 (1,200) - 11,981,528 Right-of-use assets 222,484 35,644 - - 258,128 Total capital assets being depreciated/amortized 63,434,265 2,389,950 (1,200) - 65,823,015 Less accumulated depreciation/amortization Buildings (109,835) (4,120) - - (113,955) Improvements other than buildings (25,255,577) (1,701,612) - - (26,957,189) Software (107,799) (8,140) - - (115,939) Machinery and equipment (8,525,792) (762,466) 1,200 - (9,287,058) Right-of-use assets (34,401) (62,654) - - (97,055) Total accumulated depreciation/amortization (34,033,404) (2,538,992) 1,200 - (36,571,196) Total capital assets being depreciated/amortized, net 29,400,861 (149,042) - - 29,251,819 Business-type activities, net $ 30,172,394 $ 882,755 $ - $ - $ 31,055,149 48  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 6. CHANGES IN CAPITAL ASSETS – CONTINUED Amortization of equipment under financing contracts and right-of-use assets is included with depreciation expense in the financial statements. Depreciation and amortization expense was charged to functions/programs of the primary government as follows: Depreciation/Amortization Expense Governmental activities General government $ 831,196 Public safety 1,155,774 Physical environment 57,332 Transportation 443,777 Economic environment 190,341 Culture and recreation 1,291,248 Total depreciation/amortization expense – governmental activities $ 3,969,668 Business-type activities Utilities Fund $ 1,817,841 Sanitation Fund 274,030 Stormwater Fund 447,121 Total depreciation/amortization expense – business-type activities $ 2,538,992 Construction Commitments In February 2023, the City engaged a construction contractor to perform the Fort Walton Beach Landing Phase I improvements for a total price of $2,279,137. The project costs are being funded from several sources including a grant from the Florida Department of Environmental Protection, tourist development tax proceeds, discretionary sales surtax proceeds, and tax increment revenues of the Fort Walton Beach Community Redevelopment Agency. As of September 30, 2023, the City has incurred total contract costs of $862,798, which includes unbilled retainage of $43,140. 49  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES As of September 30, 2023, the City had various components of deferred outflows of resources and deferred inflows of resources as follows: Governmental activities: General Governmental Fund Activities Deferred outflows City pension contributions made subsequent to the measurement date $ - $ 3,651,356 Net difference between projected and actual earnings on pension plan investments - 6,603,223 Differences between expected and actual experience on pension plan actuarial assumptions - 1,186,549 Changes in assumptions related to pension plan - 1,040,057 City OPEB contributions made subsequent to the measurement date 176,888 Changes in assumptions related to OPEB plan - 911,017 Total deferred outflows $ - $ 13,569,090 Deferred inflows Differences between expected and actual experience on pension plan actuarial assumptions $ - $ 249,989 Net difference between projected and actual earnings on pension plan investments - - Changes in assumptions related to pension plan - - Differences between expected and actual experience on OPEB plan actuarial assumptions - 1,244,275 Changes in assumptions related to OPEB plan 1,298,723 Lease contracts 4,042,776 4,042,776 Unavailable revenue - special assessments 32,217 - Unavailable revenue - long-term receivable from sale of buildings 478,517 - Total deferred inflows $ 4,553,510 $ 6,835,763 50  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES – CONTINUED Business-type activities: Utilities Sanitation Stormwater Business-Type Fund Fund Fund Activities Deferred outflows City pension contributions made subsequent to the measurement date $ 68,014 $ 51,981 $ 7,463 $ 127,458 Deferred loss on refunding 54,727 - - 54,727 City OPEB contributions made subsequent to the measurement date 24,584 16,374 6,460 47,418 Changes in assumptions related to OPEB plan 126,633 84,341 33,250 244,224 Total deferred outflows $ 1,554,367 $ 842,239 $ 266,519 $ 2,663,125 Deferred inflows Net difference between projected and actual earnings on pension plan investments $ - $ - $ - $ - Changes in assumptions related to OPEB plan 180,498 120,223 47,430 348,151 Differences between expected and actual experience on OPEB plan actuarial assumptions 172,931 115,182 45,441 333,554 Lease contracts 84,246 - - 84,246 Total deferred inflows $ 437,675 $ 235,405 $ 92,871 $ 765,951 8. DEFINED BENEFIT PENSION PLANS The City of Fort Walton Beach, Florida sponsors three single employer defined benefit pension plans: the General Employees' Retirement Fund (GERF), the Police Officers' Retirement Fund (PORF) and the Firefighters' Retirement Fund (FRF). These plans provide benefits for all qualifying employees of the City. The financial activity of each plan is reported as a Pension Trust Fund in the City of Fort Walton Beach, Florida's internal combined financial statements and can be found under subheading “Fund Financial Statements” of this note. There is no separate report available for the individual pension plans. Plan Description – General Employees’ Retirement Fund (GERF) Plan Administration The authority and responsibility for the establishment, amendment and administration of this Plan is vested in the City Council, and the Members thereof shall be designated as trustees of the fund. The trustees are authorized to adopt reasonable rules and regulations for the administration of the fund created by this Plan. 51  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – General Employees’ Retirement Fund (GERF) – Continued Plan Administration – Continued The Plan is a single employer defined benefit pension plan administered by the City’s Finance Director. The Finance Director shall administer this Plan for the trustees and participants, subject at all times to the limitations and conditions specified in or imposed by provisions of this Plan and the rules and regulations adopted by the City Council. The trustees and the plan administrator shall serve without additional compensation beyond that already provided by the City for their respective duties. Plan membership consists of all full-time City employees including the City Manager, Finance Director, and the Chief of Police, if they elect to participate, but not including City Council Members, police officers other than the Chief of Police, and firefighters. Effective January 1, 2010, the plan is closed to new entrants. Plan Membership as of October 1, 2021: Inactive Plan Members or Beneficiaries Current Receiving Benefits 174 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 38 Active Plan Members 50 262 Benefits Provided The plan provides retirement, termination, disability and death benefits. A member may retire at age 52 with 10 years of credited service (early retirement) or at age 62 and 10 years of credited service (normal retirement). Benefits become 100% vested upon completion of 10 years of credited service. For the City Manager, Finance Director, or Department Heads, including the Chief of Police, the Member becomes vested at 20% per year, except that credited service other than that as a Charter Officer or Department Head will accrue at a rate of 10% per year. Retirement benefits are a percentage (2.75% or 2.50%) of final average earnings times the years of credited service with maximum of 75% or 100% of current compensation depending on vested status at April 5, 1999. Benefits are reduced by 3% for each year by which the early retirement date precedes the age of 62. Varied benefits exist for service and non-service-connected disabilities as well as death in the line of duty or other pre-retirement death. In accordance with the annual increase in CPI-U as measured in December, all retirees are entitled to an adjustment payable each April 1, subject to a minimum of 0% and a maximum of 3%. The adjustment does not apply to members who retire following a vested terminated status or disability retirees. Funding Policy and Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2023, the participants’ contribution rate was 5.0%. The City is required to contribute the remaining amount necessary to fund the normal cost and amortize the unfunded actuarial accrued liability over not more than 15 years. For the year ended September 30, 2023, the City was required to contribute $289,455. 52  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability (Asset) – GERF The measurement date is September 30, 2022. The measurement period for the pension expense was October 1, 2021 to September 30, 2022. The reporting period is October 1, 2022 through September 30, 2023. The City’s net pension liability was measured as of September 30, 2022. The total pension liability used to calculate the net pension liability was determined as of that date. Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2021 updated to September 30, 2022 using the following actuarial assumptions: Inflation 2.50% Salary Increases Age-Based Discount Rate 7.00% Investment Rate of Return 7.00% Mortality rates for healthy lives were obtained from the PubG.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set back one-year Females – Employees and Healthy Retirees Mortality rates for disabled lives were obtained from the PubG.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – Disabled Retirees with three-year set forward Females – Disabled Retirees with three-year set forward The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2021, FRS valuation report for non-special risk employees, with appropriate adjustments made based on plan demographics. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2022, the inflation rate assumption of the investment advisor was 2.50%. 53  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability (Asset) – GERF – Continued Actuarial Assumptions – Continued Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2022 are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 52.50% 7.50% International equity 10.00% 8.50% Broad market fixed income 17.50% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Infrastructure 5.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that Sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 54  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Change in Net Pension Liability (Asset) – GERF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2022 (Valuation Date of 10/01/2021) $ 54,173,531 $ 59,999,067 $ (5,825,536) Changes: Service cost 311,634 - 311,634 Interest 3,695,597 - 3,695,597 Differences between expected and actual experience (614,717) - (614,717) Contributions – employer - 580,847 (580,847) Contributions – employee - 128,595 (128,595) Net investment income - (8,789,933) 8,789,933 Benefit payments, including refunds of employee contributions (3,381,848) (3,381,848) - Administrative expenses - (41,837) 41,837 Net changes 10,666 (11,504,176) 11,514,842 Balances at September 30, 2023 (Measurement Date of 9/30/2022) $ 54,184,197 $ 48,494,891 $ 5,689,306 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 89.50%. Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% Sponsor's net pension liability $ 11,233,811 $ 5,689,306 $ 983,414 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. 55  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – GERF For the year ended September 30, 2023, the City recognized a pension expense of $190,178. On September 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City contributions subsequent to measurement date $ 314,371 $ - Net difference between projected and actual earnings on pension plan investments 5,944,333 - Total $ 6,258,704 $ - Deferred outflows of resources related to pensions of $314,371 resulting from the City’s contributions subsequent to the measurement date will be recognized as a change in the net pension asset for the year ending September 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2024 $ 1,297,551 2025 908,098 2026 1,159,710 2027 2,578,974 $ 5,944,333 Plan Description – Police Officers’ Retirement Fund (PORF) Plan Administration The Police Officers’ Retirement Board of Trustees (Police Board) is designated as the plan administrator. The Police Board shall consist of five Trustees, two of whom, unless otherwise prohibited by law, shall be legal residents of the City, who shall be appointed by the City Council, and two of whom shall be Members of the System, who shall be elected by a majority of the Police Officers who are Members of the System. The fifth Trustee shall be chosen by a majority of the previous four Trustees as provided for herein, and such person's name shall be submitted to the City Council who shall, as a ministerial duty, appoint such person to the Police Board as its fifth Trustee. Each person employed by the City’s police department as a full-time police officer becomes a member of the Plan as a condition of his employment. All police officers are therefore eligible for plan benefits as provided for in the plan document and by applicable law. 56  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – PORF – Continued Plan Membership as of October 1, 2021: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 48 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 17 Active Plan Members 49 114 Benefits Provided The plan provides retirement, termination, disability and death benefits. A member may retire at age 50 with 10 years of credited service or completion of 25 years of credited service (early retirement) or at age 55 or the completion of 30 years of credited service (normal retirement). Members hired between ages 45 and 50 must work 10 years. Benefits become 100% vested upon completion of 10 years of credited service. The plan provides retirement benefits in the amount of 2.75% of average final compensation times credited service. Benefits are reduced 6% for each year prior to the age of 55. Varied benefits exist for disability and pre-retirement death. Each April 1 the benefit paid to service retires is adjusted in accordance with the CPI increase during the previous year not to exceed 3%. Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2023, the participants’ contribution rate was 5.0% of payroll until a 75% maximum accrual is attained and then 0.5% thereafter. The State of Florida is required to contribute 7.4% of payroll and the City is required to contribute the difference between the actuarially determined rate and the contribution rate of the participants and the State of Florida. For the year ended September 30, 2023, the City was required to contribute 39.2% of payroll. Net Pension Liability – PORF The measurement date is September 30, 2022. The measurement period for the pension expense was October 1, 2021 to September 30, 2022. The reporting period is October 1, 2022 through September 30, 2023. The City’s net pension liability was measured as of September 30, 2022. The total pension liability used to calculate the net pension liability was determined as of that date. Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2021 updated to September 30, 2022, using the following actuarial assumptions: Inflation 2.50% Salary increases Service based Discount rate 7.00% Investment rate of return 7.00% 57  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – PORF – Continued Actuarial Assumptions – Continued Mortality rates for healthy lives were obtained from the PubS.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set forward one-year Females – (Below Median) for Employees and Healthy Retirees set forward one-year Mortality rates for disabled lives were obtained from the PubH-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Females – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2021, FRS valuation report for special risk employees, with appropriate adjustments made based on plan demographics. The other significant actuarial assumptions used in the October 1, 2021, valuation were based on the results of an actuarial experience study dated June 4, 2018. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2022, the inflation rate assumption of the investment advisor was 2.50%. Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2022, are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 45.00% 7.50% International equity 15.00% 8.50% Broad market fixed income 20.00% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Infrastructure 5.00% 4.50% Total 100.00% 58  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – PORF – Continued Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in Net Pension Liability – PORF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2022 (Valuation Date of 10/01/2021) $ 32,111,029 $ 27,679,005 $ 4,432,024 Changes: Service cost 748,564 - 748,564 Interest 2,230,909 - 2,230,909 Differences between expected and actual experience (262,825) - (262,825) Contributions – employer - 1,314,250 (1,314,250) Contributions – state - 236,730 (236,730) Contributions – employee - 151,799 (151,799) Net investment income - (3,684,483) 3,684,483 Benefit payments, including refunds of employee contributions (1,978,930) (1,978,930) - Administrative expenses - (63,679) 63,679 Net changes 737,718 (4,024,313) 4,762,031 Balances at September 30, 2023 (Measurement Date of 9/30/2022) $ 32,848,747 $ 23,654,692 $ 9,194,055 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 72.01%. 59  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – PORF – Continued Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% Sponsor's net pension liability $ 13,204,788 $ 9,194,055 $ 5,876,756 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – PORF For the year ended September 30, 2023, the City recognized pension expense of $1,929,847. On September 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City and State contributions subsequent to measurement date $ 1,694,073 $ - Net difference between projected and actual earnings on pension plan investments 2,683,331 - Changes of assumptions 352,852 - Differences between expected and actual experience 238,474 249,989 Total $ 4,968,730 $ 249,989 Deferred outflows of resources related to pensions of $1,694,073 resulting from the City’s and State’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2024 $ 738,976 2025 671,043 2026 492,625 2027 1,122,024 $ 3,024,668 60  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – Firefighters’ Retirement Fund (FRF) Plan Administration The Plan is administered by the Firefighters’ Retirement Board of Trustees (Fire Board) comprised of: a. Two members of the fund elected by a majority of the membership, b. Two City residents appointed by the City Council, c. Fifth member elected by other four and appointed by City Council as a ministerial duty. Each person employed by the City’s fire department as a full-time firefighter becomes a member of the plan as a condition of this employment. All firefighters are therefore eligible for plan benefits as provided for in the plan document and by applicable law. Plan Membership as of October 1, 2021: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 29 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 10 Active Plan Members 43 82 Benefits Provided The plan provides retirement, disability and death benefits. A member may retire at age 45 with 10 years of credited service (early retirement) or at age 55 and 10 years of credited service or 25 years of credited service regardless of age (normal retirement). Benefits become 100% vested upon completion of 10 years of credit service. The plan provides a retirement benefit which is 3.25% of average final compensation times credited service with maximum of 100% of current compensation. Benefits are reduced 0.25% for each month prior to the normal retirement date. Varied benefits exist for disability and pre-retirement death. Benefits for service retirees are adjusted for a 3% cost of living increase on the January 1 following the later of age 58 or the date of retirement. Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2023, the participants’ contribution rate was 8.0% of payroll. The State of Florida is required to contribute 7.8% of payroll and the City is required to contribute the difference between the actuarially determined rate and the contribution rate of the participants and the State of Florida. For the year ended September 30, 2023, the City was required to contribute 44.3% of payroll. Net Pension Liability – FRF The measurement date is September 30, 2022. The measurement period for the pension expense was October 1, 2021 to September 30, 2022. The reporting period is October 1, 2022 through September 30, 2023. The City’s net pension liability was measured as of September 30, 2022. The total pension liability used to calculate the net pension liability was determined as of that date. 61  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – FRF – Continued Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2021, updated to September 30, 2022, using the following actuarial assumptions: Inflation 2.50% Salary increases Service based Discount rate 7.00% Investment rate of return 7.00% Mortality rates for healthy lives were obtained from the PubS.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set forward one-year Females – (Below Median) for Employees and Healthy Retirees set forward one-year Mortality rates for disabled lives were obtained from the PubH-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Females – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2021, FRS valuation report for special risk employees, with appropriate adjustments made based on plan demographics. The most recent actuarial experience study used to review the other significant assumptions was dated June 8, 2022. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2022, the inflation rate assumption of the investment advisor was 2.50%. 62  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – FRF – Continued Actuarial Assumptions – Continued Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2022, are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 47.50% 7.50% International equity 15.00% 8.50% Broad market fixed income 17.50% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Infrastructure 5.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 63  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – FRF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2022 (Valuation Date of 10/01/2021) $ 31,894,238 $ 23,759,893 $ 8,134,345 Changes: Service cost 768,244 - 768,244 Interest 2,229,203 - 2,229,203 Changes of assumptions 103,378 - 103,378 Differences between expected and actual experience 790,469 - 790,469 Contributions – employer - 1,390,710 (1,390,710) Contributions – state - 256,006 (256,006) Contributions – employee - 233,380 (233,380) Contributions – buy back 22,695 22,695 - Net investment income - (3,520,580) 3,520,580 Benefit payments, including refunds of employee contributions (1,633,458) (1,633,458) - Administrative expenses - (64,300) 64,300 Net changes 2,280,531 (3,315,547) 5,596,078 Balances at September 30, 2023 (Measurement Date of 9/30/2022) $ 34,174,769 $ 20,444,346 $ 13,730,423 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 59.82%. Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% Sponsor's net pension liability $ 18,367,045 $ 13,730,423 $ 9,948,539 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. 64  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – FRF For the year ended September 30, 2023, the City recognized a pension expense of $2,543,368. On September 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City and State contributions subsequent to measurement date $ 1,770,370 $ - Net difference between projected and actual earnings on pension plan investments 2,579,857 - Changes of assumptions 687,205 - Differences between expected and actual experience 948,075 - Total $ 5,985,507 $ - Deferred outflows of resources related to pensions of $1,770,370 resulting from the City’s and State’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2024 $ 1,205,690 2025 834,471 2026 958,016 2027 1,216,960 $ 4,215,137 Pension Expense For the fiscal year ended September 30, 2023, the City recognized an aggregate pension expense of $4,663,393 on all defined benefit pension plans. 65  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements The following are the financial statements for the individual pension trust funds (GERF, PORF and FRF) for the year ended September 30, 2023: COMBINING STATEMENT OF PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ASSETS Cash and cash equivalents $ 590,890 $ 651,833 $ 500,960 $ 1,743,683 Accounts receivable - 21,371 26,771 48,142 Due from other governments - 267,370 339,159 606,529 Investments, at market U.S. Government and Agency obligations 6,034,086 4,173,378 2,597,663 12,805,127 Corporate obligations 897,877 648,034 449,340 1,995,251 Mutual and exchange-traded funds 33,324,603 15,971,960 15,174,733 64,471,296 Infrastructure investment funds 2,629,542 1,456,186 1,347,140 5,432,868 Real estate investment funds 6,015,136 2,829,203 2,524,241 11,368,580 Total investments, at market 48,901,244 25,078,761 22,093,117 96,073,122 TOTAL ASSETS 49,492,134 26,019,335 22,960,007 98,471,476 LIABILITIES Accounts payable 59,124 82,153 106,629 247,906 NET POSITION RESTRICTED FOR PENSIONS $ 49,433,010 $ 25,937,182 $ 22,853,378 $ 98,223,570 66  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements – Continued COMBINING STATEMENT OF CHANGES IN PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ADDITIONS Contributions Employer $ 391,098 $ 1,426,703 $ 1,431,211 $ 3,249,012 Plan members 107,036 176,335 263,765 547,136 State of Florida - 267,370 339,159 606,529 Total contributions 498,134 1,870,408 2,034,135 4,402,677 Investment income 4,341,624 2,646,705 2,225,196 9,213,525 Less investment expense (180,286) (54,998) (37,655) (272,939) Net investment income 4,161,338 2,591,707 2,187,541 8,940,586 Miscellaneous revenue 1,812 - 3 1,815 TOTAL ADDITIONS 4,661,284 4,462,115 4,221,679 13,345,078 DEDUCTIONS Benefits and refunds paid Retirement payments 3,490,231 1,832,226 1,617,235 6,939,692 Disability payments 33,583 156,874 5,894 196,351 Other - 36,882 47,724 84,606 Total benefits and refunds paid 3,523,814 2,025,982 1,670,853 7,220,649 Administrative expenses Legal 9,110 12,392 12,672 34,174 Contractual 72,311 76,560 75,921 224,792 Other 40,669 50,852 35,483 127,004 Total administrative expenses 122,090 139,804 124,076 385,970 TOTAL DEDUCTIONS 3,645,904 2,165,786 1,794,929 7,606,619 INCREASE IN PLAN NET POSITION 1,015,380 2,296,329 2,426,750 5,738,459 NET POSITION RESTRICED FOR PENSIONS Beginning of year 48,417,630 23,640,853 20,426,628 92,485,111 End of year $ 49,433,010 $ 25,937,182 $ 22,853,378 $ 98,223,570 67  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 9. DEFINED CONTRIBUTION PENSION PLAN City of Fort Walton Beach Defined Contribution Plan In December 2009, City Council closed the General Employees’ Defined Benefit Plan. All general, full-time employees hired on or after January 1, 2010, are members of the Defined Contribution Retirement Plan (the Plan). The Plan is a money purchase defined contribution retirement plan administered by ICMA Retirement Corporation and Mission Square Retirement, with the City serving as trustee. All funds are held in the ICMA Retirement Corporation Governmental Money Purchase Plan & Trust in the name of each participant. The City finance director serves as the coordinator for the Plan. The Plan requires a 5% payroll contribution by the employee with a 5% employer (City) match. Employees can increase their contribution; however, only an additional 2½% is eligible for City match. Members of the General Employees’ Defined Benefit Pension Plan, who were not fully or partially vested at the time the Plan was opened, were permitted to transfer their contributions to the Plan as a one-time, irrevocable election. The Plan participants individually select and make changes in funding options, which are made available by the independent plan administrator. Since participants select the investment fund or funds in which their deferred compensation accounts are invested, the city has no liability for investment losses. The authority for establishing and amending the Plan’s provisions lies with the City Council. The City Council also has the authority for amending contribution requirements. Contributions made to the Plan by the employees and by the City were $345,081 and $345,081, respectively, for the fiscal year ending September 30, 2023. The City’s contributions vest 20% each year beginning after one year of employment. Participants are fully vested after 5 years of service. 10. DEFERRED COMPENSATION PLAN The City offers employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457 (the Plan). The Plan is a tax-deferred supplemental retirement program that allows City employees to contribute a portion of their salary, before federal income taxes, to a retirement account. The assets are held in trust for the employees’ benefit. The Plan participants individually select and make changes in funding options, which are made available by the independent plan administrator. Since participants select the investment fund or funds in which their deferred compensation accounts are invested, the City has no liability for investment losses. The City’s fiduciary responsibility is to administer the Plan properly and to assure the investment alternatives made available are reasonable. Assets of the Plan have a fair value of $2,553,000 on September 30, 2023. Contributions made by Plan members during the fiscal year ended September 30, 2023, were $156,667. 68  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description The Fort Walton Beach’s Retiree Health Care Plan (the Plan) is a single employer defined benefit postemployment health care plan that covers eligible retired employees of the City. The Plan, which is administered by the City, allows employees who retire and meet retirement eligibility requirements under one of the City’s retirement plans to continue medical, dental, and life insurance coverage as a participant in the City’s plan. Plan Membership as of September 30, 2022: Inactive Plan Members or Beneficiaries Current Receiving Benefits 117 Inactive Plan Members Entitled to But Not Yet Receiving Benefits - Active Plan Members 262 379 Benefits Provided The benefits provided are the same as those provided for active employees. Spouses and dependents of eligible retirees are also eligible for medical coverage. All employees of the City are eligible to receive postemployment health care benefits. Contributions Retirees participating in the group insurance plans offered by the City are required to contribute 100% of the active premiums. In future years, contributions are assumed to increase at the same rate as premiums. Total OPEB Liability The City’s total OPEB liability was measured as of September 30, 2022. The total OPEB liability was determined by an actuarial valuation. The measurement period for OPEB expense was October 1, 2021 to September 30, 2022. The reporting period is October 1, 2022 to September 30, 2023. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2022, using the following actuarial assumptions: Inflation 2.50% Salary Increases Service based Discount Rate 4.77% Initial Trend Rate 7.25% Ultimate Trend Rate 4.00% Years to Ultimate 52 69  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Total OPEB Liability – Continued Actuarial Assumptions – Continued For general employees, mortality rates were based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2018. For female lives, the headcount-weighted PubG- 2010 female employee table was used. For male lives, the headcount-weighted PubG-2010 male below median income employee table, set back one year, was used. For disabled female lives, 100% of the Disabled Female table was used, set forward three years. For disabled male lives, 100% of the Disabled Male table was used, set forward three years. For police and fire employees, mortality rates were also based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2018. For both males and females, the PubS.H-2010 below median income employee table, set forward one year, was used. For both disabled males and females, the 80% PubG.H-2010 and 20%PubS.H-2010 for Disabled Retirees was used. Discount Rate Given the City’s decision not to fund the program, all future benefit payments were discounted using a high-quality municipal bond rate of 4.77%. The high-quality municipal bond rate was based on the week closest but not later than the measurement date of the Bond Buyer 20-Bond Index as published by the Federal Reserve. The 20-Bond Index consists of 20 general obligation bonds that mature in 20 years. The average rating of the 20 bonds is roughly equivalent to Moody's “Aa2” rating and S&P's “AA” rating. Change in Total OPEB Liability Increase (Decrease) Total OPEB Plan Fiduciary Total OPEB Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2022 $ 7,000,692 $ - $ 7,000,692 Changes for the year: Service cost 399,330 - 399,330 Interest 176,997 - 176,997 Differences between expected and actual experience (978,450) - (978,450) Changes of assumptions (1,661,244) - (1,661,244) Contributions – employer - 236,797 (236,797) Benefit payments (233,797) (233,797) - Administrative expense - (3,000) 3,000 Net changes (2,297,164) - (2,297,164) Reporting period ending September 30, 2023 $ 4,703,528 $ - $ 4,703,528 70  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Change in Total OPEB Liability – Continued Sensitivity of the Total OPEB Liability to Changes in the Discount Rate Current 1% Decrease Discount Rate 1% Increase 3.77% 4.77% 5.77% Total OPEB liability $ 5,395,710 $ 4,703,528 $ 4,141,955 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Trend Rates Healthcare Cost 1% Decrease Trend Rates 1% Increase 3.00%-6.25% 4.00%-7.25% 5.00%-8.25% Total OPEB liability $ 4,191,918 $ 4,703,528 $ 5,340,195 OPEB Plan Fiduciary Net Position The plan is unfunded, so the OPEB plan’s fiduciary net position is $0. There are no OPEB assets accumulated in a GASB compliant trust to pay for related plan benefits. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended September 30, 2023, the City recognized OPEB expense of $275,372. On September 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ - $ 1,577,829 Changes of assumptions 1,155,241 1,646,874 Employer contributions subsequent to the measurement date 224,306 - Total $ 1,379,547 $ 3,224,703 71  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – Continued Deferred outflows of resources related to pensions of $224,306 resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ending September 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year ended September 30: 2024 $ (303,955) 2025 (303,959) 2026 (274,517) 2027 (432,837) 2028 (377,100) Thereafter (377,094) $ (2,069,462) 12. UNEARNED REVENUES The composition of unearned revenues as of September 30, 2023, was as follows: General Utilities Fund Fund Totals Federal grant proceeds received in advance of meeting eligibility requirements $ - $ 3,651,981 $ 3,651,981 Unredeemed gift cards 31,931 - 31,931 Charges for services paid in advance - 65,216 65,216 $ 31,931 $ 3,717,197 $ 3,749,128 The American Rescue Plan Act (ARPA) grant documents do not require unspent funds to be held in a separate bank account and since the revenue is not earned, it is not a component of net position at either the fund or government-wide level. The terms of the grant require the funds to be expended by specific dates, and unspent grant funds are not typically considered restricted assets of the governmental unit. Therefore, the City has not reported the unspent proceeds as restricted assets as of September 30, 2023. 72  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 13. FINANCED EQUIPMENT The City has entered into contracts for financing the acquisition of fitness equipment for its recreation complex, a ladder fire truck, and cameras for police vehicles. These agreements qualify as financed purchases for accounting purposes as a result of the transfer of title or bargain purchase option and therefore has been recorded at the present value of the future debt service payments as of the inception date in the General Fund. The assets acquired through financing contracts were as follows: Governmental Assets Activities Fitness equipment $ 75,385 Ladder fire truck 999,320 Police vehicle camera kits 356,030 Accumulated depreciation (323,114) Assets financed, net $ 1,107,621 14. LONG-TERM DEBT Changes in Long-Term Debt Liabilities The following is a summary of changes in long-term debt liabilities of the City for the year ended September 30, 2023: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities Direct placements: Capital Improvement Revenue Note, Series 2013 $ 2,475,784 $ - $ (252,694) $ 2,223,090 $ 256,506 Capital Improvement Revenue Note, Series 2013A 5,203,182 - (417,559) 4,785,623 428,792 Capital Improvement Revenue Bonds, Series 2018 11,365,436 - (414,704) 10,950,732 430,587 Direct borrowings: Golf Course Irrigation System Revenue Note, 2021 1,209,393 - (295,272) 914,121 274,723 Financing contract - fitness equipment 39,580 - (15,087) 24,493 16,070 Financing contract - ladder fire truck 561,165 - (334,892) 226,273 226,273 Financing contract - police equipment - 304,825 (19,010) 285,815 71,454 Lease obligations 393,186 - (200,139) 193,047 161,945 (1) Subscription liabilities 1,281,392 971,904 (538,665) 1,714,631 495,932 Compensated absences 958,865 1,037,605 (970,744) 1,025,726 256,432 Total governmental activities $ 23,487,983 $ 2,314,334 $ (3,458,766) $ 22,343,551 $ 2,618,714 (1) Beginning balances were the result of implementing GASB Statement No. 96 as of October 1, 2022. These liabilities are offset by a related subscription asset. See Note 6 for additional details. 73  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Changes in Long-Term Debt Liabilities – Continued Beginning Ending Due Within Balance Additions Reductions Balance One Year Business-type activities Direct placements: Utility System Revenue Refunding Note, Series 2015 $ 6,167,000 $ - $ (484,000) $ 5,683,000 $ 498,000 Direct borrowings: State Revolving Fund Loan, 2015 10,452,433 - (748,307) 9,704,126 762,594 Lease obligations 190,610 35,644 (60,237) 166,017 63,549 Compensated absences 202,789 259,316 (246,130) 215,975 53,995 Total business-type activities $ 17,012,832 $ 294,960 $ (1,538,674) $ 15,769,118 $ 1,378,138 For the governmental activities, compensated absences are generally liquidated by the General Fund. Description of Long-Term Debt Outstanding Governmental Activities – Direct Placements $4,470,610 City of Fort Walton Beach, Florida, Capital Improvement Refunding Revenue Note, Series 2013, 2.30% interest due semiannually and principal due annually ranging from $187,659 to $299,010 through 2031. Available non ad valorem revenues are pledged for payment of the note. Proceeds were used for refunding Series 2001 revenue bonds for construction of certain capital improvements. $8,500,000 City of Fort Walton Beach, Florida, Capital Improvement Revenue Note, Series 2013A, 2.69% interest due semiannually and principal due annually ranging from $326,969 to $464,334 through 2027 with a balloon payment of $3,000,000 due in 2028. Budgeted and appropriated half cent sales tax is pledged for payment of the note. Proceeds were used to finance the construction of the City's new recreational complex along with the purchase of a bucket truck and a grounds sweeper for City's municipal golf course. $12,520,000 City of Fort Walton Beach, Florida, Capital Improvement Revenue Bonds, Series 2018, bearing interest at 3.83%, due in semiannual payments of principal and interest ranging from $11,583 to $1,019,479 through 2038. Available non ad valorem revenues are pledged for payment of the bond. Proceeds were used to finance the construction of a new field office complex on Hollywood Blvd. In the event of default (non-payment), the lender may declare all outstanding payments of principal and interest on the debt to be immediately due and payable for all of the direct placement issuances discussed above. Furthermore, these direct placement issuances do not contain any subjective acceleration clauses. 74  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Description of Long-Term Debt Outstanding Governmental Activities – Direct Borrowings $1,500,000 golf course revenue note payable, 2021, due in monthly installments of $26,013 through October 2026, which includes principal and interest at 1.55%. The note is payable from pledged revenues of the golf course with any shortfalls funded by legally available non-ad valorem revenues. Proceeds are expected to be used for golf course repairs and renovations in fiscal year 2022. In the event of default (non-payment), the lender may declare all outstanding payments of principal and interest on the debt to be immediately due and payable. This note does not contain any subjective acceleration clauses. $75,135 fitness equipment contract payable, 2020, due in monthly installments of $1,430 through March 2025, which includes principal and interest at 6.34%. