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

31. Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Independent Auditor' s Report ( Continued) Accounting principles generally accepted in the United States of America require that the Management' s Discussion and Analysis on pages 3 - 13, the Schedule of Funding Progress on page 80, and the Schedule of Contributions from the Employer and Other Contributing Entities on page 81 be presented to supplement the basic ti0aso m financial statements. Such information, 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 LLc placing the basic financial statements in an appropriate operational, economic, or historical context. We have m applied certain limited procedures to the required supplementary information in accordance with auditing standards c generally accepted in the United States of America, which consisted of inquiries of management about the methods 6 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 N statements. We do not express an opinion or provide any assurance on the information because the limited a procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. d Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise E the City of Fort Walton Beach, Florida's financial statements as a whole. The introductory section, combining and UE0 individual nonmajor fund financial statements, and statistical section, are presented for purposes of additional 0 analysis and are not a required part of the financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the LL a underlying accounting and other records used to prepare the financial statements. The information has been a, subjected to the auditing procedures applied in the audit of the financial statements and certain additional N 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. The introductory and statistical sections have 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 them. Gt% c March 5. 2013 Packet.. -  3. 1. a MANAGEMENT' S DISCUSSION AND ANALYSIS As management of the City of Fort Walton Beach, Florida, we offer readers of the City of Fort Walton Beach' s financial statements this narrative overview and analysis of the financial activities of the City of Fort Walton Beach for the fiscal year ended September 30, 2012. 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 -viii of this report. FINANCIAL HIGHLIGHTS The assets of the City of Fort Walton Beach exceeded its liabilities by $65. 0 million ( net assets). Of this amount, $ 20.0 million represents unrestricted net assets that are available to meet the City' s ongoing obligations to citizens and creditors. The government' s net assets decreased by $ 1. 5 million, primarily attributable to an impairment loss of $588,652, due to the revised average expected life of the City' s Pump Station # 1, an increase in the other post -employment benefits ( OPEB) liability, unanticipated expenses that necessitated the use of fund balance, and lower than anticipated revenues. As of the close of the fiscal year, the City of Fort Walton Beach' s governmental funds reported combined ending fund balances of $16. 1 million, a decrease of $ 1. 6 million in comparison with the prior year. Approximately 55. 6% of this amount, or $ 9. 0 million, is available for spending at the discretion of City Council. At the end of the fiscal year, unrestricted fund balance for the General Fund was $ 7. 0 million, or 39. 1% of total General Fund expenditures. The City of Fort Walton Beach' s total debt decreased by $ 542, 439, or 3. 4 %, during the fiscal year, primarily attributable to scheduled principle payments and the Golf Equipment Lease nearing maturity. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis intends to serve as an introduction to the City of Fort Walton Beach' 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 ( GASH) Statement 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. 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 of Fort Walton Beach' s finances in a manner similar to a private-sector business. Two statements, the statement of net assets and the statement of activities, are utilized to provide information on a government -wide basis. The statement of net assets presents information on all of the City of Fort Walton Beach' s assets and liabilities, with the difference between the two reported as net assets. This statement combines and consolidates the governmental funds' current financial resources ( short -term available resources) with  3. t. a capital assets and long -term obligations. Over time, increases or decreases in net assets may serve as a useful indicator of the financial position of the City of Fort Walton Beach. The statement of activities presents information showing how the government' s net assets changed during the most recent fiscal year. All changes in net assets 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 of the government -wide financial statements distinguish functions of the City of Fort Walton Beach 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 of Fort Walton Beach include general government ( city clerk, city council, city manager, community redevelopment and depart agency, human exp sees), resources, finance, purchasing, fleet maintenance, service maintenance, s e public safety ( police, fire, and code enforcement services), phy transportation ( engineering, streets, public works, and right -of w- ay), economic development ( Community Development Block Grant Program), culture and recreation ( parks, library, and museum), and debt service interest. The business -type activities of the City of Fort Walton Beach include utilities ( water, sewer, and storm water), sanitation, and golf. The government -wide financial statements include not only the City of Fort Walton Beach 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 of Fort Walton Beach is financially accountable. The CRA is considered a blended component unit of the City of Fort Walton Beach, Florida and presented as a special revenue fund as part of the primary government. The government -wide financial statements are found on pages 14 - 15 of this report. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City of Fort Walton Beach, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City of Fort Walton Beach can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. 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 -teen 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 governments near -term financial requirements. The basic governmental fund financial statements are on pages 16 -21 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 govenument -wide financial statements. By doing