Duncan Valley Electric Cooperative Inc

“A business relationship exists between director frie and director downs. Both serve on the board of arizona electric power cooperative at the request of and for the benefit of the cooperative.”

“The cooperative was formed by the members to provide electric and gas 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. 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 and review prior to filing. The discussion and review took place at a regularly scheduled board meeting.”

“Prior to service for the cooperative, each director, employee, or member of a committee with board-delegated powers shall sign a statement affirming that such person: (a) has received a copy of the conflict of interest policy; (b) has read and understands the policy; (c) has agreed to comply with the policy; and (d) understands that the cooperative is a non-profit organization and that in order to maintain its federal tax exemption it must engage primarily in activities which accomplish its tax-exempt purposes. The cooperative conducts annual reviews which, at a minimum, include the following subjects: (a) whether compensation arrangements and benefits are reasonable and are the results of arm's-length bargaining; (b) whether partnership and joint venture arrangements conform to written policies, are properly recorded, reflect reasonable payments for goods and services, further the cooperative's non-profit purposes and do not result in inurement and impermissible private benefit; and (c) whether agreements to provide services, and agreements with other service providers, directors, employees, members or third party payors, further the cooperative's non-profit purposes and do not result in inurement or impermissible private benefit.”

“The board of directors use internal and/or external resources when determining the compensation of the general manager. Form 990, part vi, section b, line 15b: the general manager uses internal and external resources when determining the accounting manager compensation.”

“The cooperative will provide a complete copy of its governing documents, conflict of interest policy, and audited financial statements to any member who requests a copy of any such document. The cooperative includes a detailed balance sheet and income statement in the annual report provided to the members in attendance at the annual meeting, and upon request. Finally, the bylaws can be found on the cooperative's website.”

“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 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 plan 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,meeting the eligibility requirements of such plans. The organization also provides health and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers is comprised of the actuarial increase in the defined benefit plan, the total amount contributed by the cooperative to the defined contribution plan and insurance paid on behalf of and for their benefit.”

“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 a net gain of $173,440, which is the effect of 1) an electric division margin being offset against the cumulative amount of prior year losses in the electric division, being set aside as unallocated and available to offset future net margins, 2) a gas division loss being set aside as unallocated and available to offset future net margins from the gas division, 3) retention of non-operating income (losses), and 4) the difference in reporting of unrealized gains and losses on investments on financial statements prepared in accordance with generally accepted accounting principles and for tax purposes. Unrealized gains and losses on investments are not reportable on the form 990. The following schedule is provided to further explain the impact of this transaction: (a) - net gain on page 1, part i, line 19 $ 173,440 (b) - unrealized gain/(loss) on investments, part xi, line 5 $ 58,605 total 2024 net margin per financial statements (a + b) $ 232,045”

“The accounting records of the cooperative are maintained in accordance with the uniform system of accounts (usoa) as prescribed by the federal energy regulatory commission for class a and b electric utilities modified for electric borrowers of the national rural utilities cooperative finance corporation. 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 the total wages accrued and/or paid: total per lines 5-7 $ 1,025,575 less: director fees reported on forms 1099-nec (43,100) less: employee officer benefits included in line 5 (76,696) plus: salaries and wages capitalized directly to plant 122,775 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 222,305 total wages accrued and/or paid $ 1,250,859”

“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 gas and 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 bylaws. 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 gas and electricity from the cooperative for the current year. Patronage dividends are the process by which the cooperative operates at cost with its patrons, thereby a key component to accomplishing its exempt purpose, and is reported as an expense for tax purposes. Patronage dividends are not an expense for financial statements prepared in accordance with generally accepted accounting principles. In 2024, the cooperative is offsetting prior year losses, therefore the amount reported on line 4 is zero.”

“Administrative & general expense is comprised of the following: office supplies $ 102,252 outside services 31,646 director expense 101,662 annual meeting expense 17,643 dues to associated organizations 48,240 miscellaneous general 80,599 utility commission related expense 14,989 maintenance of general plant 15,829 duplicate charges (credit) (2,077) total admin & general exp per financial statements $ 410,783 less: reclass of director fees to part ix, line 5 (43,100) less: reclass of labor to part ix, lines 5 & 7 (199,815) less: reclass of benefits to part ix, lines 8-10 (80,949) total admin & general expense per form 990, part ix $ 86,919”

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