ACFR - FY2020 5-28-21 FINAL - Flipbook - Page 71
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 on 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 major 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 are in the possession of 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 otherthan temporary impairment on a quarterly basis 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 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 of time sufficient to allow for any anticipated recovery in the fair value. In analyzing
an issuer financial condition, the City considers whether the federal government or its
agencies issue the securities, whether downgrades by bond rating agencies have occurred,
and the results of reviews of the issuer’s financial condition.
The City has no formal policy concerning interest rate risk.
Concentration of Credit Risk
The City’s non-pension holdings at U.S. Bank (USB) contain approximately 8.92% of total
investments. The breakdown is composed of securities 4.57%, money market account
.25%, and government guaranteed bonds (Ginnie 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 an interest rates which range from 1.52% to 2.42%. Certificate of Deposits
are 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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