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CITY OF SUNNY ISLES BEACH, FLORIDA <br />NOTES TO FINANCIAL STATEMENTS <br />FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2023 <br />NOTE 2 - DEPOSITS AND INVESTMENTS (CONTINUED) <br />INTEREST RATE RISK <br />Interest rate risk is the risk that changes in market interest rates will adversely affect the fair <br />value of an investment. Generally, the longer the maturity of an investment, the greater the <br />sensitivity of its fair value to changes in market interest rates. The City's investment policy <br />minimizes interest rate risk by structuring the portfolio so that securities mature to meet <br />cash requirements for ongoing operations, thereby avoiding the need to sell securities on the <br />open market prior to maturity and by investing funds only in authorized securities. In <br />addition, the City limits the length to maturity of any U.S. Government Security, U.S. <br />Government Agency, or certificate of deposit to a maximum of 10 years. <br />CREDIT RISK <br />Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation <br />to the holder of the investment. This is measured by the assignment of a rating by a <br />nationally recognized statistical rating organization. In accordance with the City's <br />investment policy, the City minimizes credit risk by limiting investments to authorized <br />securities and diversifying the portfolio on any investment below a AAA rating so that <br />potential losses on individual securities will be minimized. <br />All U.S. Government Securities are explicitly guaranteed by the U.S. government and are <br />not subject to credit risk. The U.S. Government Agency investments are rated AA+ by <br />Standard and Poor's. Investments in certificates of deposit are held in qualified public <br />depositories pursuant to Chapter 280.03 of the Florida Statutes, Florida Security for Public <br />Deposits Act. Under the Act, all qualified public depositories are required to pledge eligible <br />collateral having fair value equal to or greater than the average daily or monthly balance of <br />all public deposits, times the depository's collateral pledging level. <br />CONCENTRATION CREDIT RISK <br />The City's investment policy does not limit its investments in any one issuer for U.S. <br />Government Securities or Agencies, or registered money market mutual funds, except for <br />Treasury Strips, which are limited to 10% of available funds. The City's investment policy <br />does limit its investments in certificates of deposit, the Florida Local Government Surplus <br />Funds Trust Fund and intergovernmental investment pools to 50% in any one issuer. <br />W <br />