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the financed fitness equipment. This agreement does not contain any subjective acceleration clauses. $999,320 ladder fire truck contract payable, 2021, due in monthly installments of $28,455 through May 2024, which includes principal and interest at 1.59%. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the financed ladder fire truck. This agreement does not contain any subjective acceleration clauses. The City has acquired the right to use golf carts, utility carts, commercial mowers, and related ancillary equipment through leases with various unrelated parties. Under the provisions of GASB Statement No. 87, the City is a lessee under 10 equipment leases for its governmental activities. The City’s lease liability is measured at the present value of lease payments expected to be remitted during the lease term, including options reasonably certain to be exercised. The lease terms range from 3 to 5 years, and the discount rate used to calculate the present value of the lease payments range from 4.48% to 4.63%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate for vehicles and equipment. The carrying value of the right-of-use assets and the related accumulated amortization can be found in Note 6. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the leased equipment. These agreements do not contain any subjective acceleration clauses. The City has entered into six subscription-based information technology arrangements with various software vendors as the result of implementing GASB Statement No. 96 as of October 1, 2022. The City’s subscription liability is measured using the present value of subscription payments expected to be remitted to the vendors during the subscription terms, including options reasonably certain to be exercised. The agreements require annual base subscription payments ranging from $6,500 to $250,961. The discount rate used to calculate the present value of the subscription payments was 4.63%, which is the City’s estimated incremental borrowing rate for equipment, software, and similar assets. The carrying value of the related subscription assets can be found in Note 6. In the event of default, the lenders may revoke the City’s licenses to use the underlying software. These agreements do not contain any subjective acceleration clauses. 75  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Description of Long-Term Debt Outstanding – Continued Business-Type Activities – Direct Placements $8,794,000 Utility System Revenue Refunding Note, Series 2015, due in annual installments of $407,000 to $645,000 beginning July 2017 through July 2033, with interest only semi-annual payments from January 2016 through January 2017; stated interest at 2.92%. Net revenues derived by the City from the utility operations are pledged for the payment of the note. Proceeds used to refinance and refund the Utility System Revenue Bonds, Series 2005, which was for water system and wastewater system improvements. In the event of default (non-payment), the lender may declare all outstanding payments of principal and interest on the debt to be immediately due and payable. This note does not contain any subjective acceleration clauses. Business-Type Activities – Direct Borrowings $15,637,939 State of Florida Department of Environmental Protection Revolving Loan Fund; semiannual payments of $471,683 including interest at 1.90% beginning August 2015, through February 2035. Proceeds used for force main replacement, storage tank construction and pump station upgrades. In the event of default (non-payment), the lender may notify financial market credit rating agencies, file suit for past due amounts, and accelerate repayment of unpaid principal to as much as 1.667 times the financing rate. This loan does not contain any subjective acceleration clauses. The City has acquired the right to use two loaders and two excavators through leases with various unrelated parties. The City is a lessee under four equipment leases for its business-type activities. The City’s lease liability is measured at the present value of lease payments expected to be remitted during the lease term, including options reasonably certain to be exercised. The lease terms range from 3 to 5 years, and the discount rate used to calculate the present value of the lease payments range from 4.48% to 4.63%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate for vehicles and equipment. The carrying value of the right-of-use assets and the related accumulated amortization can be found in Note 6. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the leased equipment. These agreements do not contain any subjective acceleration clauses. 76  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Annual Requirements to Amortize Debt Outstanding The annual requirements to amortize all debt outstanding except accrued and annual leave and advances from other funds as of September 30, 2023, were as follows: Governmental Activities: Year Ending Revenue Bonds and Notes Financing Contracts September 30 Principal Interest Principal Interest 2024 $ 1,390,608 $ 610,698 $ 313,797 $ 2,461 2025 1,551,611 573,208 79,877 157 2026 1,597,208 529,610 71,454 - 2027 1,355,392 486,533 71,453 - 2028 3,894,503 439,084 - - 2029-2033 4,737,124 1,335,036 - - 2034-2038 4,347,120 480,880 - - Total $ 18,873,566 $ 4,455,049 $ 536,581 $ 2,618 Year Ending Lease Obligations Subscription Liabilities September 30 Principal Interest Principal Interest 2024 $ 161,945 $ 4,876 $ 495,932 $ 78,790 2025 23,769 802 507,094 55,406 2026 7,333 213 518,953 31,497 2027 - - 192,652 8,327 Total $ 193,047 $ 5,891 $ 1,714,631 $ 174,020 77  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Annual Requirements to Amortize Debt Outstanding – Continued Business-Type Activities: Year Ending Revenue Note State Revolving Loan Lease Obligations September 30 Principal Interest Principal Interest Principal Interest 2024 $ 498,000 $ 165,944 $ 762,594 $ 180,773 $ 63,549 $ 6,111 2025 512,000 151,402 777,152 166,215 66,553 3,309 2026 527,000 136,452 791,988 151,379 35,109 491 2027 542,000 121,063 807,107 136,260 806 4 2028 558,000 105,237 822,515 120,852 - - 2029-2033 3,046,000 271,939 4,354,186 362,648 - - 2034-2038 - - 1,388,584 26,466 - - Total $ 5,683,000 $ 952,037 $ 9,704,126 $ 1,144,593 $ 166,017 $ 9,915 15. COMMENTS REQUIRED BY THE BOND AND ORDINANCES Capital Improvement Refunding Revenue Note, Series 2013 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2023. 3. The City is not aware of any instances of noncompliance with the debt covenants. Capital Improvement Revenue Note, Series 2013A 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2023. 3. The City is not aware of any instances of noncompliance with the debt covenants. 78  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 15. COMMENTS REQUIRED BY THE BOND AND ORDINANCES – CONTINUED Capital Improvement Revenue Bonds, Series 2018 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2023. 3. The City is not aware of any instances of noncompliance with the debt covenants. Golf Course Revenue Note, Series 2021 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2023. 3. The City is not aware of any instances of noncompliance with the debt covenants. Utility System Revenue Refunding Note, Series 2015 1. The statement of net position and statement of revenues, expenses, and changes in net position of the Utility Fund are shown in the financial section of the report. 2. Net revenues pledged consist of gross revenues less costs of operation and maintenance. The net revenues pledged in fiscal year 2023 were approximately $3,946,746. 3. The debt issued refunded Series 2005 bond used for system improvements. 4. The term of the pledge commitment ends in January 2033. 5. The pledged revenues needed to meet the rate covenants in fiscal year 2023 were $830,096. The covenant is based upon 125% of the annual debt service requirement. 6. The pledged revenues exceeded the debt service requirements by $3,116,650 in fiscal year 2023. 7. The City is not aware of any instances of noncompliance with the debt covenants. 79  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 16. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of September 30, 2023, was as follows: Due to/from Other Funds Receivable Fund Payable Fund Amount General Community Development Block Grant $ 67,451 Advance to/from Other Funds Receivable Fund Payable Fund Amount Sanitation General $ 54,574 General Fund receivables from the Community Development Block Grant Fund are the result of eliminating a temporary deficit cash balance. On September 30, 2014, the City’s Sanitation Fund loaned the General Fund $500,000 to purchase a Fire Engine. The loan from the Sanitation Fund will be paid back over a 10-year period at an interest rate of 2.00%. The balance of the advance as of September 30, 2023, is $54,574. The composition of interfund transfers for the year ended September 30, 2023, was as follows: Transfers In Other Governmental Transfers Out General Fund Funds Total General Fund $ - $ 2,441,479 $ 2,441,479 Utilities Fund 1,239,251 - 1,239,251 Sanitation Fund 360,348 - 360,348 Stormwater Fund 198,166 - 198,166 $ 1,797,765 $ 2,441,479 $ 4,239,244 The transfers out of the General Fund were $2,441,479. These transfers consist of a $2,406,861 transfer to the Debt Service Fund (Other Governmental Fund) for principal and interest payments on debt, and a $34,618 transfer to the Beal Memorial Cemetery Perpetual Care Fund (Other Governmental Fund) for permanent maintenance. Transfers into the General Fund of $1,797,765 consist of franchise fees, compensation for heavy trucks wear and tear on roadways, and a portion of the debt service for the new field office complex from the enterprise funds representing their portion of use of the facility. 80  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 17. GOVERNMENTAL FUND BALANCES At September 30, 2023, the City's governmental fund balances were classified as follows: Community Other Total Redevelopment Governmental Governmental General Fund Agency Funds Funds Nonspendable Inventory $ 311,357 $ - $ - $ 311,357 Restricted for Public safety - - 1,566,532 1,566,532 Debt service - - 21,156 21,156 Improvement districts - 6,225,881 - 6,225,881 Library capital projects 132,030 - - 132,030 Discretionary sales taxes 7,101,953 - - 7,101,953 Other purposes 9,127 - - 9,127 Total restricted 7,243,110 6,225,881 1,587,688 15,056,679 Committed Affordable housing projects 1,716,292 - - 1,716,292 Cemetery maintenance 16,412 - 3,814,516 3,830,928 Natural disaster recovery 9,823,759 - - 9,823,759 Total committed 11,556,463 - 3,814,516 15,370,979 Assigned for Capital expenditures 5,222,717 - - 5,222,717 Long-term debt 850,000 - - 850,000 Other purposes 3,518,146 - - 3,518,146 Total assigned 9,590,863 - - 9,590,863 Unassigned 4,983,996 - (19,782) 4,964,214 $ 33,685,789 $ 6,225,881 $ 5,382,422 $ 45,294,092 The Community Development Block Grant special revenue fund had a deficit fund balance at year end. The deficit will be eliminated by future transfers from other funds and by future grant funding. 81  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 18. ENCUMBRANCES The amount of encumbrances outstanding as of September 30, 2023, were as follows: Governmental Funds – General Fund $ 4,936,403 Community Redevelopment Agency Fund 2,880,194 Other Governmental Funds 17,088 $ 7,833,685 Encumbrances at year end do not constitute expenditures or liabilities; therefore, they are not reflected in the statement of revenues, expenditures, and changes in fund balances. 19. EXPENDITURES IN EXCESS OF BUDGETED APPROPRIATIONS The following funds had an excess of expenditures over final budgeted appropriations for the year ended September 30, 2023: Excess Over Fund Budget CDBG Fund $ 19,489 Debt Service Fund $ 125,679 20. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; employee medical benefits and natural disasters. The City purchases insurance through commercial carriers. Insurance coverage for workers’ compensation, liability, casualty, inland marine, flood, police accidental death, public officials’ bonds, fiduciary and fuel tanks were purchased from several commercial carriers during the year ended September 30, 2023. There has been no significant reduction in insurance coverage from the prior year. Commercial insurance coverage has been sufficient to cover all claims made in the prior three fiscal years. 21. COMMITMENTS AND CONTINGENCIES Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time, although the City expects such amount, if any, to be immaterial. 82  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 21. COMMITMENTS AND CONTINGENCIES – CONTINUED Fort Walton Beach Housing Authority (FWBHA) Development Project The FWBHA has applied to the Florida Housing Finance Corporation for low-income housing tax credits (LIHTC) for the Bayside Gardens redevelopment of Charlie Hill Terrace. In order to make the application more competitive, the FWBHA requested a commitment of $340,000 from the City as the Local Government Area of Opportunity (LGAO). The City Council adopted a resolution in fiscal year 2021 to commit the funding requested in the form of a 50% grant and 50% loan to the FWBHA. As of the date of this report, the FWBHA is awaiting a final decision on the application filed with the Florida Housing Finance Corporation. Workforce Housing Incentive Fund In May 2022, the City Council adopted a resolution establishing the Workforce Housing Incentive Fund, which shall be managed by the City’s Growth Management Department. The funds will be used in accordance with guidelines established in section 4.10 of the City’s Land Development Code and any requests for funding will be made in the form of development agreements and require City Council approval. Requests for funding may either be approved as up-front payments or as reimbursements once projects are completed. The City Council shall determine the manner of payments to recipients. The resolution sets forth an initial commitment of $1,500,000 from the City’s General Fund resources to the Workforce Housing Incentive Fund. The City awarded $123,708 from the Workforce Housing Incentive Fund during the year ended September 30, 2023, for development projects. Wastewater Service Interlocal Agreement with Okaloosa County In 2009, the City adopted the Wastewater Service Interlocal Agreement with Okaloosa County (Agreement). The Agreement outlines a long–term association with Okaloosa County Water & Sewer for the treatment of the City’s influent wastewater flow at a set percentage of the County’s base sewer rate plus a locked-in annual rate escalator. The agreement provides other ancillary benefits to the City such as the provision of “no cost” tertiary treated effluent for use as irrigation water at the City’s’ 36–hole municipal Golf Club. The Agreement is effective for 30 years and can be automatically extended for up to two additional terms for a period of ten years for each extension term. On a monthly basis, the County bills the City at a rate equal to $2.77 per each 1,000 gallons of wastewater flow. Additionally, the City pays to the County the Sewer Readiness to Serve Fee, which is equal to $5,507 per month. Annually, the rate per thousand and the Readiness to Serve Fee increases by 3%. Fees paid for wastewater treatment to Okaloosa County, Florida during the year ended September 30, 2023, were $2,421,919. 83  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 21. COMMITMENTS AND CONTINGENCIES – CONTINUED Wastewater Service Interlocal Agreement with Okaloosa County – Continued The minimum commitment by the City under the Agreement is as follows: Fiscal Year Ending September 30 2024 $ 67,239 2025 69,256 2026 71,334 2027 73,474 2028 75,678 2029 through 2033 413,836 2034 through 2038 479,749 2039 104,755 Total $ 1,355,321 22. SUBSEQUENT EVENTS Artificial Turf Contract In January 2024, the City entered into an agreement with a specialty contractor to install artificial sports turf for five baseball/softball fields at the Preston Hood Athletic Complex and 12 soccer goal boxes at the Oakland Heights athletic fields for a total contract price of $794,260. The project is expected to be completed in May 2024. 84 REQUIRED SUPPLEMENTARY INFORMATION  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 13,158,331 $ 13,158,331 $ 13,833,548 $ 675,217 Permits and fees 3,256,178 3,276,428 3,707,886 431,458 Intergovernmental 6,917,455 8,475,376 7,636,947 (838,429) Charges for services 3,338,326 3,343,009 3,743,367 400,358 Fines 64,463 64,463 190,708 126,245 Investment income 25,000 25,000 699,261 674,261 Miscellaneous 668,290 722,240 875,077 152,837 Total revenues 27,428,043 29,064,847 30,686,794 1,621,947 EXPENDITURES Current General governmental services 5,369,630 5,423,787 4,407,665 1,016,122 Public safety 14,360,298 14,569,302 13,905,764 663,538 Physical environment 418,557 418,557 434,119 (15,562) Transportation 814,474 2,321,765 938,417 1,383,348 Economic environment 87,500 87,500 19,500 68,000 Culture and recreation 5,702,918 5,779,721 5,170,888 608,833 Capital outlay 3,933,552 9,604,954 3,916,725 5,688,229 Debt service - - 764,077 (764,077) Total expenditures 30,686,929 38,205,586 29,557,155 8,648,431 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (3,258,886) (9,140,739) 1,129,639 10,270,378 OTHER FINANCING SOURCES (USES) Sale of general capital assets - - 4,668,757 4,668,757 Issuance of financing contracts - - 304,825 304,825 Issuance of subscription liabilities - - 971,904 971,904 Transfers in 1,090,895 1,090,895 1,797,765 706,870 Transfers out (38,400) (2,400,331) (2,441,479) (41,148) Total other financing sources (uses) 1,052,495 (1,309,436) 5,301,772 6,611,208 NET CHANGE IN FUND BALANCE (2,206,391) (10,450,175) 6,431,411 16,881,586 FUND BALANCE AT BEGINNING OF YEAR 2,206,391 10,450,175 27,254,378 16,804,203 FUND BALANCE AT END OF YEAR $ - $ - $ 33,685,789 $ 33,685,789 See notes to the required supplementary information. 85  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION COMMUNITY REDEVELOPMENT AGENCY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 1,510,607 $ 1,510,607 $ 1,510,607 $ - Permits and fees - - 210,673 210,673 Intergovernmental 2,757,390 2,757,390 2,257,919 (499,471) Investment income - - 51,201 51,201 Miscellaneous - - 112,761 112,761 Total revenues 4,267,997 4,267,997 4,143,161 (124,836) EXPENDITURES Current Public safety 413,457 413,457 333,462 79,995 Economic environment 2,616,088 2,616,088 755,547 1,860,541 Capital outlay 630,910 2,254,999 2,062,487 192,512 Total expenditures 3,660,455 5,284,544 3,151,496 2,133,048 NET CHANGE IN FUND BALANCE 607,542 (1,016,547) 991,665 2,008,212 FUND BALANCE AT BEGINNING OF YEAR - 1,016,547 5,234,216 4,217,669 FUND BALANCE AT END OF YEAR $ 607,542 $ - $ 6,225,881 $ 6,225,881 See notes to the required supplementary information. 86  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2023 Budgetary data reflected in the accompanying schedules of revenues, expenditures, and changes in fund balance – budget and actual are established by the following procedures: Prior to September 1st of each year, proposed budgets are received by the City Council from the City Manager. These proposed expenditures, along with all estimated receipts, taxes to be levied, and balances expected to be brought forward are considered by the City Council. The City Council requires such changes as deemed necessary, sets proposed mileages, and establishes dates for tentative and final public budget hearings as prescribed by Florida Statutes. Proposed budgets are advertised in a newspaper of general circulation in the City. Public hearings are conducted for the purposes of receiving input, responding to complaints, and providing reasons and explanations for intended actions to all citizens participating. Prior to October 1st, the budget for all governmental and proprietary funds of the City is legally enacted through passage of a resolution. Budget amendments are periodically passed via resolutions throughout the fiscal year. Budgeted beginning fund balance in the accompanying financial statements reflects planned utilization of prior years' unassigned fund balance to the level required to accomplish current year objectives. The level of budgetary control (that is the level at which expenditures cannot legally exceed appropriations) has been established at the fund level. The City Manager and Finance Director are authorized to transfer budgeted amounts within departments of a fund and between departments of a fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. Budget amounts reflected in the financial statements are originally adopted amounts as amended by action of the City Council by revision of fund totals. All amendments to the originally adopted amounts were made in a legally permissible manner. 