Lyntegar Electric Cooperative Inc

“During the year, the bylaws of the cooperative were amended as follows: article iv - directors section 2 was amended to add if an election is not held due to failure to reach a quorum at any annual meeting where an election is scheduled, that election shall take place either at a special meeting of the members held for that purpose, or at the next regularly scheduled annual meeting. A director elected under these circumstances, at a special meeting or at the next annual meeting, shall serve only the remainder of the three year term as if elected on the date of the originally scheduled election.”

“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 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 $ 6,169,323 less: director fees reported on forms 1099-misc (161,320) less: employee officer benefits included in line 5 (106,097) plus: salaries and wages capitalized directly to plant 2,271,696 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 1,114,729 total wages accrued and/or paid $ 9,288,331”

“Administrative and general expense is comprised of the following: administrative & general $ 1,423,476 safety, wellness and continuing education 130,593 office supplies 485,134 outside services employed 220,621 insurances and damages 59,813 regulatory commission 115,950 directors 177,659 dues paid to associated organizations 92,436 annual meeting 102,833 miscellaneous general 124,636 general advertising 103,261 maintenance of general plant 343,802 total admin & general exp per financial statements $ 3,380,214 less: reclass of miscellaneous expenses (13,004) less: reclass of director fees to part ix, line 5 (161,320) less: reclass of labor to part ix, lines 5 & 7 (1,170,152) less: reclass of benefits to part ix, lines 8-10 (380,198) total admin & general expense per form 990, part ix $ 1,655,540”

“Other expenses is comprised of the following: sales $ 90,454 transmission 21,870 satellite and internet expenses 6,244 investment expenses and deductions 197,158 total other expenses per form 990 line 24e $ 315,726”

“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 2019 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.”

“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.”

“Patronage capital allocated or to be allocated 12,524,805. Patronage capital retired -4,086,898. Net change in memberships 400. Other comprehensive income - post retirement health benefits -6,341. Other - book/tax difference on other investment income -5,861.”

“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.”