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

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