87  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) GENERAL EMPLOYEES’ RETIREMENT FUND Reporting Date * 2023 2022 2021 2020 2019 2018 2017 2016 2015 Total Pension Liability Service cost $ 311,634 $ 330,178 $ 366,197 $ 372,064 $ 446,214 $ 504,055 $ 557,163 $ 569,712 $ 622,382 Interest 3,695,597 3,677,931 3,723,744 3,888,510 3,827,379 3,771,606 3,317,396 3,314,990 3,222,809 Differences between expected and actual experience (614,717) 275,286 60,721 (466,270) (265,877) (404,763) 400,221 (1,074,244) - 1 Changes of assumptions - 1,521,135 618,633 (768,706) - - 4,485,495 - - Benefit payments, including refunds of employee contributions (3,381,848) (3,366,874) (3,327,697) (3,161,812) (3,157,696) (3,056,444) (2,858,889) (2,676,038) (2,575,304) Net change in total pension liability 10,666 2,437,656 1,441,598 (136,214) 850,020 814,454 5,901,386 134,420 1,269,887 Total pension liability – beginning 54,173,531 51,735,875 50,294,277 50,430,491 49,580,471 48,766,017 42,864,631 42,730,211 41,460,324 Total pension liability – ending (a) 54,184,197 54,173,531 51,735,875 50,294,277 50,430,491 49,580,471 48,766,017 42,864,631 42,730,211 Plan Fiduciary Net Position Contributions – employer $ 580,847 $ 1,024,247 $ 1,419,339 $ 1,751,654 $ 2,006,925 $ 1,254,097 $ 1,280,082 $ 1,355,041 $ 1,296,450 Contributions – member 128,595 136,164 147,885 150,018 158,138 171,869 202,268 209,567 212,790 Net investment income (8,789,933) 10,772,183 4,869,412 1,788,274 4,975,937 4,967,834 4,031,981 (4,390) 3,228,153 Benefit payments, including refunds of employee contributions (3,381,848) (3,366,874) (3,327,697) (3,161,812) (3,157,696) (3,056,444) (2,858,889) (2,676,038) (2,575,304) Administrative expenses (41,837) (48,305) (50,568) (40,421) (49,518) (42,201) (35,704) (39,535) (42,483) Net change in plan fiduciary net position (11,504,176) 8,517,415 3,058,371 487,713 3,933,786 3,295,155 2,619,738 (1,155,355) 2,119,606 Plan fiduciary net position – beginning 59,999,067 51,481,652 48,423,281 47,935,568 44,001,782 40,706,627 38,086,889 39,242,244 37,122,638 Plan fiduciary net position – ending (b) 48,494,891 59,999,067 51,481,652 48,423,281 47,935,568 44,001,782 40,706,627 38,086,889 39,242,244 Net pension liability (asset) – ending (a) – (b) $ 5,689,306 $ (5,825,536) $ 254,223 $ 1,870,996 $ 2,494,923 $ 5,578,689 $ 8,059,390 $ 4,777,742 $ 3,487,967 Plan fiduciary net position as a percentage of the total pension liability 89.50% 110.75% 99.51% 96.28% 95.05% 88.75% 83.47% 88.85% 91.84% Covered payroll $ 2,571,886 $ 2,723,263 $ 2,957,684 $ 3,000,359 $ 3,162,762 $ 3,437,375 $ 4,045,350 $ 4,191,304 $ 4,255,801 Net pension liability as a percentage of covered payroll 221.21% -213.92% 8.60% 62.36% 78.88% 162.30% 199.23% 113.99% 81.96% Notes: 1 As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System in its July 1, 2019, actuarial valuation for non-special risk lives, with appropriate risk and collar adjustments made based on plan demographics. The investment rate of return assumption was lowered from 7.60% to 7.30% for the 2021 reporting date. The investment rate of return assumption was lowered from 7.30% to 7.00% for the 2022 reporting date. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 88  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) POLICE OFFICERS’ RETIREMENT FUND Reporting Date * 2023 2022 2021 2020 2019 2018 2017 2016 2015 Total Pension Liability Service cost $ 748,564 $ 699,264 $ 546,326 $ 384,431 $ 395,440 $ 334,061 $ 344,958 $ 336,234 $ 322,118 Interest 2,230,909 2,142,668 2,143,525 1,976,534 2,112,261 2,084,744 1,948,181 1,953,123 1,905,286 Change in excess state money - - (172,843) 40,065 20,893 8,823 - - - 3 Changes of benefit terms - - 1,428,025 - - - - - - Differences between expected and actual experiences (262,825) 476,947 (211,485) 283,813 (833,418) (343,066) (425,107) (659,966) - 2 Changes of assumptions - 682,631 46,143 584,615 (251,695) - 1,633,122 - - Benefit payments, including refunds of employee contributions (1,978,930) (1,900,983) (1,868,482) (1,851,074) (1,764,575) (1,821,727) (1,744,710) (1,655,069) (1,632,053) Net change in total pension liability 737,718 2,100,527 1,911,209 1,418,384 (321,094) 262,835 1,756,444 (25,678) 595,351 Total pension liability – beginning 32,111,029 30,010,502 28,099,293 26,680,909 27,002,003 26,739,168 24,982,724 25,008,402 24,413,051 Total pension liability – ending (a) 32,848,747 32,111,029 30,010,502 28,099,293 26,680,909 27,002,003 26,739,168 24,982,724 25,008,402 Plan Fiduciary Net Position 1 Contributions – employer $ 1,314,250 $ 1,232,753 $ 806,946 $ 732,187 $ 830,613 $ 569,215 $ 577,564 $ 628,975 $ 836,053 Contributions – state 236,730 223,280 217,473 221,641 202,468 190,399 181,303 175,025 175,703 Contributions – member 151,799 147,074 132,013 113,192 112,112 104,557 102,214 101,886 96,591 Net investment income (3,684,483) 4,499,980 2,166,715 1,085,486 1,609,609 2,036,244 1,698,093 (538,198) 1,869,244 Benefit payments, including refunds of employee contributions (1,978,930) (1,900,983) (1,868,482) (1,851,074) (1,764,575) (1,821,727) (1,744,710) (1,655,069) (1,632,053) Administrative expenses (63,679) (52,862) (57,304) (64,930) (54,400) (39,184) (44,882) (25,084) (38,242) Net change in plan fiduciary net position (4,024,313) 4,149,242 1,397,361 236,502 935,827 1,039,504 769,582 (1,312,465) 1,307,296 Plan fiduciary net position – beginning 27,679,005 23,529,763 22,132,402 21,895,900 20,960,073 19,920,569 19,150,987 20,463,452 19,156,156 Plan fiduciary net position – ending (b) 23,654,692 27,679,005 23,529,763 22,132,402 21,895,900 20,960,073 19,920,569 19,150,987 20,463,452 Net pension liability – ending (a) – (b) $ 9,194,055 $ 4,432,024 $ 6,480,739 $ 5,966,891 $ 4,785,009 $ 6,041,930 $ 6,818,599 $ 5,831,737 $ 4,544,950 Plan fiduciary net position as a percentage of the total pension liability 72.01% 86.20% 78.41% 78.76% 82.07% 77.62% 74.50% 76.66% 81.83% Covered payroll $ 3,035,976 $ 2,941,480 $ 2,640,254 $ 2,263,844 $ 2,242,245 $ 2,091,146 $ 2,073,208 $ 2,037,716 $ 1,975,478 Net pension liability as a percentage of covered payroll 302.84% 150.67% 245.46% 263.57% 213.40% 288.93% 328.89% 286.19% 230.07% See notes to schedule on the next page. 89  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) – CONTINUED POLICE OFFICERS’ RETIREMENT FUND Notes: 1 Adjusted for actual contributions made. 2 As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System in its July 1, 2019, actuarial valuation for special risk lives, with appropriate risk and collar adjustments made based on plan demographics. For the 2021 reporting date, changes of assumptions resulted from the changes in benefit terms discussed below; the retirement assumptions were updated to assume 25% probability of retirement between ages 52-54 with less than 25 year of service, as well as 50% probability of retirement upon completion of 25 years of service, and a 100% probability of retirement upon completion of 26 or more years of service. The investment rate of return assumption was lowered from 7.40% to 7.20% for the 2021 reporting date. The investment rate of return assumption was lowered from 7.20% to 7.00% for the 2022 reporting date. 3 For the 2021 reporting date, the plan was amended by Ordinance 2025 to provide the following benefit changes: 1) requirements for normal retirement eligibility to be the earlier of age 52 and 10 years of service or 25 years of service (regardless of age); 2) reduces the early retirement reduction from 6.00% to 3.00% per year for each year prior to normal retirement; and 3) increases the maximum benefit accrual rate from 2.75% to 3.00% of average final compensation per year for each year of service, up to a maximum of 75% of average final compensation. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 90  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) FIREFIGHTERS’ RETIREMENT FUND Reporting Date * 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Total Pension Liability Service cost $ 768,244 $ 645,171 $ 546,149 $ 513,466 $ 477,930 $ 494,032 $ 453,506 $ 478,365 $ 414,836 $ 384,107 Interest 2,229,203 2,115,954 2,063,083 1,978,589 1,864,720 1,830,663 1,645,954 1,554,072 1,425,875 1,367,809 Change in excess state money - - - - - - - - 89,886 2 Changes of benefit terms - - - (2,402) - - - 804,097 - - Differences between expected and actual experiences 790,469 397,047 231,328 98,199 513,043 (199,349) 261,007 (224,382) - - Contributions – buy back 22,695 - - - - 32,155 - 72,413 - - 1 Changes of assumptions 103,378 760,987 66,865 655,972 601,424 258,300 1,243,794 - - - Benefit payments, including refunds of employee contributions (1,633,458) (1,536,000) (1,459,394) (1,407,554) (1,318,156) (1,434,474) (1,237,389) (1,140,432) (1,071,302) (1,042,333) Net change in total pension liability 2,280,531 2,383,159 1,448,031 1,836,270 2,138,961 981,327 2,366,872 1,544,133 859,295 709,583 Total pension liability – beginning 31,894,238 29,511,079 28,063,048 26,226,778 24,087,817 23,106,490 20,739,618 19,195,485 18,336,190 17,626,607 Total pension liability – ending (a) 34,174,769 31,894,238 29,511,079 28,063,048 26,226,778 24,087,817 23,106,490 20,739,618 19,195,485 18,336,190 Plan Fiduciary Net Position Contributions – employer $ 1,390,710 $ 1,390,526 $ 1,231,466 $ 1,016,560 $ 1,089,746 $ 794,144 $ 744,019 $ 672,369 $ 715,439 $ 703,618 Contributions – state 256,006 235,435 209,723 219,901 195,017 204,568 201,904 205,007 214,272 204,226 Contributions – member 233,380 226,099 204,865 189,154 182,127 173,480 164,876 150,357 135,622 133,633 Contributions – buy back 22,695 - - - - 32,155 - 72,413 - - Net investment income (3,520,580) 3,874,693 1,922,011 564,309 1,430,717 1,401,324 969,107 15,563 1,201,162 1,099,298 Benefit payments, including refunds of employee contributions (1,633,458) (1,536,000) (1,459,394) (1,407,554) (1,318,156) (1,434,474) (1,237,389) (1,140,432) (1,071,302) (1,042,333) Administrative expenses (64,300) (44,086) (55,253) (66,388) (67,773) (28,449) (43,625) (47,088) (34,537) (33,706) Net change in plan fiduciary net position (3,315,547) 4,146,667 2,053,418 515,982 1,511,678 1,142,748 798,892 (71,811) 1,160,656 1,064,736 Plan fiduciary net position – beginning 23,759,893 19,613,226 17,559,808 17,043,826 15,532,148 14,389,400 13,590,508 13,662,319 12,501,663 11,436,927 Plan fiduciary net position – ending (b) 20,444,346 23,759,893 19,613,226 17,559,808 17,043,826 15,532,148 14,389,400 13,590,508 13,662,319 12,501,663 Net pension liability – ending (a) – (b) $ 13,730,423 $ 8,134,345 $ 9,897,853 $ 10,503,240 $ 9,182,952 $ 8,555,669 $ 8,717,090 $ 7,149,110 $ 5,533,166 $ 5,834,527 Plan fiduciary net position as a percentage of the total pension liability 59.82% 74.50% 66.46% 62.57% 64.99% 64.48% 62.27% 65.53% 71.17% 68.18% Covered payroll $ 2,917,251 $ 2,826,544 $ 2,560,508 $ 2,364,429 $ 2,276,592 $ 2,168,503 $ 2,060,954 $ 2,072,260 $ 2,054,879 $ 2,054,879 Net pension liability as a percentage of covered payroll 470.66% 287.78% 386.56% 444.22% 403.36% 394.54% 422.96% 344.99% 269.27% 283.94% Notes: 1 The investment rate of return assumption was lowered from 7.20% to 7.00% for the 2022 reporting date. The investment rate of return assumption was lowered from 7.40% to 7.20% for the 2021 reporting date. As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System in its July 1, 2019, actuarial valuation for special risk lives, with appropriate risk and collar adjustments made based on plan demographics. 2 Effective July 1, 2019, Chapter 118.1816, Florida Statutes states that a death or disability for a firefighter due to the diagnosis of cancer or circumstances that arise out of the treatment of cancer will be treated as duty-related. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 91  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS (UNAUDITED) FORT WALTON BEACH RETIREE HEALTH CARE PLAN Reporting Date * 2023 2022 2021 2020 2019 2018 Total OPEB Liability Service cost $ 399,330 $ 410,684 $ 230,648 $ 190,791 $ 91,714 $ 105,139 Interest 176,997 155,984 228,430 235,597 205,213 187,954 2 Differences between expected and actual experience (978,450) - (1,195,507) - (494,909) - 1 Changes of assumptions (1,661,244) (334,427) 1,699,860 519,859 288,811 (639,051) Benefit payments (233,797) (218,502) (250,893) (232,308) (151,409) (139,227) Net change in total OPEB liability (2,297,164) 13,739 712,538 713,939 (60,580) (485,185) Total OPEB liability - beginning 7,000,692 6,986,953 6,274,415 5,560,476 5,621,056 6,106,241 Total OPEB liability - ending (a) 4,703,528 7,000,692 6,986,953 6,274,415 5,560,476 5,621,056 Plan Fiduciary Net Position Contributions - employer 236,797 228,302 253,893 242,108 154,409 148,727 3 Benefit payments (233,797) (218,502) (250,893) (232,308) (151,409) (139,227) Administrative expenses (3,000) (9,800) (3,000) (9,800) (3,000) (9,500) Net change in plan fiduciary net position - - - - - - Plan fiduciary net position - beginning - - - - - - Plan fiduciary net position - ending (b) - - - - - - Sponsor's total OPEB liability - ending (a) - (b) $ 4,703,528 $ 7,000,692 $ 6,986,953 $ 6,274,415 $ 5,560,476 $ 5,621,056 Plan fiduciary net position as a percentage of total OPEB liability ** 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Covered-employee payroll (projected) $ 13,747,571 $ 12,653,509 $ 12,085,491 $ 11,392,366 $ 10,891,364 $ 7,927,323 City's total OPEB liability as a percentage of covered-employee payroll 34.21% 55.33% 57.81% 55.08% 51.05% 70.91% Notes: 1 As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System to match the pension plan assumptions. Changes of assumptions and other inputs also reflect the changes in the discount rate each period. The following are the discount rates used in each period: FY 2023: 4.77% FY 2022: 2.43% FY 2021: 2.14% FY 2020: 3.58% FY 2019: 4.18% In addition, there were changes to actuarial assumptions for updated health care costs and premiums, health care trend rates, mortality rates, retirement rates, and disability rates. 2 Differences between expected and actual experience reflects the impact of changes to the census data from the prior valuation to the valuation as of 9/30/2020. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. **There are no OPEB plan assets accumulated in a GASB compliant trust to pay for related plan benefits. 92  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) LAST TEN FISCAL YEARS Plan Year 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 General Employees' Retirement Fund Actuarially determined contribution $ 289,455 $ 580,847 $ 1,024,247 $ 1,419,339 $ 1,602,192 $ 1,771,147 $ 1,120,584 $ 1,197,424 $ 1,286,744 $ 1,187,794 Contributions in relation to the actuarially determined contributions 314,371 580,847 1,024,247 1,419,339 1,751,654 2,006,925 1,254,097 1,280,082 1,355,041 1,296,450 Contribution deficiency (excess) $ (24,916) $ - $ - $ - $ (149,462) $ (235,778) $ (133,513) $ (82,658) $ (68,297) $ (108,656) Covered payroll1 $ 2,140,710 $ 2,571,886 $ 2,723,263 $ 2,957,684 $ 3,000,359 $ 3,162,762 $ 3,437,375 $ 4,045,350 $ 4,191,304 $ 4,255,801 Contributions as a percentage of covered payroll 14.69% 22.58% 37.61% 47.99% 58.38% 63.45% 36.48% 32.33% 32.33% 30.46% Police Officers' Retirement Fund Actuarially determined contribution $ 1,643,297 $ 1,429,945 $ 1,456,033 $ 1,024,419 $ 837,623 $ 928,289 $ 650,347 $ 709,037 $ 772,294 $ 932,426 Contributions in relation to the actuarially determined contributions 1,694,073 1,550,980 1,456,033 1,024,419 913,763 1,033,081 750,791 790,573 772,294 1,011,756 Contribution deficiency (excess) $ (50,776) $ (121,035) $ - $ - $ (76,140) $ (104,792) $ (100,444) $ (81,536) $ - $ (79,330) Covered payroll1 $ 3,526,388 $ 3,035,976 $ 2,941,480 $ 2,640,254 $ 2,263,844 $ 2,242,245 $ 2,091,146 $ 2,073,208 $ 2,037,716 $ 1,975,478 Contributions as a percentage of covered payroll 48.04% 51.09% 49.50% 38.80% 40.36% 46.07% 35.90% 38.13% 37.90% 51.22% Firefighters' Retirement Fund Actuarially determined contribution $ 1,627,107 $ 1,546,144 $ 1,534,814 $ 1,293,057 $ 1,127,832 $ 1,138,295 $ 899,929 $ 816,138 $ 748,086 $ 824,007 Contributions in relation to the actuarially determined contributions 1,706,211 1,646,716 1,625,961 1,441,189 1,236,461 1,284,763 998,712 945,923 877,376 839,825 Contribution deficiency (excess) $ (79,104) $ (100,572) $ (91,147) $ (148,132) $ (108,629) $ (146,468) $ (98,783) $ (129,785) $ (129,290) $ (15,818) Covered payroll1 $ 3,123,046 $ 2,917,251 $ 2,826,544 $ 2,560,508 $ 2,364,429 $ 2,276,592 $ 2,168,503 $ 2,060,954 $ 2,072,260 $ 2,121,613 Contributions as a percentage of covered payroll 54.63% 56.45% 57.52% 56.29% 52.29% 56.43% 46.06% 45.90% 42.34% 39.58% ¹ As of 2014, the Covered payroll numbers shown are in compliance with GASB Statement No. 82. See notes to the schedule of contributions. 93  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS SEPTEMBER 30, 2023 Measurement Period Ended: 9/30/2022 9/30/2021 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 General Employees' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense -14.99% 21.35% 10.25% 3.78% 11.43% 12.45% 10.78% -0.01% 8.82% Police Officers' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense -13.47% 19.34% 10.01% 5.08% 7.82% 10.52% 9.12% -2.69% 9.96% Firefighters' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense -14.84% 19.75% 11.01% 3.33% 9.24% 9.88% 7.25% 0.12% 9.72% Note: This information is not available for previous years. 94  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) GENERAL EMPLOYEES’ RETIREMENT FUND Valuation Date: October 1, 2021 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Funding method: Entry-Age Actuarial Cost Method Mortality rates: Healthy lives: Female: PubG.H-2010 for Employees Male: PubG.H-2010 (Below Median) for Employees, set back one year Disabled lives: Female: PubG.H-2010 for Disabled Retirees, set forward three years Male: PubG.H-2010 for Disabled Retirees, set forward three years Interest rate: 7.00% per year, compounded annually, net of investment related expenses Inflation: 2.50% Termination rates: Age-based rates. Sample rates as follows: Sample Ages Probability 25 7.724% 30 7.397% 35 6.858% 40 6.113% 45 5.163% 50 4.316% 55 4.371% 60 5.631% Disability rates: Age-based rates. Sample rates as follows: Sample Ages Probability 20 0.07% 30 0.11% 40 0.19% 50 0.51% 60 1.66% 95  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED GENERAL EMPLOYEES’ RETIREMENT FUND Salary increases: Age-based increase table, as follows: Age Increase* Under 25 6.50% 25-34 5.50% 35-44 4.50% 45+ 3.50% *Increase shown is inclusive of a 3% wage inflationary assumption. Retirement age: 100% probability of retirement upon attaining age 62 and ten years of service, along with probabilities of retiring with a subsidized benefit prior to age 62 at the following rates: Age Probability 52 4.218% 53 4.249% 54 4.293% 55 4.371% 56 4.500% 57 4.688% 58 4.941% 59 5.258% 60 5.631% 61 6.053% Cost of living increase: 2.50% per year beginning at retirement Payroll growth: None (closed plan) for purposes of amortizing the Unfunded Actuarial Accrued Liability. Actuarial asset All assets are valued at fair value with an adjustment made to uniformly spread method: actuarial investment gains and losses (as measured by actual fair value investment return against expected fair value investment return) over a five-year period. 96  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) POLICE OFFICERS’ RETIREMENT FUND Valuation Date: October 1, 2021 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Funding method: Entry-Age Normal Actuarial Cost Method Mortality rates: Healthy lives: Female: PubS.H-2010 (Below Median) for Employees, set forward one year Male: PubS.H-2010 (Below Median) for Employees, set forward one year Disabled lives: Female: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Male: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Interest rate: 7.00% per year, compounded annually, net of investment related expenses Retirement age: Member Age Retirement Probability 50-51 5.0% 52-54 25.0% 55-56 10.0% 57 33.3% 58-59 50.0% 60+ 100.0% In addition to the above table, 100% are assumed to retire upon completion of 25 years of service at the age of 60. Early retirement: Service Years Retirement Probability 25 50.0% 26+ 100.0% Cost-of-living increase: 2.50% per year beginning at retirement Payroll growth: None Actuarial asset All assets are valued at fair value with an adjustment made to uniformly spread method: actuarial investment gains and losses (as measured by actual fair value investment return against expected fair value investment return) over a five-year period. 