Fort Walton Beach — Comprehensive Annual Financial Report September 30, 2013 — reading text

control, such that there is a reasonable possibility that a material misstatement of the entity'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 first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Fort Walton Beach, Florida's financial statements are free of 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 determination of financial statement amounts. 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. 121 Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Internal Auditor's 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 (Continued) 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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. We noted certain matters that we reported to the City of Fort Walton Beach, Florida in a separate letter dated March 3, 2014. Fort Walton Beach, Florida March 3, 2014 122 Honorable Mayor and City Council Members City of Fort Walton Beach, Florida INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR STATE PROJECT AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH CHAPTER 10.550, RULES OF THE AUDITOR GENERAL Report on Compliance for Each Major State Project We have audited City of Fort Walton Beach, Florida's compliance with the types of compliance requirements described in the Florida Department of Financial Services' State Projects Compliance Supplement that could have a direct and material effect on each of City of Fort Walton Beach, Florida's major state projects for the year ended September 30, 2013. City of Fort Walton Beach, Florida's major state projects are identified in the summary of auditor’s results section of the accompanying Schedule of Findings and Questioned Costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state projects. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of City of Fort Walton Beach, Florida’s major state projects based on our audit of the types of compliance requirements referred to above. 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 Chapter 10.550, Rules of the Auditor General. Those standards and Chapter 10.550 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state project occurred. An audit includes examining, on a test basis, evidence about City of Fort Walton Beach, Florida’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major state project. However, our audit does not provide a legal determination of City of Fort Walton Beach, Florida's compliance. Opinion on Each Major State Project In our opinion, City of Fort Walton Beach, Florida complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major state projects for the year ended September 30, 2013. 123 Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Independent Auditor's Report on Compliance for Each Major Project and on Internal Control Over Compliance Required by Chapter 10.550, Rules of the Auditor General (Continued) Report on Internal Control Over Compliance Management of City of Fort Walton Beach, Florida is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Fort Walton Beach, Florida’s internal control over compliance with the types of requirements that could have a direct and material effect on each major state project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major state project and to test and report on internal control over compliance in accordance with Chapter 10.550, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of Fort Walton Beach, Florida’s 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 state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or 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 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 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. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 Chapter 10.550. Accordingly, this report is not suitable for any other purpose. Fort Walton Beach, Florida March 3, 2014 124  City of Fort Walton Beach, Florida SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended September 30, 2013 I. SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting:  Material weakness(es) identified? Yes X No None  Significant deficiency(ies) identified? Yes X Reported Noncompliance material to financial statements noted? Yes X No State Financial Assistance Internal control over major programs:  Material weakness(es) identified? Yes X No None  Significant deficiency(ies) identified? Yes X Reported Type of auditor's report issued on compliance for major programs: Unmodified  Any audit findings disclosed that are required to be reported in accordance with Chapter 10.550? Yes X No Identification of major project: CFDA Number Name of State Project 37.077 Wastewater Treatment Facility Construction Dollar threshold used to distinguish between type A and type B programs $300,000 Auditee qualified as low-risk auditee? Yes X No II. FINANCIAL STATEMENT FINDINGS The results of our audit of the City of Fort Walton Beach, Florida did not disclose any findings required to be reported under Chapter 10.550, Rules of the Auditor General. 125 (THIS PAGE INTENTIONALLY LEFT BLANK.) Honorable Mayor and City Council Members City of Fort Walton Beach, Florida MANAGEMENT LETTER We have audited the financial statements of the City of Fort Walton Beach, Florida, as of and for the fiscal year ended September 30, 2013, and have issued our report thereon dated March 3, 2014. 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, and Chapter 10,550, Rules of the Florida Auditor General. We have issued our Independent Auditor's Independent Auditor's 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; Independent Auditor's Report on Compliance With Requirements Applicable to Each Major State Project and on Internal Control over Compliance in Accordance with Chapter 10.550, Rules of the Florida Auditor General; and the Schedule of Findings and Questioned Costs. Disclosures in this report, which are dated March 3, 2014, should be considered in conjunction with this management letter. Additionally, our audit was