Kenergy Corp

“A business relationship exists between director richard basham and employee officer timothy lindahl. They serve on the board of kentucky electric cooperatives at the request of and for the benefit of the cooperative.”

“During the year, the cooperative's bylaws were amended. The following is a summary of the changes: article i - members section 8. Member advisory committee, commercial advisory committee and industrial advisory committee, was removed from the bylaws. The previous section 9. Contractually bound, was renumbered to section 8. A complete copy of the bylaws can be found on the cooperative's website: www.kenergycorp.com/bylaws.”

“The cooperative was formed by the members to provide electric service at cost on a cooperative basis.”

“The members of the cooperative vote on the board of directors. Elections are done on a one member one vote basis.”

“The following acts require approval of the members of the cooperative: 1. Dissolution/liquidation of the cooperative 2. Merger or consolidation of the cooperative with another organization 3. Disposal of a substantial portion of the cooperative's assets 4. Amendment to the articles of incorporation 5. Removal of a director from the board”

“The cooperative has no committees with authority to act on behalf of the governing body. Therefore, and pursuant to form 990 instructions, the question has been answered "no".”

“Management presented a copy of the form 990 to the board for discussion and review prior to filing.”

“Annually, the chairman of the board of directors requires each board member and the ceo to complete and sign a form listing the names of their business interest, positions held, and the ownership percentage. Annually, the ceo requires all vice-presidents and managers to complete a survey providing the same information.”

“The compensation committee determines the ceo compensation based on a review of performance and of external market pricing. To assist with external market pricing, an independent compensation consultant is periodically used. For all other employee officers and key employees, compensation is determined using external market sources, including a compensation survey. Internal market pricing is established by utilizing a point factor method of assigning weighted factors based on a variety of competencies. The board of directors approves the budget, including compensation of employee officers and key employees, based on this process.”

“Kenergy provides each member, through a billing insert, a condensed balance sheet and income statement comparing the most recent calendar year to the previous calendar year. The comparative statement of operations, as well as the bylaws, can also be found on the cooperative's website at www.kenergycorp.com/about. Additionally, policies are made available to members upon a written request.”

“In order to provide retirement benefits to its employees, the cooperative actively participates in a multi-employer defined benefit plan. Contributions to this plan are based on the full funding limitation of such plan. Employer contributions for the plan are available to participating employees, including officers, key employees and highly compensated employees, meeting the eligibility requirements of such plans. A defined contribution plan is also offered to employees. Since january 1, 2019, the defined contribution plan is for elective salary deferrals only and not matched by the cooperative. The cooperative also provides health and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officer and highly compensated employees is comprised of the actuarial increase in the defined benefit plan and insurance paid on behalf of and for their benefit.”

“Patronage dividends result from the payment of interest from cooperative banks and the purchase of supplies and services from other cooperative organizations. The expenses associated with purchases from and payments to such cooperative organizations are a direct component of cost of the electric service provided by the cooperative to its members.”

“The accounting records of the cooperative are maintained in accordance with the uniform system of accounts (usoa) as prescribed by the federal regulatory commission for class a and b electric utilities modified for electric borrowers of the the rural utilities service (rus). The usoa does not record expenses in the general expense categories provided on part ix lines 1-23. The cooperative separately states salaries and wages, employee benefits and payroll taxes that are allocated in accordance with their accounting system, but other expenses that are described in lines 1-23 are reported on line 24 under the expense categories required by the usoa.”

“Salaries and wages are allocated to asset, liability, and expense accounts based on the accounting system described above. The following schedule reconciles amounts reported on lines 5-7 to total wages accrued and/or paid: total per lines 5-7 $ 9,912,793 less: director fees reported on forms 1099-nec (137,800) less: employee officer benefits reported on line 5 (614,367) plus: salaries and wages allocated to nonoperating margins 450,604 plus: salaries and wages capitalized directly to plant 4,044,988 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 406,946 total wages accrued and/or paid $14,063,164”

“Other expenses is comprised of the following: consumer expense $ 735,657 taxes 553,173 other deductions 9,237 total other expenses per form 990, line 24e $ 1,298,067”

“Pursuant to the form 990 instructions, the amount of patronage dividends paid to the members (hereinafter referred to as "patrons") should be reported on part ix, line 4. The phrase "patronage dividends paid" refers to the process, subsequent to year-end, by which the cooperative allocates patronage capital to and, therefore, operates at cost with its patrons. The cooperative's tax exempt purpose is to provide electricity to its patrons and to do so on a cooperative basis. Tax law defines "operating on a cooperative basis" as subordination of capital, democratic control, and operation at cost. The cooperative operates at cost through the allocation of true patronage dividends (also referred to as allocations of patronage capital) to its patrons. Patronage dividends are considered paid if the allocation is made (1) pursuant to a pre-existing obligation, (2) from the margins produced from the transactions done with or for patrons, and (3) in a fair and equitable manner on the basis of patronage (i.e. Purchases). Additionally, the allocation of patronage dividends should be made within a reasonable time period after the close of the cooperative's year-end of december 31. Each one of these requirements for a true patronage dividend is provided for in the non-profit operation article of the cooperative's bylaws. The amount reported on part ix, line 4 represents the amount of patronage capital that is allocated to the patrons resulting from their purchase of electricity from the cooperative for the 2024 calendar year. When allocated, the cooperative credits to an individual capital account for each patron the stated dollar amount of the patronage dividend. Additionally, because patronage dividends are the process by which the cooperative operates at cost with its patrons and thereby a key component to accomplishing its exempt purpose, the cooperative has reported such amounts as an expense for form 990 reporting. Patronage dividends are not an expense for financial statements prepared in accordance with generally accepted accounting principles, however.”

“Aministrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 2,421,695 office supplies 10,921 outside services 448,051 reg. Commission expense 53,598 miscellaneous general 611,638 directors expense 175,897 maintenance of general plant 1,192,943 advertising expense 3,107 management expense 12,540 franchises expense 12,025 total admin & general exp per financial statements $ 4,942,415 less: reclass of scholarships to part ix, line 2 (16,000) less: reclass of director fees to part ix, line 5 (137,800) less: reclass of labor to part ix, lines 5 & 7 (2,148,493) less: reclass of benefits to part ix, lines 8-10 (959,057) total admin & general expense per form 990, part ix $ 1,681,065”

“Patronage capital assignable 5,002,833. Patronage capital retired - total -289,270. Patronage capital retired - discount 171,059. Patronage capital retired - member contributions 18,767. Net change in memberships 1,620. Book-to-tax adjustment - fiber grant -1,982,145.”

“The board of directors have assigned members to an audit committee to oversee the financial statement audit and select the independent financial statement auditor. Procedural changes did not occur during the year.”