97  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED POLICE OFFICERS’ RETIREMENT FUND Marital assumption: 100% of active members are assumed to be married, with husbands 3 years older than wives. Salary increases: Service Years Assumption Less than 1 10.0% 1-4 6.5% 5-9 6.0% 10-14 5.5% 15-19 4.5% 20+ 3.5% In addition to the table on the previous page, projected salary at retirement is increased 20% to account for non-regular compensation. Disability rate: % Becoming Disabled During the Age Year 20 0.28% 25 0.30% 30 0.36% 35 0.46% 40 0.60% 45 1.02% 50 2.00% 55 3.10% 60 4.18% It is assumed that 75% of disablements are service-related. Termination rate: Service Years Termination Probability Less than 2 15.0% 2-4 12.0% 5-6 10.0% 7-9 2.0% 10 8.0% 11 7.5% 12 7.0% 13 6.5% 14-19 6.0% 20+ 2.0% 98  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) FIREFIGHTERS’ RETIREMENT FUND Valuation Date: October 1, 2021 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial cost method: Entry Age Normal Actuarial Cost Method Mortality rates: Healthy lives: Female: PubS.H-2010 (Below Median) for Employees,set forward one year. Male: PubS.H-2010 (Below Median) for Employees,set forward one year Disabled lives: Female: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Male: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Interest rate: 7.00% per year compounded annually, net of investment related expenses Disability rate: See table below; it is assumed that 75% of disablements and active Member deaths are service related. Termination rate: See table below; assumed rates were approved in conjunction with an actuarial experience study dated June 2017. Salary increases: See table below; assumed rates were approved in conjunction with an actuarial experience study dated June 2017. Cost-of-living increase: 3.00% per year beginning at age 58 Payroll growth: 1.49% per year, in compliance with Part VII of Chapter 112, Florida Statutes Actuarial asset All assets are valued at fair value with an adjustment made to uniformly spread method: actuarial investment gains and losses (as measured by actual fair value investment return against expected fair value investment return) over a five-year period. Salary increases: Service Years Increase 0 12.0% 1-9 6.0% 10+ 5.0% 99  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED FIREFIGHTERS’ RETIREMENT FUND Disability rate: Age Disability Rate 20 0.14% 25 0.15% 30 0.18% 35 0.23% 40 0.30% 45 0.51% 50 1.00% 55 1.55% 60 2.09% 65 2.09% Termination rate: Service Years Termination Rate 0 13.0% 1 12.0% 2 11.0% 3 10.0% 4 9.0% 5 8.0% 6 7.0% 7 6.5% 8 6.0% 9 5.5% 10 5.0% 11 4.5% 12+ 4.0% Retirement age: Member Age Retirement Probability 45 - 54 3.0% 55+ 100.0% In addition to the above table, 100% are assumed to retire upon completion of 25 years of service. The assumed rates in this table were approved in conjunction with an actuarial experience study dated June 2017. 100  CITY OF FORT WALTON BEACH, FLORIDA NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2023 Special Revenue Funds Beal Law Memorial Total Law Enforcement Florida Community Cemetery Nonmajor Enforcement Trust Building Development Perpetual Governmental Trust Training Code Block Grant Care Debt Service Funds ASSETS Cash and cash equivalents $ 210,762 $ 30,009 $ 1,415,249 $ - $ 160,685 $ - $ 1,816,705 Investments - - - - 3,657,073 - 3,657,073 Receivables - - - - 30 - 30 Due from other governments 18,825 - - 76,132 - - 94,957 Restricted assets Cash and cash equivalents - - - - - 21,156 21,156 TOTAL ASSETS $ 229,587 $ 30,009 $ 1,415,249 $ 76,132 $ 3,817,788 $ 21,156 $ 5,589,921 LIABILITIES Accounts payable $ - $ - $ 5,755 $ 28,463 $ 3,272 $ - $ 37,490 Accrued liabilities 85,569 - 16,989 - - - 102,558 Due to other funds - - - 67,451 - - 67,451 Total liabilities 85,569 - 22,744 95,914 3,272 - 207,499 FUND BALANCE Restricted 144,018 30,009 1,392,505 - - 21,156 1,587,688 Committed - - - - 3,814,516 - 3,814,516 Unassigned - - - (19,782) - - (19,782) Total fund balance 144,018 30,009 1,392,505 (19,782) 3,814,516 21,156 5,382,422 TOTAL LIABILITIES AND FUND BALANCE $ 229,587 $ 30,009 $ 1,415,249 $ 76,132 $ 3,817,788 $ 21,156 $ 5,589,921 101  CITY OF FORT WALTON BEACH, FLORIDA NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2023 Special Revenue Funds Beal Law Memorial Total Law Enforcement Florida Community Cemetery Nonmajor Enforcement Trust Building Development Perpetual Debt Governmental Trust Training Code Block Grant Care Service Funds REVENUES Permits and fees $ - $ - $ 804,189 $ - $ - $ - $ 804,189 Intergovernmental 22,910 - - 251,792 - - 274,702 Fines 38,530 7,823 - - - - 46,353 Investment income - - - - 352,299 - 352,299 Miscellaneous 2,353 291 14,827 - 3,184 - 20,655 Total revenues 63,793 8,114 819,016 251,792 355,483 - 1,498,198 EXPENDITURES Current Public safety 26,629 - 601,859 - - - 628,488 Physical environment - - - - 11,098 - 11,098 Economic environment - - - 251,792 - - 251,792 Capital outlay - - 39,739 - - - 39,739 Debt service Principal - - - - - 1,749,218 1,749,218 Interest - - - - - 657,643 657,643 Total expenditures 26,629 - 641,598 251,792 11,098 2,406,861 3,337,978 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 37,164 8,114 177,418 - 344,385 (2,406,861) (1,839,780) OTHER FINANCING SOURCES Transfers in - - - - 34,618 2,406,861 2,441,479 Total other financing sources - - - - 34,618 2,406,861 2,441,479 NET CHANGE IN FUND BALANCE 37,164 8,114 177,418 - 379,003 - 601,699 FUND BALANCE (DEFICIT) AT BEGINNING OF YEAR 106,854 21,895 1,215,087 (19,782) 3,435,513 21,156 4,780,723 FUND BALANCE (DEFICIT) AT END OF YEAR $ 144,018 $ 30,009 $ 1,392,505 $ (19,782) $ 3,814,516 $ 21,156 $ 5,382,422 102  CITY OF FORT WALTON BEACH, FLORIDA LAW ENFORCEMENT TRUST SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental $ - $ 49,077 $ 22,910 $ (26,167) Fines - - 38,530 38,530 Miscellaneous 2,309 2,309 2,353 44 Total revenues 2,309 51,386 63,793 12,407 EXPENDITURES Current Public safety 12,173 61,250 26,629 34,621 Capital outlay - - - - Total expenditures 12,173 61,250 26,629 34,621 NET CHANGE IN FUND BALANCE (9,864) (9,864) 37,164 47,028 FUND BALANCE AT BEGINNING OF YEAR 9,864 9,864 106,854 96,990 FUND BALANCE AT END OF YEAR $ - $ - $ 144,018 $ 144,018 103  CITY OF FORT WALTON BEACH, FLORIDA LAW ENFORCEMENT TRUST TRAINING SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Fines $ 400 $ 400 $ 7,823 $ 7,423 Miscellaneous 100 100 291 191 Total revenues 500 500 8,114 7,614 EXPENDITURES Current Public safety 500 500 - 500 Total expenditures 500 500 - 500 NET CHANGE IN FUND BALANCE - - 8,114 8,114 FUND BALANCE AT BEGINNING OF YEAR - - 21,895 21,895 FUND BALANCE AT END OF YEAR $ - $ - $ 30,009 $ 30,009 104  CITY OF FORT WALTON BEACH, FLORIDA FLORIDA BUILDING CODE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Permits and fees $ 624,152 $ 624,152 $ 804,189 $ 180,037 Miscellaneous 500 500 14,827 14,327 Total revenues 624,652 624,652 819,016 194,364 EXPENDITURES Current Public safety 641,025 641,025 601,859 39,166 Capital outlay 29,891 29,891 39,739 (9,848) Total expenditures 670,916 670,916 641,598 29,318 NET CHANGE IN FUND BALANCE (46,264) (46,264) 177,418 223,682 FUND BALANCE AT BEGINNING OF YEAR 46,264 46,264 1,215,087 1,168,823 FUND BALANCE AT END OF YEAR $ - $ - $ 1,392,505 $ 1,392,505 105  CITY OF FORT WALTON BEACH, FLORIDA COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental $ 142,827 142,827 $ 251,792 $ 108,965 Total revenues 142,827 142,827 251,792 108,965 EXPENDITURES Current Economic environment 232,303 232,303 251,792 (19,489) Total expenditures 232,303 232,303 251,792 (19,489) NET CHANGE IN FUND BALANCE (89,476) (89,476) - 89,476 FUND BALANCE (DEFICIT) AT BEGINNING OF YEAR 89,476 89,476 (19,782) (109,258) FUND BALANCE (DEFICIT) AT END OF YEAR $ - $ - $ (19,782) $ (19,782) 106  CITY OF FORT WALTON BEACH, FLORIDA BEAL MEMORIAL CEMETERY PERPETUAL CARE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 352,299 $ 352,299 Miscellaneous 300 300 3,184 2,884 Total revenues 300 300 355,483 355,183 EXPENDITURES Current Physical environment 14,919 14,919 11,098 3,821 EXCESS OF REVENUES OVER EXPENDITURES (14,619) (14,619) 344,385 359,004 OTHER FINANCING SOURCES (USES) Transfers in 38,400 38,400 34,618 (3,782) Transfers out (49,680) (766,377) - 766,377 Total other financing sources (uses) (11,280) (727,977) 34,618 762,595 NET CHANGE IN FUND BALANCE (25,899) (742,596) 379,003 1,121,599 FUND BALANCE AT BEGINNING OF YEAR 46,297 762,994 3,435,513 2,672,519 FUND BALANCE AT END OF YEAR $ 20,398 $ 20,398 $ 3,814,516 $ 3,794,118 107  CITY OF FORT WALTON BEACH, FLORIDA DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Miscellaneous $ - $ - $ - $ - Total revenues - - - - EXPENDITURES Debt service Principal 1,993,611 1,993,611 1,749,218 244,393 Interest 287,571 287,571 657,643 (370,072) Total expenditures 2,281,182 2,281,182 2,406,861 (125,679) DEFICIENCY OF REVENUES UNDER EXPENDITURES (2,281,182) (2,281,182) (2,406,861) (125,679) OTHER FINANCING SOURCES Transfers in 2,281,182 2,281,182 2,406,861 125,679 NET CHANGE IN FUND BALANCE - - - - FUND BALANCE AT BEGINNING OF YEAR - - 21,156 21,156 FUND BALANCE AT END OF YEAR $ - $ - $ 21,156 $ 21,156 108 III. STATISTICAL SECTION (UNAUDITED) This section of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, and note disclosures say about the City’s overall financial Health. Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive and annual financial reports for the relevant year.  City of Fort Walton Beach, Florida SCHEDULE 1 NET POSITION BY COMPONENT Last Ten Fiscal Years (full accrual basis of accounting) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Governmental Activities Net investment in capital assets $ 24,866,399 $ 27,443,877 $ 27,791,054 $ 27,347,098 $ 29,375,380 $ 28,280,342 $ 28,266,271 $ 28,034,343 $ 28,661,006 $ 31,498,779 Restricted Debt service 25,449 25,449 21,156 21,156 26 - 21,156 21,156 21,156 21,156 Improvement Districts 4,073,364 1,874,265 1,437,363 1,552,484 1,812,525 1,691,456 3,060,014 4,133,412 5,234,216 6,225,881 Public safety 565,946 507,625 536,448 426,892 468,331 673,892 879,583 1,060,646 1,343,836 1,566,532 Other purposes 172,630 187,575 165,895 93,456 66,707 1,370,446 2,248,298 3,784,023 5,776,594 7,243,110 Unrestricted 10,700,661 159,868 2,158,813 (1,447,438) (2,667,720) (377,793) 4,171,642 8,279,303 8,070,651 10,278,765 Total governmental activities net position $ 40,404,449 $ 30,198,659 $ 32,110,729 $ 27,993,648 $ 29,055,249 $ 31,638,343 $ 38,646,964 $ 45,312,883 $ 49,107,459 $ 56,834,223 Business-Type Activities Net investment in capital assets $ 13,779,184 $ 12,886,793 $ 12,893,855 $ 13,818,340 $ 13,829,575 $ 13,678,160 $ 14,566,978 $ 14,023,752 $ 13,422,691 $ 15,556,733 Restricted Debt service 1,082,935 157,228 157,228 157,228 157,228 157,228 157,228 157,228 157,228 157,228 System improvements 367,263 382,734 404,761 452,472 440,212 454,564 465,123 476,154 463,361 434,824 Unrestricted 9,658,709 10,656,992 11,118,844 11,731,659 12,252,058 14,010,607 14,639,462 15,561,538 15,699,234 14,439,484 Total business-type activities net position $ 24,888,091 $ 24,083,747 $ 24,574,688 $ 26,159,699 $ 26,679,073 $ 28,300,559 $ 29,828,791 $ 30,218,672 $ 29,742,514 $ 30,588,269 Primary Government Net investment in capital assets $ 38,645,583 $ 40,330,670 $ 40,684,909 $ 41,165,438 $ 43,204,955 $ 41,958,502 $ 42,833,249 $ 42,058,095 $ 42,083,697 $ 47,055,512 Restricted 6,287,587 3,134,876 2,722,851 2,703,688 2,945,029 4,347,586 6,831,402 9,632,619 12,996,391 15,648,731 Unrestricted 20,359,370 10,816,860 13,277,657 10,284,221 9,584,338 13,632,814 18,811,104 23,840,841 23,769,885 24,718,249 Total primary government net position $ 65,292,540 $ 54,282,406 $ 56,685,417 $ 54,153,347 $ 55,734,322 $ 59,938,902 $ 68,475,755 $ 75,531,555 $ 78,849,973 $ 87,422,492 Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 109  City of Fort Walton Beach, Florida SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (full accrual basis of accounting) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Expenses Governmental activities General government $ 3,179,768 $ 2,735,875 $ 3,285,039 $ 3,581,072 $ 3,799,439 $ 3,559,619 $ 4,182,204 $ 4,222,810 $ 4,318,011 $ 5,321,980 Public safety 9,685,621 9,562,140 10,172,215 11,507,059 11,420,904 11,159,777 12,040,368 13,746,451 14,020,586 19,077,377 Physical environment 392,255 379,334 430,490 543,287 505,458 519,126 497,072 547,701 531,268 531,784 Transportation 1,495,374 1,474,209 1,494,178 1,536,979 1,401,819 1,406,227 1,268,589 1,253,402 1,401,797 1,385,178 Economic environment 803,175 1,813,782 1,540,230 1,591,643 1,174,794 1,412,332 1,317,571 1,131,722 1,194,625 1,217,467 Culture and recreation 4,829,004 4,601,503 5,375,183 5,403,198 5,538,881 5,781,339 5,999,273 5,990,714 6,103,857 6,545,449 Debt service interest 483,301 340,497 323,639 304,331 291,590 664,131 727,034 700,924 716,930 728,062 Total government activities 20,868,498 20,907,340 22,620,974 24,467,569 24,132,885 24,502,551 26,032,111 27,593,724 28,287,074 34,807,297 Business-type activities Utilities 9,185,338 9,205,259 10,066,769 9,420,248 9,810,437 9,961,949 9,315,619 10,574,909 10,480,961 10,003,984 Sanitation 3,393,269 3,319,760 3,407,992 3,687,087 3,774,624 3,720,984 3,824,136 3,996,753 4,142,106 4,774,632 Stormwater 439,191 460,314 611,351 681,541 727,282 762,181 764,925 1,040,698 1,035,826 967,922 Total business-type activities 13,020,013 12,985,333 14,086,112 13,788,876 14,312,343 14,445,114 13,904,680 15,612,360 15,658,893 15,746,538 Total primary government expenses $ 33,888,511 $ 33,892,673 $ 36,707,086 $ 38,256,445 $ 38,445,228 $ 38,947,665 $ 39,936,791 $ 43,206,084 $ 43,945,967 $ 50,553,835 Program Revenues Governmental activities Charges for services General government $ 476,824 $ 421,987 $ 421,503 $ 448,911 $ 434,820 $ 508,494 $ 532,475 $ 550,688 $ 354,235 $ 291,558 Public safety 495,111 490,379 523,163 570,556 532,536 643,944 1,440,937 1,883,415 2,204,959 2,296,942 Physical environment 376,998 409,253 371,205 399,338 387,821 414,695 415,266 724,582 535,838 486,857 Transportation 140,038 140,809 207,860 240,653 246,164 252,418 258,883 270,779 288,888 198,547 Economic environment 10 5,000 392,118 12,000 - 21,300 36,701 51,039 46,413 47,806 Culture and recreation 1,853,087 1,930,131 1,805,332 1,846,019 2,078,405 2,171,484 2,095,326 2,572,448 2,787,760 3,076,149 Operating grants and contributions 682,200 909,461 908,595 825,624 706,094 765,032 4,049,001 2,348,391 1,460,346 1,866,820 Capital grants and contributions 109,629 525,320 802,809 361,641 1,487,587 37,406 232,491 186,874 125,832 1,251,331 Total governmental activities program revenues 4,133,897 4,832,340 5,432,585 4,704,742 5,873,427 4,814,773 9,061,080 8,588,216 7,804,271 9,516,010 Business-type activities Charges for services Utilities 8,586,045 9,233,820 10,141,724 10,970,823 10,737,496 11,390,289 11,356,045 11,856,685 11,944,833 11,790,008 Sanitation 3,571,037 3,582,005 3,599,838 3,663,445 3,774,519 3,871,204 3,934,207 4,381,765 4,824,130 5,018,548 Stormwater 596,133 694,581 860,644 917,844 975,805 1,027,310 1,035,033 1,035,527 1,037,228 1,036,590 Capital grants and contributions (157,294) 87,797 533,515 1,314,521 151,049 93,282 211,962 89,963 46,063 122,670 Total business-type activities program revenues 12,595,921 13,598,203 15,135,721 16,866,633 15,638,869 16,382,085 16,537,247 17,363,940 17,852,254 17,967,816 Total primary government program revenues $ 16,729,818 $ 18,430,543 $ 20,568,306 $ 21,571,375 $ 21,512,296 $ 21,196,858 $ 25,598,327 $ 25,952,156 $ 25,656,525 $ 27,483,826 Continued… 110  City of Fort Walton Beach, Florida SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (full accrual basis of accounting) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Net (Expense)/Revenue Governmental activities $ (16,734,601) $ (16,075,000) $ (17,188,389) $ (19,762,827) $ (18,259,458) $ (19,687,778) $ (16,971,031) $ (19,005,508) $ (20,482,803) $ (25,291,287) Business-type activities (424,092) 612,870 1,049,609 3,077,757 1,326,526 1,936,971 2,632,567 1,751,580 2,193,361 2,221,278 Total primary government $ (17,158,693) $ (15,462,130) $ (16,138,780) $ (16,685,070) $ (16,932,932) $ (17,750,807) $ (14,338,464) $ (17,253,928) $ (18,289,442) $ (23,070,009) General Revenues and Other Changes in Net Position Governmental activities Taxes Property taxes $ 5,385,235 $ 5,473,438 $ 5,617,998 $ 5,807,598 $ 6,041,303 $ 6,416,668 $ 6,573,751 $ 6,608,861 $ 7,025,573 $ 7,618,352 Sales taxes 2,362,190 2,557,062 2,707,153 2,792,840 2,941,301 4,335,114 4,940,279 6,021,460 6,401,055 6,142,151 Utility service taxes 3,889,976 4,036,009 3,931,939 3,962,859 4,182,026 4,045,085 4,024,523 4,136,505 4,294,415 4,515,669 Tax Increments for Redevelopment district 1,501,208 1,552,560 1,628,439 1,649,589 1,811,121 1,893,803 2,369,529 2,320,213 2,404,122 2,668,386 Franchise fees 2,004,101 2,162,617 2,202,420 2,034,209 2,131,104 2,084,717 2,070,302 2,146,088 2,355,837 2,415,585 Intergovernmental, unrestricted 819,556 896,837 910,615 981,613 1,009,901 1,034,884 978,949 1,101,020 1,374,067 1,407,882 Gain on sale of assets 520,152 524,720 873,101 - - 66,523 158,530 740,344 39,877 4,740,578 Miscellaneous 103,986 199,776 27,976 157,806 93,106 77,264 44,913 93,227 83,470 72,967 Investment earnings (losses) 345,734 272,076 444,972 414,160 263,824 1,225,235 1,071,190 743,927 (1,498,120) 1,638,716 Transfers 2,851,638 657,558 755,846 761,739 847,373 1,091,579 1,747,686 1,759,782 1,797,083 1,797,765 Total governmental activities 19,783,776 18,332,653 19,100,459 18,562,413 19,321,059 22,270,872 23,979,652 25,671,427 24,277,379 33,018,051 Business-type activities Gain on sale of assets 22,813 716 26,093 32,663 14,258 44,914 16,801 260,579 - 50,435 Miscellaneous 6,839 9,222 5,502 27,727 16,575 17,671 1,551 105,520 4,088 1,580 Investment earnings (losses) 55,669 159,761 165,583 85,567 9,388 713,509 624,999 31,984 (876,524) 370,227 Transfers (2,851,638) (657,558) (755,846) (761,739) (847,373) (1,091,579) (1,747,686) (1,759,782) (1,797,083) (1,797,765) Total business-type activities (2,766,317) (487,859) (558,668) (615,782) (807,152) (315,485) (1,104,335) (1,361,699) (2,669,519) (1,375,523) Total primary government $ 17,017,459 $ 17,844,794 $ 18,541,791 $ 17,946,631 $ 18,513,907 $ 21,955,387 $ 22,875,317 $ 24,309,728 $ 21,607,860 $ 31,642,528 Change in Net Position Governmental activities $ 3,049,175 $ 2,257,653 $ 1,912,070 $ (1,200,414) $ 1,061,601 $ 2,583,094 $ 7,008,621 $ 6,665,919 $ 3,794,576 $ 7,726,764 Business-type activities (3,190,409) 125,011 490,941 2,461,975 519,374 1,621,486 1,528,232 389,881 (476,158) 845,755 Total primary government $ (141,234) $ 2,382,664 $ 2,403,011 $ 1,261,561 $ 1,580,975 $ 4,204,580 $ 8,536,853 $ 7,055,800 $ 3,318,418 $ 8,572,519 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY13, Cost Allocations were reported as expense reductions in General Government - in prior years they were reported as transfers. