Fort Walton Beach Council agenda — 03-19-12--special--audit — reading text

Walton Beach America' s Most Beautiful Beaches 107 Miracle Strip Parkway, SW * Fort Walton Beach, Fl 32548 850) 833 -9500 * Fax ( 850) 833 -9640' www. fwb.org March 05, 2013 Honorable Mayor, City Council Members, and 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 ofthe City of Fort Walton Beach, Florida for the fiscal year ended September 30, 2012, is hereby submitted herewith pursuant to Florida Statutes Chapter 218. 32( 1)( d) requiring each local government entity to complete an audit report within twelve months after the end of the fiscal year. This report consists of managements 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 govemment' 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 Averret O' Sullivan Creel LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements ofthe City for the fiscal year ending September 30, 2012, 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, iv  F- 3 .1. a based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Fort Walton Beach' s financial statements for the fiscal year ending September 30, 2012, 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. The independent audit of the financial statements of the City of Fort Walton Beach was part of a broader, state mandated " Single Audit" designed to meet the special needs of state grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government' s internal controls and compliance with legal requirements, with special emphasis on internal controls and compliance with legal requirements involving the administration of federal awards. These reports are available in the Compliance section of this 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. GOVERNMENT PROFILE MN Originally chartered as a municipality under the laws of the State ofFlorida, actual formation of the City was in 1941 when the Florida legislature officially named it the Town ofFort Walton. In 1953, the Florida Legislature granted the City a new charter at which time the name was changed to Fort C Walton Beach. 0a z 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 communityon the Gulf Coast ofNorthwest Florida. Situated at thejunction oftwo majorhighways- A US 98 ( Miracle Strip Parkway) and SR 85 ( Eglin Parkway) - Fort Walton Beach enjoys the benefits a of its crossroads location along the coastal portion of the Northwest Florida regional transportation network. The City offers a full- service government that utilizes a Council- manager form of government. The City provides police and fire protection; cultural and recreational activities including parks, a library, a museum, and two 18 -hole golf courses; planning and zoning; public works such as street, sidewalk, right -of w - ay, and cemetery maintenance; utilities service including water, sewer, and storm water; and garbage collection to a coastal community of 19, 534 full -time residents. The financial reporting entity (the government) includes all the funds and account groups ofthe 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. PackeR Pg. 15 -  3. 1 a The annual budget serves as a foundation for the City of Fort Walton Beach' s financial planning and control. The City ofFort Walton Beach prepares a budget designed to meet the highest standards of performance in municipal budgeting. The budget process begins in February with individual strategic planning meetings held with the Mayor, City Council, City Manager, and Department Directors. A Budget Policy Workshop is held with City Council in May to determine City Council' s priorities and position on issues critical to development of the operational and capital budgets. City Council' s decisions on the issues presented provide the framework under which the upcoming year' s budget is prepared to meet City Council' s programmatic objectives within available fiscal resources. Department Directors, with the assistance of their division managers, 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 objectives, accomplishments, and performance measures. The City Charter charges the City Manager with the duty of presenting a balanced budget to 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 order to accomplish this goal, a Budget Committee is formed comprised of the City Manager, Finance Director, and the Budget & Grants Manager. The Committee conducts comprehensive meetings with Department Directors and Division Managers to review their budget requests and a collaborative effort is undertaken to achieve City Council and department goals within fiscal constraints. The City Council is required by Florida State Statute and City Charter to hold public hearings on the proposed budget and adopt a final budget no later than September 30, the close of the City' s fiscal year. The appropriated budget is prepared by fund, department (e.g. administrative services), and division (e. g. information technology). 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 ofappropriations 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, this comparison is presented on page 20 and for the Community Redevelopment Agency on page 21 as part of the basic financial statements for the governmental funds. For other governmental funds with appropriated annual budgets, this comparison is presented in the combining and individual fund statements and schedules, section D of this report, which starts on page 83. 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. vi  F3 1.. a Local Economy The City of Fort Walton Beach continues to navigate an environment ofdecreased revenues, coupled with a desire to maintain the same level of programs and services. The City currently faces many of the same economic challenges that are affecting the global economy due to the recessionary environment. 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. Eglin Air Force Base is the world' s largest Department of Defense installation spanning 724 square miles and defense contractor companies are established throughout the Northwest Florida region. It is estimated that local military bases ( Eglin and Hurlburt Air Force Bases and Duke Field) currently represent a $ 6. 0 billion annual economic impact on the area, with approximately 73% of the local economy supported by the military. Long -Term Financial Planning The City undertakes several processes to assist in future planning, such as: A 5 -year CIP ( Capital Improvement Program) Plan is developed and approved by City Council each year during the annual budget process.