Fort Walton Beach — Annual Comprehensive Financial Report, September 30, 2025 — reading text

valorem revenues will increase by 5.44% city-wide as compared to the final 2023 Certification of Taxable Value DR-420. Eglin Air Force Base is the world’s largest Department of Defense installation, spanning over 640 square miles. Defense contractor companies are established throughout the Northwest Florida region. It is estimated that local military bases currently represent a $9B annual economic impact on the area, with 72% or the local economy in jobs alone 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 drivable 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 2025-2026. The City’s budget for FY 2025-2026 allocates $32.2M to the General Fund, $22.4M to the Enterprise Funds, and $10.6M to Other Funds. For the FY 2025-2026 budget, the ad valorem rate remained at the millage rate of 4.3282 mills. The FY 2025-2026 budget includes a new five-year utility rate study, which was adopted by City Council in September 2025. The utility rate study included recommendations on rate structures for water and wastewater, stormwater, and solid waste. No other significant changes to the City’s various rates and fees are included in the FY 2024-2025 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 Annual Comprehensive Financial Report (ACFR) for the fiscal year ended September 30, 2024, which the City has received for over 20 consecutive years. To be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized ACFR, 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, 2025. The City has received this prestigious award for 30 consecutive years. 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, X Jason Davis 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, 2024 Executive Director/CEO x  Citizens of Fort Walton Beach City Council City Clerk City Manager 3 FTE 3.25 FTE City Attorney 0400 0200 & 0210 Public Works Growth Management Financial Services Fire Services Human Resources Police Services Recreation Services And Utility Services 14.25 FTE 16 FTE & 1 Contract 43.25 FTE 8.50 FTE 74.20 FTE 71.20 FTE 80 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 Maintenance: Parks, Sewer Collections Debt Service & Policing/CRA CRA Management Hazardous Right-Of-Way and Stormwater Materials Crime Prevention Cemetery Treasury Response Streets Communications Library Utility Billing Fire Education 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 Report on the Audit of the Financial Statements 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, 2025, 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, 2025, 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