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 111  City of Fort Walton Beach, Florida SCHEDULE 3 FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Fund Nonspendable $ 262,964 $ 249,732 $ 240,865 $ 245,181 $ 250,315 $ 269,837 $ 286,427 $ 259,960 $ 284,342 $ 311,357 Restricted 4,083,267 183,512 163,817 93,456 66,707 4,497,485 2,248,298 5,712,331 6,164,287 7,243,110 Committed 5,589,056 5,761,221 6,009,523 6,687,557 6,663,230 8,019,062 8,045,739 8,649,189 10,409,244 11,556,463 Assigned 1,584,887 1,396,207 1,198,378 1,891,555 1,913,861 2,341,510 2,184,202 3,908,571 3,096,152 9,590,863 Unassigned 1,300,881 2,225,633 4,356,681 3,561,586 2,282,375 3,291,695 8,218,150 8,845,558 7,300,353 4,983,996 Total general fund $ 12,821,055 $ 9,816,305 $ 11,969,264 $ 12,479,335 $ 11,176,488 $ 18,419,589 $ 20,982,816 $ 27,375,609 $ 27,254,378 $ 33,685,789 All Other Governmental Funds Nonspendable $ 798 $ 848 $ 1,762 $ - $ - $ - $ - $ - $ - $ - Restricted 4,663,961 2,410,554 1,995,283 2,000,532 2,280,882 2,365,348 3,960,753 5,215,214 6,599,208 7,813,569 Committed 2,249,720 2,259,756 2,467,828 2,739,865 2,974,049 3,120,593 3,451,682 4,154,232 3,435,513 3,814,516 Unassigned (6,231) - - (5,861) (19,270) (31,326) (17,483) (19,782) (19,782) (19,782) Total all other governmental funds $ 6,908,248 $ 4,671,158 $ 4,464,873 $ 4,734,536 $ 5,235,661 $ 5,454,615 $ 7,394,952 $ 9,349,664 $ 10,014,939 $ 11,608,303 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 112  City of Fort Walton Beach, Florida SCHEDULE 4 CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Revenues Taxes $ 11,537,812 $ 11,837,177 $ 11,941,311 $ 12,220,392 $ 12,741,642 $ 13,101,370 $ 13,441,866 $ 13,705,445 $ 14,378,360 $ 15,344,155 Licenses, permits, and fees 2,392,487 2,564,079 2,623,810 2,514,178 2,586,035 2,659,200 3,475,389 4,102,640 4,471,993 4,722,748 Intergovernmental 3,376,079 3,951,367 4,322,696 4,266,425 4,880,937 5,516,224 9,870,743 9,094,488 8,760,009 10,169,568 Charges for services 2,373,486 2,499,107 2,402,801 2,488,384 2,739,021 2,868,887 2,757,191 3,461,193 3,628,960 3,743,367 Fines and forfeits 133,645 131,020 121,513 127,406 101,378 94,578 93,827 77,476 117,291 237,061 Investment income (losses) - - - - - - - - (1,939,598) 1,102,761 Miscellaneous 827,526 1,142,936 935,821 1,042,958 819,264 1,770,325 1,561,538 1,358,329 910,757 1,008,493 Total Revenues 20,641,035 22,125,686 22,347,952 22,659,743 23,868,277 26,010,584 31,200,554 31,799,571 30,327,772 36,328,153 Expenditures General governmental services 2,891,275 2,813,835 3,017,374 3,228,767 3,631,410 3,377,241 3,620,756 3,632,924 3,737,220 4,407,665 Public safety 9,082,876 9,080,984 9,053,178 9,913,344 10,584,430 10,157,745 11,255,650 12,988,274 14,189,424 14,867,714 Physical environment 325,864 339,596 337,831 372,552 425,472 439,446 440,769 491,526 484,405 445,217 Transportation 867,730 862,712 852,602 890,762 762,058 824,349 723,669 741,097 890,333 938,417 Economic environment 745,586 1,730,631 1,432,788 1,468,393 1,045,687 1,282,063 1,182,887 945,657 1,006,864 1,026,839 Culture and recreation 3,744,452 4,122,310 4,196,979 4,170,787 4,477,927 4,685,690 4,929,243 4,924,696 4,880,270 5,170,888 Capital outlay 4,721,096 8,128,139 2,105,686 1,598,285 3,574,823 10,498,028 4,546,491 2,823,402 3,827,661 6,018,951 Debt service Principal 612,996 660,107 673,851 682,229 718,320 698,381 1,084,666 1,203,619 1,871,562 2,488,022 Interest and other costs 377,574 354,544 336,835 316,629 297,245 547,165 734,680 708,959 725,016 682,916 Total expenditures 23,369,449 28,092,858 22,007,124 22,641,748 25,517,372 32,510,108 28,518,811 28,460,154 31,612,755 36,046,629 Excess of revenue over (under) expenditures (2,728,414) (5,967,172) 340,828 17,995 (1,649,095) (6,499,524) 2,681,743 3,339,417 (1,284,983) 281,524 Other Financing Sources (Uses) Proceeds from financing contracts - 67,774 - - - 350,000 74,135 - - 304,825 Proceeds from issuance of leases - - - - - - - - 31,944 - Proceeds from issuance of subscription liabilities - - - - - - - - - 971,904 Transfers in 1,636,165 1,721,632 1,798,184 1,794,419 1,868,634 2,353,906 3,620,644 3,723,288 4,217,403 4,239,244 Transfers out (1,241,454) (1,064,074) (1,042,338) (1,032,680) (1,021,261) (1,262,327) (1,872,958) (1,963,506) (2,420,320) (2,441,479) Sale of general capital assets - - 850,000 - - - - 748,986 - 4,668,757 Debt issuance - - - - - 12,520,000 - 2,499,320 - - Total other financing sources (uses) 394,711 725,332 1,605,846 761,739 847,373 13,961,579 1,821,821 5,008,088 1,829,027 7,743,251 Net change in fund balance $ (2,333,703) $ (5,241,840) $ 1,946,674 $ 779,734 $ (801,722) $ 7,462,055 $ 4,503,564 $ 8,347,505 $ 544,044 $ 8,024,775 Debt service as a percentage of noncapital expenditures 5.31% 5.08% 5.08% 4.75% 4.63% 5.66% 7.59% 7.46% 9.35% 10.56% Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government- wide information include information beginning in that year. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. Note: Beginning in FY22, the City implemented GASB Statement No. 87, Leases Note: Beginning in FY22, the City began separately reporting investment income (looses) from other miscellaneous revenues Note: Beginning in FY23, the City implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements 113  City of Fort Walton Beach, Florida SCHEDULE 5 REVENUES AND OTHER SOURCES (1) Last Ten Fiscal Years Unaudited Investment Income Other Fiscal Licenses, Fees, Intergovernmental Charges for Fines and (Losses) and Financing Year Taxes and Permits Revenues Services Forfeitures Other Revenues Sources TOTAL 2023 $ 15,344,155 $ 4,722,748 $ 10,169,568 $ 3,743,367 $ 237,061 $ 2,111,254 $ 7,743,251 $ 44,071,404 2022 14,378,360 4,471,993 8,760,009 3,628,960 117,291 (1,028,841) 1,829,027 32,156,799 2021 13,705,445 4,102,640 9,094,488 3,461,193 77,476 1,358,329 5,008,088 36,807,659 2020 13,441,866 3,475,389 9,870,743 2,757,191 93,827 1,561,538 1,821,821 33,022,375 2019 13,101,370 2,659,200 5,516,224 2,868,887 94,578 1,770,325 15,223,906 41,234,490 2018 12,741,642 2,586,035 4,880,937 2,739,021 101,378 819,264 1,868,634 25,736,911 2017 12,220,392 2,514,178 4,266,425 2,488,384 127,406 1,042,958 1,794,419 24,454,162 2016 11,941,311 2,623,810 4,322,696 2,402,801 121,513 935,821 2,648,184 24,996,136 2015 11,837,177 2,564,079 3,951,367 2,499,107 131,020 1,142,936 1,789,406 23,915,092 2014 11,537,812 2,392,487 3,376,079 2,373,486 133,645 827,526 1,636,165 22,277,200 (1) Includes General Fund, LETFs, CDBG Fund, FBC Fund, CRA Fund, Debt Service Fund, and Beal Memorial Cemetery Fund Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 114  City of Fort Walton Beach, Florida SCHEDULE 6 ASSESSED VALUE OF TAXABLE PROPERTY (1) Last Ten Fiscal Years Unaudited Total Assessed Total Tax Real Personal Assessed Value for Direct Tax Year Property Property Value Exemptions Operations Rate 2023 $ 2,491,514,381 $ 165,274,982 $ 2,656,789,363 $ 572,446,316 $ 2,084,343,047 4.6116 2022 2,284,074,540 134,039,029 2,418,113,569 531,246,048 1,886,867,521 4.9999 2021 2,029,638,016 127,094,869 2,156,732,885 519,837,310 1,636,895,575 5.3293 2020 1,932,732,538 121,764,835 2,054,497,373 509,515,431 1,544,981,942 5.3293 2019 1,824,002,582 118,539,677 1,942,542,259 493,474,028 1,449,068,231 5.6395 2018 1,717,941,745 113,382,574 1,831,324,319 477,406,649 1,353,917,670 5.7697 2017 1,622,927,933 117,555,021 1,740,482,954 462,721,193 1,277,761,761 5.7697 2016 1,569,650,612 113,113,590 1,682,764,202 458,344,109 1,224,420,093 5.7697 2015 1,521,529,660 112,451,954 1,633,981,614 448,170,536 1,185,811,078 5.7697 2014 1,475,665,054 108,533,120 1,584,198,174 434,639,300 1,149,558,874 5.7697 (1) Florida State Law requires all property to be assessed at current fair market. The January 2021 assessment is the basis for Fiscal Year 2021-22 tax revenues. Source: Okaloosa County Property Appraiser 115  City of Fort Walton Beach, Florida SCHEDULE 7 PROPERTY TAX RATES PER $1,000 OF TAXABLE VALUE - ALL DIRECT AND OVERLAPPING GOVERNMENTS (1) Last Ten Fiscal Years Unaudited City of Fort Walton Beach Direct Rate Overlapping Rates* Okaloosa Northwest Florida Total Total Direct Okaloosa County School Water Overlapping Year (1) Basic Rate Rate County Board Management Rates 2023 4.6116 4.6116 3.8308 5.4770 0.0234 9.3312 2022 4.9999 4.9999 3.8308 5.5790 0.0261 9.4359 2021 5.3293 5.3293 3.8308 5.9430 0.0294 9.8032 2020 5.3293 5.3293 3.8308 6.0350 0.0311 9.8969 2019 5.6395 5.6395 3.8308 6.2060 0.0327 10.0695 2018 5.7697 5.7697 3.8308 6.3610 0.0338 10.2256 2017 5.7697 5.7697 3.8308 6.5880 0.0353 10.4541 2016 5.7697 5.7697 3.4308 6.9070 0.0366 10.3744 2015 5.7697 5.7697 3.4308 7.2790 0.0378 10.7476 2014 5.7697 5.7697 3.4308 7.4410 0.0390 10.9108 (1) As of levy date, November 1 of each year listed. The 2023 millage rate is the basis for fiscal year 2023-24 tax revenues. * Overlapping rates are those of local and county governments that apply to property owners within the City of Fort Walton Beach Source: Okaloosa County Tax Collector 116  City of Fort Walton Beach, Florida SCHEDULE 8 PRINCIPAL TAXPAYERS Unaudited 2023 2014 Total Total Assessed Assessed Taxpayer Value Percentage Rank Value Percentage Rank Florida Power & Light Co. $ 37,074,961 1.78% 1 $ 17,924,703 1.56% 1 Florida Power & Light Co. (Gulf Power Co.) Suso 2 Uptown, LP 20,210,337 0.97% 2 14,293,746 1.24% 2 Suso 2 Uptown, LP KAGR Fort Walton 1005 LLC 12,163,269 0.58% 3 6,090,252 0.53% 3 Fort Walton Machining, Inc. FWB Greens LLC 11,868,002 0.57% 4 6,071,539 0.53% 4 Cox Communications Gulf Coast, LLC Extra Space Properties Two LLC 10,734,992 0.52% 5 5,874,093 0.51% 5 Pacifica Walton Beach, LLC BAE Systems Technology 10,476,187 0.50% 6 5,832,398 0.51% 6 99 Eglin, LTD J2 Development LLC 10,314,265 0.49% 7 5,207,740 0.45% 7 Embarq Corp. WIM-FWB RI LLC 9,868,692 0.47% 8 4,841,868 0.42% 8 HSU Paul S & Majes Pacifica Walton Beach LLC 9,702,970 0.47% 9 4,776,715 0.42% 9 DRS Training and Control Cox Communications Gulf Coast, LLC 8,556,141 0.41% 10 4,677,929 0.41% 10 FNBT.com Bank Total Taxable Assessed Value of Principal Taxpayers 140,969,816 6.76% 75,590,983 6.58% Total Taxable Assessed Value of Other Taxpayers 1,943,373,231 93.24% 1,073,967,891 93.42% Total Taxable Assessed Value $ 2,084,343,047 100.00% $ 1,149,558,874 100.00% (1) The 2023 tax roll is the basis for fiscal year 2023-24 tax revenues. Source: Okaloosa County Property Appraiser 117  City of Fort Walton Beach, Florida SCHEDULE 9 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Unaudited Ratio of Ratio of Amount of Percent of Amount of Total Total Taxes Delinquent Current Current Delinquent Collected Collected to Amount of Taxes to Tax Total Tax Taxes Taxes Taxes for the Current Delinquent Current Year Levy (1) Collected Collected Collected Year Levy Taxes Levy 2023 The 2023 tax levy is the basis for fiscal year 2023-24 tax revenues. 2022 $ 9,451,861 $ 9,105,332 96.3% $ 19,389 $ 9,124,721 96.5% $ 4,244 0.0% 2021 8,739,154 8,419,880 96.3% 21,315 8,441,195 96.6% 9,958 0.1% 2020 8,245,481 7,939,074 96.3% 13,594 7,952,668 96.4% 6,029 0.1% 2019 8,186,794 7,900,798 96.5% 18,327 7,919,125 96.7% 7,490 0.1% 2018 7,822,441 7,526,583 96.2% 20,747 7,547,330 96.5% 3,469 0.0% 2017 7,387,081 7,119,876 96.4% 8,632 7,128,508 96.5% 8,122 0.1% 2016 7,080,530 6,826,718 96.4% 18,798 6,845,517 96.7% 9,696 0.1% 2015 6,858,983 6,606,940 96.3% 30,392 6,637,332 96.8% 8,058 0.1% 2014 6,656,342 6,414,562 96.4% 31,452 6,446,014 96.8% 3,604 0.1% (1) Includes discount taken for early payment of taxes (maximum of 4%). Source: Okaloosa County Tax Collector 118  City of Fort Walton Beach, Florida SCHEDULE 10 RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Unaudited Governmental Activities Business Activities General General State Total Percentage Fiscal Obligation Lease Subscription Financing Revenue Revenue Obligation Lease Revenue Revolving Revenue Primary of Personal Per Year Bonds Liabilities Liabilities Contracts Notes Bonds Bonds Liabilities Notes Loans Bonds Government Income (1) Capita (2) 2023 $ - $ 193,047 $ 1,714,631 $ 536,581 $ 7,922,834 $ 10,950,732 $ - $ 166,017 $ 5,683,000 $ 9,704,126 $ - $ 36,870,968 0.28% 1,745.78 2022 - 393,186 - 600,745 8,888,359 11,365,436 - 190,610 6,167,000 10,452,433 - 38,057,769 0.30% 1,811.33 2021 - - - 944,447 9,828,934 11,764,842 - - 6,637,000 11,186,723 - 40,361,946 0.35% 1,926.77 2020 - - - 67,035 9,025,971 12,149,516 - - 7,093,000 11,907,259 - 40,242,781 0.38% 1,910.50 2019 - - - 6,681 9,726,372 12,520,000 - - 7,537,000 12,614,297 - 42,404,350 0.42% 2,025.04 2018 - - - 42,217 10,408,945 - - - 7,968,000 13,308,089 - 31,727,251 0.33% 1,523.15 2017 - - - 76,099 11,073,656 - - - 8,387,000 13,988,885 - 33,525,640 0.37% 1,605.17 2016 - - - 106,653 11,725,331 - - - 8,794,000 14,656,929 - 35,282,913 0.40% 1,689.88 2015 - - - 134,249 12,371,587 - - - 8,794,000 15,312,458 - 36,612,294 0.43% 1,754.39 2014 - - - 89,654 13,008,515 - - - - 14,004,706 9,640,146 36,743,021 0.45% 1,773.40 Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. (1) See Schedule 15 for personal income data. (2) See Schedule 15 for population data. Note: Beginning in FY22, the City implemented GASB Statement No. 87, Leases Note: Beginning in FY23, the City implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 119  City of Fort Walton Beach, Florida SCHEDULE 11 RATIO OF NET GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years Unaudited Governmental Activities Percentage of General Actual Taxable Fiscal Year Obligation Bonds Value of Property (1) Per Capita (2) 2023 $ - 0.00% $ - 2022 - 0.00% - 2021 - 0.00% - 2020 - 0.00% - 2019 - 0.00% - 2018 - 0.00% - 2017 - 0.00% - 2016 - 0.00% - 2015 - 0.00% - 2014 - 0.00% - Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. (1) See Schedule 6 for property value data. (2) See Schedule 15 for population data. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 120  City of Fort Walton Beach, Florida SCHEDULE 12 PLEDGED REVENUE COVERAGE SCHEDULE OF REVENUE BOND COVERAGE Last Ten Fiscal Years Unaudited Average Non-Ad Valorem Revenues Fiscal Non-Ad Valorem Avail. for Debt Service Requirements (2) Year Revenues (1) Debt Service Principal Interest Total Coverage 2023 $ 44,258,368 $ 41,571,494 $ 3,780,566 $ 1,045,404 $ 4,825,970 8.61 2022 38,884,619 39,790,234 3,107,726 1,102,464 4,210,190 9.45 2021 40,695,849 39,997,947 2,380,155 1,133,336 3,513,491 11.38 2020 39,300,045 43,467,423 2,235,704 1,185,842 3,421,546 12.70 2019 47,634,800 39,571,847 1,823,173 1,029,403 2,852,576 13.87 2018 31,508,894 29,893,013 1,846,847 803,314 2,650,161 11.28 2017 28,277,131 28,292,306 1,726,719 831,220 2,557,939 11.06 2016 28,307,481 28,537,163 1,301,785 860,023 2,161,808 13.20 2015 28,766,844 27,680,114 962,155 940,698 1,902,853 14.55 2014 26,593,384 26,466,080 890,954 797,317 1,688,271 15.68 (1) Non-Ad Valorem Revenues of General Fund, other governmental funds, and proprietary funds. (2) Combined Debt Service requirements for Capital Improvement Revenue Note Series 2013 & 2013A, Capital Improvement Revenue Bonds, Series 2018, Utility System Revenue Note 2015, SRF Loan, 2011 Revenue Note, Financing Contracts, Leases, and Subscription Liabilities. See Financial Statement Notes for detail. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 121  City of Fort Walton Beach, Florida SCHEDULE 13 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Unaudited Percentage Amount Net Debt Applicable to Applicable to Governmental Unit Outstanding Fort Walton Beach Fort Walton Beach Overlapping Debt Okaloosa County Revenue Bonds $ 71,779,943 9.69% (2) $ 6,957,860 Revenue Notes 19,303,000 9.69% (2) 1,871,102 Financing Contracts 79,341 9.69% (2) 7,691 Okaloosa County School District Certificates of Participation 2,463,000 25.45% (1) 626,945 Financing Contracts 97,390,000 25.45% (1) 24,790,182 Lease and Subscription Liabilities 8,450,728 25.45% (1) 2,151,094 Subtotal: Overlapping Debt 199,466,012 36,404,874 Direct Debt City of Fort Walton Beach Revenue Bonds & Notes 18,873,566 100.00% 18,873,566 City of Fort Walton Beach Financing Contracts 536,581 100.00% 536,581 City of Fort Walton Beach Lease Liabilities 193,047 100.00% 193,047 City of Fort Walton Beach Subscription Liabilities 1,714,631 100.00% 1,714,631 Subtotal: Direct Debt 21,317,825 21,317,825 Total Direct and Overlapping Debt $ 220,783,837 $ 57,722,699 Source: Okaloosa County, Okaloosa County School Board (1) Calculation based on total schools in Okaloosa County School District versus schools in Fort Walton Beach. (2) Calculation based on total population in Okaloosa County versus population in Fort Walton Beach. 122  City of Fort Walton Beach, Florida SCHEDULE 14 MAJOR EMPLOYERS Unaudited 2023 2014 Percentage Percentage of Total of Total Employer Product Employees Employment Ranking Employees Employment Ranking USAF - Eglin AFB (1) Air Force Development Test Center 17,040 17.69% 1 19,754 19.46% 1 (2) USAF - Hurlburt AFB Air Force Special Ops Command 13,249 13.75% 2 10,495 10.34% 2 Okaloosa County School District Education Services 3,495 3.63% 3 3,324 3.27% 3 Walmart Consumer Products 1,710 1.77% 4 Fort Walton Beach Medical Center Medical Services 1,221 1.27% 5 1,000 0.99% 5 Publix (Okaloosa Combined) Consumer Products 1,050 1.09% 6 Okaloosa County BCC (3) Local Government Services 903 0.94% 7 1,444 1.42% 4 Northwest Florida State College Education Services 765 0.79% 8 738 0.73% 10 North Okaloosa Medical Center Medical Services 737 0.76% 9 Reliance Test & Technology Government Contractor 730 0.76% 10 Jacobs Technology - TEAS Group Military Technical Support 1,000 0.99% 5 Lockheed Martin Defense Contractor 800 0.79% 7 L-3 Crestview Aerospace Military Technical Support 800 0.79% 7 InDyne Inc. Military Technical Support 800 0.79% 7 40,900 42.45% 40,155 39.56% (1) Includes military, civilian, and contractor personnel; a portion of contractor personnel may be duplicated with private sector employees also listed here. (2) Includes military and civilian personnel. (3) Includes County Commission, Clerk of Court, Property Appraiser, Sheriff (estimated), Supervisor of Elections, and Tax Collector. Source: Personnel Department of each employer 123  City of Fort Walton Beach, Florida SCHEDULE 15 MISCELLANEOUS DEMOGRAPHICAL STATISTICS Last Ten Fiscal Years Unaudited Fiscal Fort Walton Beach Okaloosa County FWB as a % Personal Income Per Capita Unemployment Year Population Population of the County (thousands of dollars) Personal Income Rate 2023 21,120 217,882 9.69% $ 12,981,628 $ 59,581 2.7% 2022 21,011 215,751 9.74% 12,663,927 58,697 2.2% 2021 20,948 213,204 9.83% 11,626,309 54,531 3.2% 2020 21,064 203,951 10.33% 10,680,336 52,367 5.2% 2019 20,940 201,514 10.39% 10,194,990 50,592 2.6% 2018 20,830 198,152 10.51% 9,678,184 48,842 2.8% 2017 20,886 195,488 10.68% 9,151,339 46,813 3.0% 2016 20,879 192,925 10.82% 8,925,717 46,265 4.2% 2015 20,869 191,898 10.88% 8,534,823 44,476 4.4% 2014 20,719 190,666 10.87% 8,151,537 42,753 4.6% 2013 20,256 188,349 10.75% 8,094,613 42,977 4.7% OKALOOSA COUNTY EDUCATION FY 2023 FY 2022 FY 2021 Schools: Grades K-5 23 23 23 Grades 6-8 12 12 12 Grades 9-12 8 8 8 PK-12 / Charter / Alternate 2 / 5 / 10 2 / 5 / 10 2 / 5 / 10 Grades K-8 1 1 1 Vocational / Technical 1 1 1 Exceptional Children 2 2 2 Students: Grades K-5 15,737 16,601 16,554 Grades 6-8 7,997 8,507 8,560 Grades 9-12 9,596 10,203 10,116 Adult Students 779 630 622 Exceptional Children 7,207 7,590 7,564 Personnel: 1,867 2,575 2,605 Source: Office of Economic & Demographic Research, FL Research & Economic Information Database, Okaloosa County School Board 124  City of Fort Walton Beach, Florida SCHEDULE 16 FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Full-Time Equivalent Employees as of September 30 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 General Government City Manager 2.00 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 2.00 Public Information Officer 2.00 - - - - - - - - - Human Resources 4.00 4.00 4.00 4.00 4.70 4.70 4.70 3.60 3.00 3.00 Information Technology 4.00 5.00 4.00 4.00 4.00 4.00 3.80 2.00 2.00 2.00 City Clerk 3.00 2.00 2.00 2.00 2.40 2.40 2.40 2.50 2.50 2.50 Finance 8.00 8.00 7.00 6.00 6.00 6.00 6.00 6.00 6.00 7.00 Purchasing 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 2.75 2.75 Administration 2.50 - - - - - - - - - Public Safety Police 70.07 67.57 70.94 69.83 71.82 70.90 65.90 61.90 61.38 60.99 Fire 43.25 44.25 44.00 44.00 37.00 37.00 37.00 37.00 38.00 37.00 Recreation & Cultural Services Administration 13.00 12.70 12.70 12.70 12.70 11.50 11.50 12.90 12.64 12.32 Parks Maintenance 13.00 13.00 13.00 13.00 12.00 10.25 10.25 10.00 10.00 10.00 Right-of-Way Maintenance - - - - 1.00 1.00 2.00 1.00 1.00 1.00 Senior Citizens Center - - - - - - - - - 1.85 Golf Club 13.35 13.42 13.42 13.42 13.96 13.81 13.81 14.26 13.93 14.26 Golf Grounds Maintenance 14.00 14.00 15.75 15.75 15.75 15.75 15.75 15.75 15.75 15.75 Library 9.40 9.40 9.22 9.22 8.72 8.72 8.72 8.02 8.02 8.02 Museum 4.10 4.10 4.10 4.10 3.60 4.00 4.00 4.60 4.10 3.60 Cemetery 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Growth Management Administration 2.00 2.00 2.00 2.00 2.00 3.00 3.00 3.00 4.00 4.00 Planning & Zoning 3.00 3.00 4.00 4.00 4.00 4.00 4.00 3.00 2.00 2.00 Building & Permitting 6.50 6.50 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Code Enforcement 2.75 2.75 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Fleet Maintenance 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 Facilities Maintenance 6.00 6.00 6.00 6.00 6.00 7.00 7.00 7.00 7.00 7.00 Streets Maintenance 5.00 5.00 5.00 5.00 5.00 5.00 5.00 6.00 6.00 6.00 Community Development Block Grant - - - - - - - - 0.48 0.48 Community Redevelopment Agency 4.60 4.60 6.00 5.00 5.00 5.00 5.00 3.00 3.00 3.00 Utility (Water/Sewer) Enterprise Administration 6.00 6.00 6.00 6.00 6.00 5.00 5.00 8.00 8.00 8.00 Customer Service 5.00 4.50 4.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 GIS 3.00 3.00 3.00 3.00 3.00 3.00 3.00 - - - Water Operations 9.00 9.00 8.00 8.00 8.00 9.00 9.00 9.00 10.00 9.00 Water Distribution 6.