ACFR - FY2021 FINAL 5-13-22 USE THIS ONE - Flipbook - Page 79
NOTES TO FINANCIAL STATEMENTS
CITY OF EUSTIS, FLORIDA
(Continued)
Note 3 - Cash, Cash Equivalents, and Investments (Continued)
Credit Risk
Credit risk is the risk of loss due to the failure of the security issuer. The City’s investment
policy limits the investments to obligations with the highest credit quality ratings. Ratings for
debt securities are displayed in the above schedule. The State of Florida 185.06 and 175.06
has a provision regarding investments which states for bonds and stocks that the corporation
is listed on any one or more of the recognized national stock exchanges or the National Market
System of the NASDAQ Stock Market and, in the case of bonds only, holds a rating in one
of the three highest classifications by a primary rating service. Investment ratings are from
Moody’s Investors Service, Inc., and Standard and Poor’s Ratings Group.
Custodial Credit Risk
For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the City will not be able to recover the value of its investments or collateral
securities that own an outside party. The Government National Mortgage Association
(GNMA) investments of the City and the City’s pension investments are held in the name of
the counterparty, not in the name of the City.
Interest Rate Risk
Interest rate risk exists when there is a possibility that changes in interest rates could
adversely affect an investment’s fair value. The weighted average maturity of the City’s
investments is displayed in the above schedule. The City evaluates securities for other- thantemporary impairment every quarter and more frequently when economic or market concerns
warrant. Consideration is given to the length of time and the extent to which the fair value
has been less, than the cost, the financial condition and near-term prospects of the issuer,
and the intent and ability of the City to retain its investment in the issuer for a period enough
to allow for any anticipated recovery in the fair value. In analyzing an issuer’s financial
condition, the City considers whether the federal government or its agencies issue the
securities, whether downgrades agencies by bond, rating the results of reviews of the issuer’s
financial condition. The City has no formal policy concerning interest rate risk.
The Concentration of Credit Risk
The City’s non-pension holdings at U.S. Bank (USB) contain approximately 8.92% of total
investments. The breakdown comprises securities at 4.57%, money market account at .25%,
and government-guaranteed bonds (Gennie Mae) of 4.10%. As the investments mature, the
money is deposited into the City master account at TD Bank, which is highly liquid and offers
interest rates that range from 1.52% to 2.42%. Certificate of Deposits is held by banks that
are qualified public depositories of the State of Florida. Currently, the City has three
Certificates of Deposit with a maturity of less than one year.
Foreign Currency Risk - the City is not exposed to this type of risk.
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