Lyntegar Electric Cooperative Inc

“During the year the cooperative's bylaws were amended. The following is a summary of the changes: article iv, section 3. Qualifications, was amended to to state "any member who is a natural person shall be eligible to become or remain a director provided that he/she: (a) is a member in good standing and presently resides in the district for which said person is seeking to be nominated or elected. (b) is not an employee of the cooperative or an owner or principal of an entity who advances the pecuniary interest of the business by providing electric energy, or a good or service or product related to providing electric energy in competition with the cooperative." the section goes on to amend part (d) stating: (d) has not, while a director and during the ten (10) years immediately before becoming a director, been convicted of, or pled guilty to, a felony, two (2) misdemeanors (excluding minor traffic violations), or any offense involving moral turpitude, or has been indicted by a state or federal grand jury which remains pending at the time of application." a complete copy of the bylaws can be found on the cooperative's website: https://lyntegar.coop/legal-notices/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”

“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.”

“On an annual basis, legal counsel is required to review the conflict of interest policy with the directors and officers at the first meeting of the board of directors following elections. Each director and officer must also complete and sign a conflict of interest certification and disclosure form. Thereafter, directors and officers are required to disclose any action or situation that might violate the policy to the full board of directors as soon as possible.”

“The board of directors utilize internal resources and perform an annual review when determining the compensation of the general manager/ceo. The board and the general manager/ceo use a compensation survey when determining the compensation of the cooperative's other employees meeting the definition of officer, key employees, and highly compensated employees, if any. The survey includes salaries from similar cooperatives throughout texas and the nation.”

“The cooperative provides a summarized copy of the audited financial statements to the members of the cooperative at the annual meeting and the cooperative bylaws are available on the cooperative's website. The cooperative will provide a complete copy of the audited financial statements, conflict of interest policy, or governing documents to any member who requests a copy.”

“In order to provide retirement benefits to its employees, the cooperative has established a defined contribution plan under section 401(k) of the internal revenue code. As part of the plan document, the cooperative provides a base and a matching contribution. Employer contributions to this plan are available to participating employees, including officers and highly compensated employees, meeting the eligibility requirements of such plan. The cooperative also provides health, dental, vision and life insurance to all employees through a qualified plan. The amounts reported on part vii, column (f) for the officers and highly compensated employees are comprised of the total amount contributed to the 401(k) pension plan and the insurance paid on behalf of and for their benefit. In addition to the above pension plans, the cooperative also provides post-retirement health insurance benefits through an unfunded welfare benefit plan. The value per person of these benefits has not been estimated.”

“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.”

“Although the cooperative is no longer a rural utilities service (rus) borrower, its accounting records are maintained in accordance with the rus uniform system of accounts (usoa) as 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.”

“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 $ 9,955,946 less: director fees reported on forms 1099-nec (159,799) less: employee officer benefits included in line 5 (193,096) plus: salaries and wages capitalized directly to plant 3,651,432 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 1,652,880 total wages accrued and/or paid $14,907,363”

“Administrative and general expense is comprised of the following: administrative & general salaries, benefits & other $ 1,652,822 safety, wellness and continuing education 88,078 office supplies 631,810 outside services employed 120,603 insurances and damages 93,685 regulatory commission 160,247 directors 185,062 dues paid to associated organizations 86,414 annual meeting 101,970 miscellaneous general (17,570) general advertising 121,377 maintenance of general plant 339,649 total admin & general exp per financial statements $ 3,564,147 less: reclass of miscellaneous expenses (143) less: reclass of director fees to part ix, line 5 (159,799) less: reclass of labor to part ix, lines 5 & 7 (2,086,682) less: reclass of benefits to part ix, lines 8-10 (443,388) total admin & general expense per form 990, part ix $ 874,135”

“Other expenses is comprised of the following: sales $ 366,129 customer accounts 800,325 customer service and information 367,898 total other expenses per financial statements $ 1,534,352 less: reclass of labor to part ix, line 5 (1,304,179) less: reclass of benefits to part ix, line 8-10 (277,120) add: reclass of satellite & internet expenses 3,503 add: reclass of investment expenses 109,775 total other expenses per form 990 line 24e $ 66,331”

“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 2022 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.”

“Patronage capital allocated or to be allocated 5,227,307. Patronage capital retired - total -3,508,544. Patronage capital retired - discount 3,224. Net change in memberships 285. Other comprehensive income - post retirement health benefits 91,714. Other - book/tax difference on other investment income 16,248.”

“The board as a whole is responsible for overseeing the financial statement audit and selecting the independent financial statement auditor. Procedural changes did not occur during the year.”