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Sewer Collections 12.00 12.00 13.00 13.00 13.00 13.00 13.00 13.00 13.00 13.00 Sanitation Enterprise Solid Waste 19.00 19.00 19.00 19.00 19.00 19.00 19.00 19.00 19.00 19.00 Recycling 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Stormwater Enterprise Stormwater 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Total 317.52 311.79 312.63 310.52 306.15 304.53 300.33 292.03 292.05 291.02 Source: City of Fort Walton Beach Adopted Budget for the relevant year. 125  City of Fort Walton Beach, Florida SCHEDULE 17 PERMITS, LICENSES AND RECREATION FACILITIES Last Ten Fiscal Years Unaudited MISCELLANEOUS PERMITS Year Mechanical Electrical Gas Plumbing Water & Sewer 2023 410 627 203 376 12 2022 287 533 195 247 17 2021 228 543 205 244 26 2020 262 573 196 231 22 2019 303 392 201 172 25 2018 300 360 159 159 37 2017 260 368 169 213 45 2016 200 216 144 92 81 2015 153 216 116 75 34 2014 247 379 136 194 27 BUSINESS TAX RECEIPTS ISSUED (formerly referred to as occupational licenses) Year Number Sold 2023 196 2022 981 2021 1,248 2020 1,120 2019 1,389 2018 1,101 2017 2,595 2016 2,115 2015 2,259 2014 2,402 MUNICIPAL RECREATIONAL FACILITIES 2 18-hole Golf Courses 1 Library 1 18-hole Disc Golf Course 4 Museums 1 Auditorium 23 Playgrounds 12 Baseball-Softball Facilities 2 Racquetball Court Facility 1 BMX/Skateboard Facility 1 Recreation Center 5 Boat Ramps 4 Soccer Field Facility 8 Exercise/Walking Tracks 16 Tennis Court Facilities 4 Beach Volleyball Court 7 Undeveloped Parks 16 Pickleball Courts 7 Waterfront Parks Sources: City of Fort Walton Beach Customer Service, Building & Permitting, and Recreation departments. Note: Change in facility and athletic field totals due to the construction of the new Recreation Center, which was complete in FY 2015. 126  City of Fort Walton Beach, Florida SCHEDULE 18 ELECTIONS - OKALOOSA COUNTY VOTER REGISTRATION Unaudited Registered Voters Pct Place Name Total Dems Reps NPA Other 01 BAKER 2,747 247 2,055 402 43 02 BLACKMON 719 73 553 87 6 03 MILLIGAN 1,435 154 981 272 28 04 HOLT 1,434 158 1,021 229 26 05 LAUREL HILL 1,210 172 820 197 21 06 GARDEN CITY 4,636 621 2,928 973 114 07 DORCAS 2,063 291 1,260 464 48 08 HONEY CREEK 4,555 790 2,609 1,034 122 09 YELLOW RIVER 4,192 698 2,381 1,003 110 10 WEST WRIGHT 5,994 1,361 2,830 1,636 167 11 EAST CRESTVIEW 12,076 2,417 5,756 3,503 400 12 WEST CRESTVIEW 988 475 250 242 21 13 NORTH CRESTVIEW 4,180 726 2,440 919 95 14 WEST NICEVILLE 2,971 471 1,704 702 94 15 VALPARAISO 3,157 482 1,831 747 97 16 SHALIMAR 2,859 538 1,590 666 65 17 CENTRAL WRIGHT 3,013 778 1,352 795 88 18 OCEAN CITY 2,535 512 1,302 654 67 19* EAST FWB 1,751 468 743 487 53 20 WEST DESTIN 2,757 395 1,714 590 58 21 MARY ESTHER 2,688 533 1,435 642 78 22* S CENTRAL FWB 2,122 518 1,030 518 56 23 EGLIN AFB 724 143 283 273 25 24* WEST FWB 2,850 737 1,302 735 76 25 N CENTRAL NICEVILLE 1,978 334 1,138 450 56 26 SEMINOLE 2,679 328 1,756 545 50 27 CINCO BAYOU 276 52 135 77 12 28* GARNIERS 330 58 204 56 12 29* GOLF COURSE 1,993 290 1,204 456 43 30 OKALOOSA ISLAND 1,546 229 927 350 40 31 LONGWOOD 2,142 329 1,425 357 31 32* FERRY PARK 2,403 422 1,446 485 50 33 ROCKY BAYOU 4,954 577 3,287 998 92 34 FLOROSA 3,524 694 1,764 977 89 35 NORTH DESTIN 3,236 417 2,049 683 87 36 SOUTH NICEVILLE 2,755 371 1,756 566 62 37 LAKE LORRAINE 2,653 370 1,673 554 56 38 NORTHGATE 2,108 433 1,120 500 55 39 EAST WRIGHT 2,240 521 1,096 560 63 40 SOUTH BLUEWATER 2,958 324 1,960 600 74 41* N CENTRAL FWB 1,321 249 786 262 24 42* NEW HEIGHTS 2,204 647 941 562 54 43 S CENTRAL NICEVILLE 2,309 398 1,324 529 58 44 CENTRAL DESTIN 1,827 304 1,003 461 59 45 SOUTH CRESTVIEW 4,434 920 2,145 1,233 136 46 NORTH BLUEWATER 4,466 617 2,770 983 96 47 WYNNEHAVEN BEACH 1,881 330 917 580 54 48* WESTWOOD RETIREMENT 109 21 71 16 1 49 EAST DESTIN 3,306 344 2,239 647 76 50 SOUTH DESTIN 2,826 300 1,929 534 63 51 AIRPORT ROAD 2,224 307 1,337 517 63 52 LIVE OAK 4,206 701 2,273 1,119 113 Countywide Total 142,544 24,645 80,845 33,427 3,627 *City Precinct City Total 15,083 3,410 7,727 3,577 369 Source: Okaloosa County Supervisor of Elections 127  City of Fort Walton Beach, Florida SCHEDULE 19 SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS Last Ten Fiscal Years Unaudited Total Ratio of Outstanding Assessments Collections Current and Fiscal Collected or to Amount Delinquent Year Assessments (1) Released Assessed Assessment 2023 $ 2,262 $ 211,291 85.94% $ 34,575 2022 2,157 25,702 9.54% 243,604 2021 1,490 25,052 8.57% 267,149 2020 766 31,086 9.66% 290,711 2019 925 31,912 9.04% 321,031 2018 755 27,180 7.17% 352,018 2017 660 25,807 6.38% 378,443 2016 380,571 27,804 6.45% 403,590 2015 - 60,251 54.24% 50,823 2014 2,014 3,328 2.91% 111,074 (1) Assessments are payable over a 15-20 year period. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 128  City of Fort Walton Beach, Florida SCHEDULE 20 MAJOR REVENUE SOURCES Last Ten Fiscal Years Unaudited Other Fiscal Property % of Total Taxes/ % of Total Sewer % of Total Sanitation % of Total Water % of Total Golf % of Total Year Taxes Revenues Franchise Fees Revenues Fees Revenues Fees Revenues Fees Revenues Fees Revenues 2023 $ 7,618,352 14.0% $ 15,741,791 28.9% $ 7,469,849 13.7% $ 4,993,143 9.2% $ 4,210,867 7.7% $ 2,553,563 4.7% 2022 7,025,573 14.5% 15,455,429 32.0% 7,382,498 15.3% 4,748,512 9.8% 4,482,309 9.3% 2,286,970 4.7% 2021 6,608,861 13.3% 14,624,266 29.5% 7,272,112 14.7% 4,381,765 8.8% 4,432,189 8.9% 1,960,608 4.0% 2020 6,573,751 13.6% 13,404,633 27.8% 6,999,110 14.5% 3,934,207 8.2% 4,067,771 8.4% 1,751,965 3.6% 2019 6,416,668 11.5% 12,358,719 22.1% 7,005,068 12.5% 3,871,165 6.9% 4,041,311 7.2% 1,696,822 3.0% 2018 6,041,303 15.3% 7,343,744 18.7% 6,728,172 17.1% 3,774,520 9.6% 3,902,809 9.9% 1,676,940 4.3% 2017 7,457,189 20.9% 7,015,584 19.6% 6,668,790 18.7% 3,663,445 10.3% 3,906,282 10.9% 1,317,803 3.7% 2016 7,271,903 20.5% 7,124,985 20.0% 6,310,574 17.7% 3,589,419 10.1% 3,769,366 10.6% 1,378,730 3.9% 2015 7,025,998 19.6% 7,171,032 20.0% 5,748,749 16.1% 3,581,264 10.0% 3,425,909 9.6% 1,399,101 3.9% 2014 6,886,443 20.6% 6,807,274 20.3% 5,177,966 15.5% 3,562,694 10.6% 3,238,894 9.7% 1,365,764 4.1% Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 129  City of Fort Walton Beach, Florida SCHEDULE 21 WATER AND WASTEWATER SERVICE RATES Unaudited Monthly Water Rates(1,2) Residential Commercial Number of Inside Outside(3) Inside Outside(3) Meters Lifeline Rate(4) $12.37 $15.46 $12.37 $15.46 Monthly Base Charge(5), Meter Size: 3/4" $12.37 $15.46 $12.37 $15.46 9,474 1.0" $12.37 $15.46 $12.37 $15.46 359 1.5" $16.81 $21.01 $16.81 $21.01 120 2.0" $28.58 $35.73 $28.58 $35.73 248 3.0" $43.55 $54.44 $43.55 $54.44 15 4.0" $54.41 $68.01 $54.41 $68.01 29 6.0" $86.57 $108.21 $86.57 $108.21 0 8.0" or 10.0" $129.74 $162.18 $129.74 $162.18 1 Multi-Residential, Addt'l per Unit $9.16 $11.45 $9.16 $11.45 10,246 Residential Customers (6) 8,682 Commercial Customers (6) 110 Total Customers 8,792 Gallonage Rate (per 1,000 gallons per unit) Inside Outside Block 1 (0 - 2,000) Included in monthly base charge Block 2 (2,001 - 4,000) $3.69 $4.61 Block 3 (4,001 - 8,000) $4.51 $5.64 Block 4 (8,001 +) $6.77 $8.46 Monthly Wastewater Rates(2) Residential Commercial Lifeline Rate(4) $28.18 $33.84 Monthly Base Charge $28.18 $33.84 Gallonage Rate (per 1,000 gallons per unit)(5) Block 1 (0 - 2,000) Included in monthly base charge Block 2 (2,001 +) $8.86 $10.64 (1) Irrigation customers subject to water rates as outlined herein (2) Monthly Base Charge is per Unit. Residential Single Family and Commercial count as 1 unit Multi-Family and Multi-Commercial are billed according to meter size and unit count (3) Outside City surcharge of 25% for water (4) Single family residence with less than 2,000 gallons per month (5) Residential service capped at 16,000 gallons per unit (6) Billed in September Source: City of Fort Walton Beach Comprehensive Fee Schedule 130  City of Fort Walton Beach, Florida SCHEDULE 22 SANITATION AND RECYCLING SERVICE RATES Unaudited Basic Garbage Rates Garbage Tipping Total Residential One Container $ 18.62 $ 6.51 $ 25.13 Two Containers 37.24 12.88 50.12 Residential Dumpsters, Individual Meters 18.62 6.51 25.13 Commercial One Container 34.94 7.28 42.22 Two Containers 69.86 14.61 84.47 Shared Dumpster (minimum charge) 34.94 7.28 42.22 Garbage and Trash Collection Garbage Tipping Total 2 Cubic Yards 2 times per week $ 74.15 $ 52.54 $ 126.69 3 times per week 111.20 78.72 189.92 4 times per week 148.34 104.84 253.18 5 times per week 185.35 131.06 316.41 6 times per week 222.41 157.24 379.65 4 Cubic Yards 2 times per week 104.67 104.84 209.51 3 times per week 157.01 157.24 314.25 4 times per week 209.34 209.63 418.97 5 times per week 261.67 261.97 523.64 6 times per week 314.00 314.36 628.36 6 Cubic Yards 2 times per week 137.41 157.24 294.65 3 times per week 206.10 235.85 441.95 4 times per week 274.74 314.36 589.10 5 times per week 343.43 392.93 736.36 6 times per week 412.13 471.60 883.73 8 Cubic Yards 2 times per week 165.73 209.63 375.36 3 times per week 248.61 314.36 562.97 4 times per week 331.46 419.15 750.61 5 times per week 414.32 523.95 938.27 6 times per week 497.19 625.90 1,123.09 Compactor Commercial Rate x 3 x Bulk Container(s) Commercial Recycling Garbage Tipping Total 4 Cubic Yards 2 times per week $ 118.89 $ - $ 118.89 3 times per week 178.29 - 178.29 4 times per week 237.74 - 237.74 5 times per week 297.19 - 297.19 6 Cubic Yards 2 times per week 178.29 - 178.29 3 times per week 267.44 - 267.44 4 times per week 356.59 - 356.59 5 times per week 445.73 - 445.73 8 Cubic Yards 2 times per week 237.74 - 237.74 3 times per week 356.59 - 356.59 4 times per week 475.48 - 475.48 5 times per week 594.33 - 594.33 Contaminated Load Fee (per dump) 4 CY 21.10 34.23 55.33 6 CY 21.10 61.55 82.65 8CY 21.10 95.68 116.78 Source: City of Fort Walton Beach Comprehensive Fee Schedule 131  City of Fort Walton Beach, Florida SCHEDULE 23 OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Function Fiscal Year 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Public Safety Police Arrests 730 608 643 627 611 660 757 921 1,041 873 Traffic citations 3,693 2,097 1,973 1,327 1,404 1,632 2,436 2,693 2,864 3,119 Fire Emergency medical responses 3,823 3,698 3,159 1,265 3,123 3,310 2,994 3,067 3,322 3,278 Fire responses 1,571 1,568 1,407 2,825 1,406 1,324 1,249 1,210 1,270 1,389 Inspections 854 885 944 643 1,008 966 932 2,409 1,000 700 Code Enforcement Code violations 780 1,392 1,129 965 1,251 1,446 1,825 1,807 1,702 1,766 Engineering Services Building permits issued 2,846 2,728 2,741 2,288 2,095 2,006 332 n/a n/a n/a Residential building permits issued 2,299 1,870 2,266 1,692 1,942 1,855 483 23 1,214 1,220 Commercial building permits issued 547 858 475 596 153 151 178 5 402 310 Value of permits (in millions) $80.21 $115.13 $70.86 $81.98 $65.80 $4.10 $2.70 n/a n/a n/a Value of residential permits (in millions) $ 27 $ 42 $ 31 $ 29 $ 41 $ 26 $ 12 $ 4 $ 16 $ 16 Value of commercial permits (in millions) $ 53 $ 73 $ 40 $ 53 $ 24 $ 15 $ 15 $ 1 $ 832 $ 27 Business Tax Receipts Sold 196 152 166 212 406 628 1,769 2,115 2,259 2,402 Street resurfacing (lane miles) 0.72 1.49 1.06 1.27 0.00 0.18 0.00 1.01 0.64 0.16 Pot holes (hours spent repairing) 272 538 422 494 557 166 213 163 770 528 Sanitation Refuse collected (tons) 25,883 26,457 27,749 27,854 26,498 26,317 26,151 25,203 24,467 26,102 Recyclables collected (tons) 2,051 2,161 2,204 2,030 2,048 2,032 1,811 1,507 1,191 754 Culture and Recreation Parks and Recreation Recreation program participants 397 311 212 191 206 199 102 154 n/a n/a Recreation program registrations n/a n/a n/a n/a n/a n/a n/a n/a 650 651 Adult athletic participants 221 1,051 857 1,042 820 770 530 n/a n/a n/a Adult athletic registrations n/a n/a n/a n/a n/a n/a n/a 621 424 426 Youth athletic participants 1,775 2,005 1,791 1,496 2,264 2,123 2,394 n/a n/a n/a Youth athletic registrations n/a n/a n/a n/a n/a n/a n/a 2,086 1,978 1,347 Skate/tennis park participants n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Library Circulation volume 128,806 113,022 121,287 127,507 157,554 147,760 139,980 144,474 137,363 145,684 Museum Number of visitors/participants(1) 14,667 14,515 9,636 13,662 30,050 23,012 24,522 22,437 22,683 19,461 Water System New connections 12 12 26 22 25 37 45 81 34 27 Water customers 10,246 9,698 9,777 9,677 9,642 9,639 9,620 9,618 9,537 9,480 Water produced (million gallons) 957 958 947 940 912 895 866 883 891 884 Source: City of Fort Walton Beach Performance Measures. 132  City of Fort Walton Beach, Florida SCHEDULE 24 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Function/Program Fiscal Year 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Sworn Officers 54 52 52 45 45 47 45 39 43 43 Engineering Services Miles of roads 93.34 93.12 93.12 93.12 93.12 93.12 93.12 93.12 93.12 93.12 Miles of sidewalks 65.19 63.79 63.79 63.79 63.79 63.67 63.67 64.73 63.67 64.73 Signs fabricated and installed 423 448 391 531 461 286 614 854 1,133 918 Culture and Recreation Parks and Recreation Recreational Amenities 116 116 116 116 129 129 129 129 129 116 Parks (acres) 448.54 448.54 448.54 448.54 (1) 206.00 206.00 206.00 206.00 196.56 180.26 Library Inventoried collection 51,461 48,335 47,216 51,398 56,973 62,513 67,881 70,353 72,313 72,729 Water and Sewer System Potable water lines (miles) 148.48 146.89 146.77 146.48 146.40 146.33 146.10 144.91 144.77 146.25 Sanitary sewer lines (miles) 131.34 129.97 129.82 129.44 129.49 129.49 129.62 129.51 110.45 130.32 Reuse water lines (miles) 7.74 7.10 7.10 7.10 7.10 7.10 7.10 7.10 7.10 7.10 Potable Water Elevated Storage Tank Capacity: 1 tank 200,000 gal; 1 tank 750,000 gal; 2 tanks 500,000 gal Potable Water Ground Storage Tank Capacity: 1 tank 135,000 gal; 1 tank 250,000 gal; 1 tank 1,000,000 gal; 1 tank 25,000 gal Pumping Capacity of Potable Water Wells: 9.231 million gallons per day Sanitary Sewer Ground Storage Tank Capacity: 4,000,000 gal Reuse Water Elevated Storage Tank Capacity: 1 tank 200,000 gal Reuse Water Ground Storage Tank Capacity: 1 tank 1,000,000 gal Stormwater System Storm drains (miles) 44.14 44.14 44.14 44.14 43.33 43.18 42.10 42.03 42.05 42.01 (1) FY 2020 Increase due to golf courses not being included in prior years. N/A: Not available. Source: City of Fort Walton Beach Performance Measures. 133  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 12/6/23 to 12/6/24 Wright National 1151306332 Fisher-Brown Agency Flood $ 500,000 B #7 Hollywood Boulevard $ 500,000 C Police Department 10/12/23 to 10/12/24 Wright National 1151291263 Fisher-Brown Agency Flood $ 500,000 B #5 Hollywood Boulevard $ 300,000 C Fire Department 10/12/23 to 10/12/24 Wright National 1151292103 Fisher-Brown Agency Flood $ 403,000 B 107 Miracle Strip Parkway $ 129,000 C Auditorium 10/12/23 to 10/12/24 Wright National 1151291796 Fisher-Brown Agency Flood $ 403,000 B 107 Miracle Strip Parkway $ 383,000 C City Hall 10/12/23 to 10/12/24 Wright National 1151292114 Fisher-Brown Agency Flood $ 178,000 B 107 Miracle Strip Parkway $ 25,000 C Council Chamber 10/12/23 to 10/12/24 Wright National 1151292125 Fisher-Brown Agency Flood $ 377,000 B 107 Miracle Strip Parkway $ 359,000 C Annex Building 10/12/23 to 10/12/24 Wright National 1151292120 Fisher-Brown Agency Flood $ 390,000 B 107 Miracle Strip Parkway $ 17,000 C Bathrooms Building 10/12/23 to 10/12/24 Wright National 1151291389 Fisher-Brown Agency Flood $ 450,000 B 141 Miracle Strip Parkway $ 100,000 C City Museum 10/12/23 to 10/12/24 Wright National 1152207556 Fisher-Brown Agency Flood $ 350,000 B 22 McGriff Street $ 50,000 C Child Care Facility 12/2/23 to 12/2/24 Wright National 1150164378 Fisher-Brown Agency Flood $ 39,000 B 338 Miracle Strip Parkway Restroom, East of Pavilion Liza Jackson Park 12/2/23 to 12/2/24 Wright National 1150164379 Fisher-Brown Agency Flood $ 39,000 B 338 Miracle Strip Parkway Restroom Near Ditch Liza Jackson Park 05/17/23 to 05/17/24 Wright National 1150342974 Fisher-Brown Agency Flood $ 98,000 B 55 Ferry Road Boy Scout Hut 07/23/23 to 07/23/24 Wright National 1152199654 Fisher-Brown Agency Flood $ 330,000 B 115 Hollywood Blvd $ 53,000 C Pump Station #1 06/23/23 to 06/23/24 Wright National 1150458831 Fisher-Brown Agency Flood $ 55,000 B 168 Coral Drive SW City Hall Ball Field Restrooms 10/1/23 to 10/1/24 Commerce and Industry Insurance Company12896318 Public Risk Insurance Agency Petroleum $ 1,000,000/inc Golf Course, Police, City Yard, Fuel Station Liability $ 1,000,000/agg Pump Station - Fire, Recreation Center 134  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Inland $ 750,000 2M | Blanket Unscheduled Marine $ 32,672 6M | Contractor's / Mobile Equipment $ 35,953 6M | Contractor's / Mobile Equipment $ 44,669 6M | Contractor's / Mobile Equipment $ 30,204 6M | Contractor's / Mobile Equipment $ 49,788 6M | Contractor's / Mobile Equipment $ 45,158 6M | Contractor's / Mobile Equipment $ 78,902 6M | Contractor's / Mobile Equipment $ 665,000 125 - 2020 Yamaha DR2E AAC Golf Carts $ 52,765 6M | Contractor's / Mobile Equipment $ 97,373 6M | Contractor's / Mobile Equipment $ 35,808 6M | Contractor's / Mobile Equipment $ 55,654 6M | Contractor's / Mobile Equipment $ 32,943 6M | Contractor's / Mobile Equipment $ 30,843 6M | Contractor's / Mobile Equipment $ 30,753 6M | Contractor's / Mobile Equipment $ 54,116 6M | Contractor's / Mobile Equipment $ 25,343 6M | Contractor's / Mobile Equipment $ 40,343 6M | Contractor's / Mobile Equipment $ 37,236 6M | Contractor's / Mobile Equipment $ 26,165 6M | Contractor's / Mobile Equipment $ 29,660 6M | Contractor's / Mobile Equipment $ 81,611 6M | Contractor's / Mobile Equipment $ 81,611 6M | Contractor's / Mobile Equipment $ 35,403 6M | Contractor's / Mobile Equipment $ 25,190 6M | Contractor's / Mobile Equipment $ 28,428 6M | Contractor's / Mobile Equipment $ 63,048 6M | Contractor's / Mobile Equipment $ 26,358 6M | Contractor's / Mobile Equipment $ 24,657 6M | Contractor's / Mobile Equipment $ 24,657 6M | Contractor's / Mobile Equipment $ 30,567 6M | Contractor's / Mobile Equipment $ 35,543 6M | Contractor's / Mobile Equipment $ 56,432 6M | Contractor's / Mobile Equipment $ 37,735 6M | Contractor's / Mobile Equipment $ 93,150 Electronic Data Processing Equipment - RC $ 730,000 Fine Arts $ 6,500 Other Inland Marine (Street Signs) $ 250,000 Rented, Borrowed, Leased Equipment - ACV $ 135,417 Rented, Borrowed, Leased Equipment - ACV $ 111,683 Rented, Borrowed, Leased Equipment - ACV $ 4,159,338 Total All Inland Marine 1/17/24 to 1/17/25 Nicole Nabors - Travelers 107774436 Fisher-Brown Agency Public Official $ 50,000 Finance Director Bond 5/3/23 to 5/3/24 Markus Schumacher - Travelers 107832461 Fisher-Brown Agency Public Official $ 50,000 Comptroller, Finance Bond Department 135  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 5/3/23 to 5/3/24 Cassandra Hodys - Travelers 107832448 Fisher-Brown Agency Public Official $ 50,000 Utility Billing Supervisor, Finance Bond Department 2/18/23 to 2/18/24 Kim Barnes - Travelers 107222946 Fisher-Brown Agency Public Official $ 50,000 City Clerk Bond 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Auto $ 1,000,000 CSL Liability 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Forgery $ 250,000 Alteration 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Money & $ 10,000 Securities (theft) 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Crime $ 250,000 Public Employees (Employee dishonesty) Blanket Fidelity Bond 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency General $ 1,000,000 Occurence Liability 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Property $ 62,098,000 Blank Real & Personal Property 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Property $ 2,000,000 Business Income (Interruption) $ 2,000,000 Additional Expense 10/1/23 to 10/1/24 PGIT WC-FL10462003 23-14 Public Risk Insurance Agency Worker's $ 1,000,000 Each Accident Comp $ 1,000,000 Disease (Policy Limit) $ 1,000,000 Disease (Each Employee) 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Public Officials $ 5,000,000/inc Claims Made Empl. Practice $ 5,000,000/agg Claims Made 10/1/23 to 10/1/24 Ace American ADD N16744931 Chubb AD&D $ 75,000 Line of Duty Coverage ACHUBB Co. $ 75,000 Fresh Pursuit Coverage $ 225,000 Unlawful/Unintentional 10/1/23 to 10/1/24 PGIT PKFL10462003 23-19 Public Risk Insurance Agency Boiler & $ 70,556,018 Equipment Breakdown Machinery 5/1/21 to 5/1/24 Travelers 105927344 Fisher-Brown Agency Fiduciary $ 2,000,000 Retirement Fund for General Liability Employees and Police 10/1/23 to 10/1/24 Ace American PTP N1793868A Chubb Group Cancer $ 25,000 First Diagnosis Cancer Benefit $ 25,000 First Diagnosis Benefit Continuation $ 75,000 Cancer Death Benefit Source: City of Fort Walton Beach Risk Management Department 136 IV. COMPLIANCE SECTION  OTHER SUPPLEMENTARY INFORMATION  COMPLIANCE MATTERS  MANAGEMENT LETTER  CITY OF FORT WALTON BEACH, FLORIDA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF RECEIPTS AND EXPENDITURES OF FUNDS RELATED TO THE DEEPWATER HORIZON OIL SPILL FOR THE YEAR ENDED SEPTEMBER 30, 2023 Amounts Amounts Received in Expended in the 2022-2023 the 2022-2023 Source Fiscal Year Fiscal Year Florida Coastal Protection Trust Fund Early Restoration Deepwater Horizon oil spill 1 $ - $ - 1 NOTE: This does not include funds related to the Deepwater Horizon oil spill that are considered state financial assistance. The schedule of expenditures of federal awards and state financial assistance includes $1,100,140 of expenditures of state financial assistance (included for CSFA #37.081) that are related to the Deepwater Horizon oil spill. 