Lea 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; and 5. Amendment to the bylaws.”

“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, review and approval prior to filing.”

“The board of directors use a compensation survey when determining the compensation of the general manager. The survey shows comparative salaries for general managers from similarly situated cooperatives located in new mexico and the nation. A compensation survey is used when determining the compensation of key employees of the cooperative. The survey shows comparative salaries for similar positions from similarly situated cooperatives located in new mexico and the nation.”

“The cooperative provides 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 mails a copy of the audited balance sheet and income statement to the members of the cooperative with the annual report.”

“The names and addresses of directors who can no longer be reached at the cooperative are as follows: john ingle p.o. Box 684 tatum, nm 88267 ray hilburn p.o. Box 978 tatum, nm 88267”

“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. Employer contributions to the paln are made pursuant to the plan document. Additionally, the cooperative 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 both plans are available to participating employees, including officers, key employees and highly compensated employees, meeting the eligibility requirements of such plans. 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 officers, key employees and highly compensated employees are comprised of the actuarial increase in the defined benefit plan, the employer contributions 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 a funded welfare benefit plan. The value of these benefits has not been estimated.”

“The board of directors considers the general manager to be both the top management official and the top financial official. Therefore, only the general manager is listed as an employee officer.”

“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.”

“The accounting records of the cooperative are maintained in accordance with the rus uniform system of accounts as prescribed for electric borrowers of the rural utilities service (rus). The uniform system of accounts 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 uniform system of accounts.”

“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 $ 5,067,523 less directors fees reported on 1099-misc (259,352) less employee officer benefits included in line 5 (121,593) plus salaries and wages allocated to nonoperating margins 292 plus salaries and wages capitalized directly to plant 632,215 plus salaries and wages capitalized/expensed indirectly through clearing & other accounts 1,150,060 total wages accrued and/or paid $ 6,469,145”

“Administrative and general expense is comprised of the following: office and supplies $ 332,351 outside services employed 130,716 injury and damages 36,837 regulatory comission expense 296,087 trustee's fees and expenses 61,536 association dues 149,891 miscellaneous and general 3,080 advertising - conservation and safety 288,203 annual meeting expense 69,653 capital credit expense 4,611 total administrative and general expense per 990 $ 1,372,965”

“Other expenses are comprised of the following: transmission expense $ 406,938 customer accounts & service 397,675 taxes - property & other 47,724 sales expense 16,240 total other expenses per form 990 line 24e $ 868,577”

“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 2016 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.”

“The cooperative previously included interest receivable as a component of prepaid expenses and deferred charges on line 9 of part x. However, for the 2016 calendar year, the cooperative began reporting this amount on line 15. To increase consistency, interest receivable in the amount of $424,331 for the 2015 calendar year has been reclassed from line 9 to line 15.”

“The cooperative previously included publicly traded investments as components of investments-other and other assets on line 12 and 15 of part x. However, for the 2016 calendar year, the cooperative began reporting these amounts on line 11. To increase consistency, publicly traded investments in the amount of $45,160,040 and $1,511,958 for the 2015 calendar year have been reclassed from lines 12 and 15 to line 11.”

“Net change in memberships 30. Other comprehensive income provision for pensions and beneifts -206,800. Patronage capital assignable 3,318,439. Patronage capital retired -1,363,610.”

“The board as a whole is responsible for overseeing the audit and soliciting the cpa who will perform the audit. Procedural changes did not occur during the year.”