Lamb County Electric Cooperative Inc

“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”

“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. The discussion and review was performed at the board meeting immediately before filing the form 990.”

“Although the cooperative does not have a written conflict of interest policy governing both employees and directors, article iv, section 4.02 of the cooperative's bylaws prohibit a director from being a close relative to another director, non-director cooperative officer or employee. A director is also prohibited from having a financial interest in a competing enterprise. A violation of this prohibition disqualifies a person from serving as a director and shall result in such director being removed from the board.”

“Annually, the board of directors review the performance of the cooperative's general manager, and use a compensation survey when determining the compensation of the general manager. As part of this process, the board of directors considers and documents the following factors: (1) job performance, (2) tenure, (3) salaries paid to general managers of electric cooperatives of similar size located in the panhandle and south plains regions of texas, (4) salary level compared to the salaries and wages paid to other employees, and (5) inflation, cost of living increases, and overall economic conditions of the area served by the cooperative. The board and the general manager use a compensation survey when determining the compensation of the cooperative's other employees meeting the definition of officer.”

“The cooperative will provide a complete copy of its governing documents and audited financial statements to any member who requests a copy of any such document. Annually, the cooperative provides a summarized copy of the audited balance sheet and income statement to the members of the cooperative at the annual meeting. A complete copy of the bylaws are available on the cooperative's website.”

“In order to provide retirement benefits to employees, the cooperative has established a defined contribution plan under section 401(k) of the internal revenue code. Employer contributions to the plan are made pursuant to the plan document. Employer contributions are available to participating employees, including officers and highly compensated employees, meeting the eligibility requirements of the plan. The cooperative also provides health, dental, vision, and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers and highly compensated employees is comprised of the total amount contributed by the cooperative to the defined contribution plan and insurance paid on behalf of and for their benefit.”

“Patronage dividends result from the purchase of wholesale power from a generation & transmission cooperative. Patronage dividends also 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.”

“In general, when an electric cooperative bases the patronage dividend calculation on its net book income/(loss), page 1, part i, line 19 - revenue less expenses - will be $0. For the current year, page 1, part i, line 19 reports net loss of ($11,014), which is the income statement effect of accrued unbilled revenue and equity method income. Equity method income is recorded on the cooperative's books and included in net margins. U.s. Gaap requires the cooperative to record on its books equity method income from its wholly owned subsidiaries. Equity method income is not income for irs form 990 purposes and as such has been reported as an other change in net assets. The gaap basis financial statements include an accrual for unbilled revenue because the cooperative's billing cycle does not end on the last day of the month. Therefore, it has revenue in december of each year that it has earned but will not bill until the first billing cycle of the following year. The cooperative estimates this revenue and records it as accrued unbilled revenue in order to match the revenue with the year earned. However, the cooperative allocates the revenue to members in the year it is billed rather than when accrued. This timing difference is fair and equitable because it matches the patronage dividend allocated with the billing records used to allocate margins. Due to the timing of when the cooperative allocates accrued unbilled revenue, page 1, part i, line 19 annually reports net income equal to the net increase in accrued unbilled revenue or a net loss equal to the net decrease in unbilled revenue plus the equity method income(loss) from subsidiary. The following schedule is provided to further explain the impact of this transaction: add: unbilled revenue 12/31/24 $ 62,513 less: unbilled revenue 12/31/23 (72,809) (a) - net decrease in unbilled revenue $ (10,296) (b) - equity method income from subsidiary $ (718) net loss on page 1, part i, line 19 (a + b) $ (11,014)”

“Although the cooperative is no longer a rural utilities services (rus) borrower, its accounting records are maintained in accordance with the rus uniform system of accounts (usoa) prescribed for rus electric borrowers. The usoa does not record expenses in the general expense categories provided on part ix lines 1-23. The cooperative separately reports 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.”

“All grants, sponsorships, and/or donations are made to non-profit and civic organizations that are located in the cooperative's service area, and are intended to improve the communities in which our members reside. Each grant, sponsorship, and/or donation made during the year was below the reporting threshold of schedule i, part ii.”

“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 either allocated or to be allocated to the patrons resulting from their purchase of electricity from the cooperative for the 2024 calendar year. 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.”

“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 $ 3,247,291 less: director fees reported on forms 1099-nec (210,132) less: employee officer benefits reported on line 5 (56,558) plus: salaries and wages capitalized directly to plant 396,599 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 240,069 total wages accrued and/or paid $ 3,617,269”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 1,303,530 office supplies 280,218 outside services employed 59,635 insurances and damages 68,865 employee pensions & benefits 852,869 directors fees 222,924 capital credit allocation exp 937 member & stockholder exp 72,361 maintenance of general plant 472,669 dues and subscriptions 48,907 miscellaneous general 8,440 regulatory commission 42,780 total admin & general exp per financial statements $ 3,434,135 less: reclass of donations to part ix, line 1 (300) less: reclass of ubi expense to part viii, line 6 (12,596) less: reclass of director fees to part ix, line 5 (210,132) less: reclass of labor to part ix, lines 5 & 7 (811,704) less: reclass of benefits to part ix, lines 8-10 (891,602) total admin & general expense per form 990, part ix $ 1,507,802”

“Other expenses is comprised of the following: customer accounts $ 19,587 customer service and information 3,372 transmission 1,937 total other expenses per financial statements $ 24,896”

“Patronage capital allocated 3,085,558. Patronage capital retired -2,165,920. Net change in memberships -75. Equity method income(loss) from subsidiary 718.”

“The board as a whole is responsible for overseeing the financial statement audit and selecting the independent financial statement auditor.”