137  INDEPENDENT AUDITORS’ REPORT ON THE SCHEDULE OF RECEIPTS AND EXPENDITURES OF FUNDS RELATED TO THE DEEPWATER HORIZON OIL SPILL To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida We have audited the financial statements of the City of Fort Walton Beach, Florida (the City) as of and for the year ended September 30, 2023, and have issued our report thereon dated March 15, 2024, which contained an unmodified opinion on those financial statements. Our audit was performed for the purpose of forming an opinion on the financial statements as a whole. The Schedule of Receipts and Expenditures of Funds related to the Deepwater Horizon Oil Spill, as listed in the table of contents, is presented for the purpose of additional analysis as required by Chapter 288.8018, Florida Statutes, and the Chapter 10.557(3)(f), Rules of the Auditor General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Fort Walton Beach, Florida March 15, 2024 138  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE FOR THE YEAR ENDED SEPTEMBER 30, 2023 Federal / State Agency Assistance Passed Pass-Through Entity Listing Number Through to Federal Program / State Project / CSFA Contract/Grant Number Expenditures Subrecipients U.S. Department of Housing & Urban Development Direct programs: CDBG Entitlement Grants Cluster Community Development Block Grants 2021-23 14.218 M-2X-MC-12-0030 $ 199,173 $ - COVID-19 Community Development Block Grants 14.218 B-20-MW-12-0030 42,119 - Indirect programs: Pass-through from Florida Department of Commerce: COVID-19 Community Development Block Grants 14.228 22CV-E03 10,500 - 251,792 - U.S. Department of Justice Direct programs: Bulletproof Vest Partnership Program 16.607 1,669 - Public Safety Partnership and Community Policing (COPS) Grant 16.710 2020UMWX0107 35,840 - Indirect programs: Pass-through from Florida Department of Law Enforcement: Byrne Memorial Justice Assistance Grant 16.738 8C071 4,085 - Byrne Memorial Justice Assistance Grant 16.738 8C187 13,305 - 54,899 - U.S. Department of Transportation Indirect programs: Highway Safety Cluster Pass-through from Florida Department of Transportation: National Priority Safety Programs 20.616 G2K18 3,851 - U.S. Department of Homeland Security Direct programs: Assistance to Firefighters Grant 97.044 EMW-2021-FG-10095 13,849 - Staffing for Adequate Fire and Emergency Response (SAFER) Grant 97.083 EMW-2018-FH-00488 827 - Indirect programs: Pass-through from Florida Division of Emergency Management: Disaster Grants - Public Assistance 97.036 Z2635 33,718 - Disaster Grants - Public Assistance 97.036 D0611 175,749 - Disaster Grants - Public Assistance 97.036 D0717 53,434 - Disaster Grants - Public Assistance 97.036 D1041 142,690 - Port Security Grant Program 97.056 EMW-2022-PU-00456 147,341 - 567,608 - TOTAL EXPENDITURES OF FEDERAL AWARDS $ 878,150 $ - Florida Department of Environmental Protection Direct programs: Statewide Water Quality Restoration Projects 37.039 LPA0164 $ 13,027 $ - Statewide Water Quality Restoration Projects 37.039 LPA0165 30,000 - Statewide Water Quality Restoration Projects 37.039 LPA0292 52,701 - Restoration Deepwater Horizon Oil Spill 37.081 DH001 1,100,140 - 1,195,868 - Florida Department of Transportation Direct programs: Local Transportation Projects 55.039 G2546 47,023 - TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE $ 1,242,891 $ - 139  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE FOR THE YEAR ENDED SEPTEMBER 30, 2023 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards and state financial assistance (the Schedule) includes the federal award and state grant activity of the City of Fort Walton Beach, Florida (the City) for the year ended September 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and Chapter 10.550, Rules of the Florida Auditor General. Because the Schedule presents only a selected portion of the operations of the City, it is not intended to, and does not, present the financial position, changes in net position, or cash flows of the City. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance and Chapter 10.550, Rules of the Florida Auditor General, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Therefore, some amounts presented in the Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 3. INDIRECT COST RATE The City has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. 140  INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council City of Fort Walton Beach, Florida We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Fort Walton Beach, Florida (the “City”), as of and for the year ended September 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated March 15, 2024. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as item #2023-001 that we consider to be a material weakness. 141 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City of Fort Walton Beach, Florida’s Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the findings identified in our audit and described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fort Walton Beach, Florida March 15, 2024 142  INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND STATE PROJECT AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE AND CHAPTER 10.550, RULES OF THE FLORIDA AUDITOR GENERAL To the City Council City of Fort Walton Beach, Florida Report on Compliance for Each Major Federal Program and State Project Opinion on Each Major Federal Program and State Project We have audited the City of Fort Walton Beach, Florida’s (the “City”) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement, and the requirements described in the Department of Financial Services’ State Projects Compliance Supplement, that could have a direct and material effect on each of the City’s major federal programs and state projects for the year ended September 30, 2023. The City’s major federal programs and state projects are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs and state projects for the year ended September 30, 2023. Basis for Opinion on Each Major Federal Program and State Project We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and Chapter 10.550, Rules of the Florida Auditor General. Our responsibilities under those standards, the Uniform Guidance, and Chapter 10.550, Rules of the Florida Auditor General are further described in the Auditors’ Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program and state project. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s federal programs and state projects. 143 Auditors’ Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, the Uniform Guidance, and Chapter 10.550, Rules of the Florida Auditor General, will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of each major federal program and state project as a whole. In performing our audit in accordance with generally accepted auditing standards, Government Auditing Standards, the Uniform Guidance, and Chapter 10.550, Rules of the Florida Auditor General, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.  Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance and Chapter 10.550, Rules of the Florida Auditor General, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program or state project that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 144 Our consideration of internal control over compliance was for the limited purpose described in the Auditors’ Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance and Chapter 10.550, Rules of the Florida Auditor General. Accordingly, this report is not suitable for any other purpose. Fort Walton Beach, Florida March 15, 2024 145  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 I. SUMMARY OF AUDITORS' RESULTS Financial Statements Type of auditors' report issued: Unmodified Internal control over financial reporting: • Material weakness(es) identified? X Yes No • Significant deficiency(ies) identified? Yes X No Noncompliance material to financial statements noted? Yes X No Federal Awards and State Financial Assistance Internal control over major program and project: • Material weakness(es) identified? Yes X No • Significant deficiency(ies) identified? Yes X No Type of auditors' report issued on compliance for major program and project: Unmodified • Any audit findings disclosed that are required to be reported in accordance with CFR 200.516(a) or Chapter 10.557, Rules of the Florida Auditor General ? Yes X No Identification of major program and project: Assistance Listing No. Name of Federal Program 97.036 Disaster Grants - Public Assistance CSFA No. Name of State Project 37.081 Restoration Deepwater Horizon Oil Spill Dollar threshold used to distinguish between type A and type B programs for federal awards: $ 750,000 Dollar threshold used to distinguish between type A and type B projects for state financial assistance: $ 372,867 146  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 II. FINANCIAL STATEMENT FINDINGS FINDING 2023-001 – GRANT ADMINISTRATION, TRACKING, AND MONITORING Criteria The City’s internal control over financial reporting is designed to allow for management and employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, a material misstatement on a timely basis. Condition The major federal program tested during the year ended September 30, 2023, was Disaster Grants – Public Assistance funded by the U.S. Department of Homeland Security. One of the grants in the population was a legacy grant associated with Hurricane Sally recovery. We determined through testing that certain expenditures related to the grant were incurred in prior years and were not correctly reported as revenue in those years or properly reported on the schedule of expenditures of federal awards (SEFA). Further, City personnel did not have access to the portal in which grant reporting was required during the year under audit as the login in credentials were associated with the former Finance Director. In addition, the City provided SEFA and schedule of expenditures of state financial assistance (SESFA) did not reconcile to the accounting records and other supporting documentation. Audit adjustments were necessary to correct the Hurricane Sally grant activities and other direct projects funded by the Florida Department of Environmental Protection. Cause While improvements were made in regard to grant accounting during the year ended September 30, 2023, the City is not consistently adhering to its written policies and procedures regarding administration, tracking, and monitoring of grant activities. Most notably, grant administration duties are not performed by a specified trained authorized individual or department. Additionally, the SEFA and SESFA were not prepared and reviewed on a timely basis by appropriately experienced and trained personnel as the software purchased for grant tracking was not fully implemented as of September 30, 2023. Effect Supporting documentation on certain grant activities requested by auditors was not readily available, and in some cases, it was unclear which individual was responsible for monitoring the City’s compliance with grant terms and conditions. Various audit adjustments were proposed and accepted by management to properly to prepare the SEFA and SESFA. Recommendation  Management should adopt written policies and procedures for grant administration, tracking, and monitoring. Furthermore, these functions should be centralized and performed by experienced and trained personnel.  These policies should reflect who is responsible for preparing and reviewing the SEFA and SESFA. 147  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 Management’s Response Concur. The Finance Department is in the process of updating its existing written policies and procedures for administration, tracking, and monitoring of grant activities. Additionally, the City has purchased, and is in the process of implementing, grant tracking software systems in order to streamline the process and increase efficiency. III. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE No such findings or questioned costs. 148  City of Fort Walton Beach “The Treasure of the Emerald Coast” 107 Miracle Strip Parkway SW * Fort Walton Beach, FL 32548 (850) 833-9504 * Fax (850) 833-9640 www.fwb.org SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED SEPTEMBER 30, 2022 I. FINANCIAL STATEMENT FINDINGS FINDING 2022-001 – RECONCILIATION OF GRANT ACTIVITIES Condition Condition The City provided schedule of grant revenues and expenditures, including unearned revenues and receivables, did not reconcile to the accounting records and other supporting documentation. Current Status Corrective action was taken. FINDING 2022-002 – COMPREHENSIVE ACCOUNTING POLICIES AND PROCEDURES / DEPARTMENT STAFFING Condition The City does not have written policy that outlines the nature and types of general ledger and account reconciliation reviews that should take place on a monthly, quarterly and year end basis in a centralized location. There were several correcting journal entries proposed by management after the year-end financial information was provided to auditors in January 2022. Current Status Corrective action was taken. FINDING 2022-003 – CASH MANAGEMENT Condition The City was unable to provide documentary evidence illustrating its adherence to its written grant administration policies pertaining to supervisory review of grant reimbursement requests prepared by City staff prior to submission to the grant funding agency. Current Status Corrective action was taken. 149  INDEPENDENT ACCOUNTANTS’ REPORT ON AN EXAMINATION OF COMPLIANCE REQUIREMENTS IN ACCORDANCE WITH CHAPTER 10.550, RULES OF THE AUDITOR GENERAL To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida We have examined the City of Fort Walton Beach, Florida’s (the City’s) compliance with the following requirements for the year ended September 30, 2023: 1) Section 218.415, Florida Statutes, in regard to the investments. 2) Section 218.8018, Florida Statutes, in regard to the Deepwater Horizon Oil Spill receipts and expenditures. Management is responsible for the City’s compliance with those requirements. Our responsibility is to express an opinion on the City’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the City complied, in all material respects, with the specified requirements. An examination involves performing procedures to obtain evidence about whether the City complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgement, including the assessment of the risks of material noncompliance, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. We are required to be independent and to meet our ethical responsibilities in accordance with relevant ethical requirements relating to the examination engagement. Our examination does not provide a legal determination of the City’s compliance with specified requirements. In our opinion, the City complied, in all material respects, with the specified requirements for the year ended September 30, 2023. Fort Walton Beach, Florida March 15, 2024 150  MANAGEMENT LETTER To the Honorable Mayor and City Council City of Fort Walton Beach, Florida We have audited the financial statements of the City of Fort Walton Beach, Florida (the City), as of and for the fiscal year ended September 30, 2023, and have issued our report thereon dated March 15, 2024. Auditors’ Responsibility We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); and Chapter 10.550, Rules of the Auditor General. Other Reporting Requirements We have issued our Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards; Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance; Schedule of Findings and Questioned Costs; and Independent Accountants’ Report on an examination conducted in accordance with AICPA Professional Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports and schedule, which are dated March 15, 2024, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding financial audit report. Corrective actions have been taken to address findings and recommendations made in the preceding financial audit report. 151 Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The official title and legal authority for the City has been disclosed in Note 1 to the financial statements. The City included the following component units: Fort Walton Beach Community Redevelopment Agency (the “CRA”). The legal authority that established the CRA is disclosed in Note 1 to the financial statements. Financial Condition and Management Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether or not the City has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Pursuant to Sections 10.554(1)(i)5.b., and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures for the City. It is management's responsibility to monitor the City's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any recommendations to improve financial management. In connection with our audit, we identified no recommendations to improve financial management other than those discussed in the schedule of findings and questioned costs. Special District Component Units Section 10.554(1)(i)5.c., Rules of the Auditor General, requires, if appropriate, that we communicate the failure of a special district that is a component unit of a county, municipality, or special district, to provide the financial information necessary for proper reporting of the component unit within the audited financial statements of the county, municipality, or special district in accordance with Section 218.39(3)(b), Florida Statutes. In connection with our audit, we did not note any special district component units that failed to provide the necessary information for proper reporting in accordance with Section 218.39(3)(b), Florida Statutes. Specific Information As required by Section 218.39(3)(c), Florida Statutes, and Section 10.554(1)(i)6, Rules of the Auditor General, the Fort Walton Beach Community Redevelopment Agency (the CRA) reported: a) The total number of CRA employees compensated in the last pay period of the CRA’s fiscal year as 5. b) The total number of independent contractors to whom nonemployee compensation was paid in the last month of the CRA’s fiscal year as 10. c) All compensation earned by or awarded to employees, whether paid or accrued, regardless of contingency as $420,249. d) All compensation earned by or awarded to nonemployee independent contractors, whether paid or accrued, regardless of contingency as $1,814,011. 152  e) Each construction project with a total cost of at least $65,000 approved by the CRA that is scheduled to being on or after October 1 of the fiscal year being reported, together with the total expenditures for such project as:  Fort Walton Beach Landing Park Improvements Phases I & II – $2,479,665  Heritage Park & Cultural Center Addition – $939,506 f) A budget variance based on the budget adopted under Section 189.016(4), Florida Statutes, before the beginning of the fiscal year being reported if the CRA amends a final adopted budget under Section 189.016(6), as $1,624,089. The specific information reported in the previous paragraph has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material, but which warrants the attention of those charged with governance. In connection with our audit, we did not note any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the City Council, and applicable management, and is not intended to be, and should not, be used by anyone other than these specified parties. We greatly appreciate the assistance and cooperation extended to us during our audit. Fort Walton Beach, Florida March 15, 2024 153