2011-2012 Annual Report - Full Version - PDF - Palmerston North ...

Note 35Financial Statements Note 35Capital managemenT◊◊◊PNCC’s capital is its equity (or ratepayers’ funds),which comprise retained earnings and reserves.Equity is represented by net assets.The Local Government Act 2002 (the Act)requires PNCC to manage its revenues, expenses,assets, liabilities, investments, and generalfinancial dealings prudently and in a mannerthat promotes the current and future interestsof the community. Ratepayers’ funds are largelymanaged as a by-product of managing revenues,expenses, assets, liabilities, investments, andgeneral financial dealings.The objective of managing these items is toachieve intergenerational equity, which is aprinciple promoted in the Act and applied byPNCC. Intergenerational equity requires today’s◊ratepayers to meet the costs of utilising PNCC’sassets and not expecting them to meet thefull cost of long term assets that will benefitratepayers in future generations. Additionally,PNCC has in place asset management plans formajor classes of assets detailing renewal andmaintenance programmes, to ensure ratepayersin future generations are not required to meetthe costs of deferred renewals and maintenance.The Act requires PNCC to make adequate andeffective provision in its Long Term Plan (LTP)and in its Annual Plan (where applicable) tomeet the expenditure needs identified in thoseplans. The Act also sets out the factors that PNCCis required to consider when determining themost appropriate sources of funding for each ofits activities. The sources and levels of fundingare set out in the funding and financial policiesin PNCC’s LTP.188Palmerston North City Council Annual Report 2011/12