Peninsula Light Company

“The cooperative was formed by the members to provide electric and water distribution services on a mutual basis.”

“The members of the company vote on the board of directors. Elections are done on a one member one vote basis.”

“In addition to director elections, 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 provided a copy of the form 990 to the board for discussion and review prior to filing.”

“Human resources monitors and administers the policy. Specifically, the board of directors and officers are required to review and be familiar with the policies outlined in the company's conflict of interest policy, and are required to disclose any action or situation that might violate the policy to the full board as soon as possible.”

“Ceo - an independent consultant was hired to conduct a market salary study for the ceo position. The consultant reports directly to the president of the board and the chairman of the board compensation committee. The ceo has no contact or interaction with the consultant or the board regarding this project. The consultant reports findings to the entire board of directors. A question and answer session follows where the consultant answers specific questions from the board about the comparability of date presented. The directors deliberate before reaching their decision as to compensation level for the ceo. The chairman of board compensation committee informs the human resources director of any compensation change and applicable effective date for the ceo. In a separate meeting with the president of the board and the chairman of the board compensation committee, the ceo is informed of any change in compensation. Other officers - an independent consultant was also hired to conduct a market survey and establish a market salary for for all exempt management positions. The consultant reports findings to the hr director. They discuss the data comparables and substantiation behind it. The hr director presents this information to the ceo. With training provided by the consultant, an internal equity compensation committee, comprised of a manager from each division of the company, provides independent recommendations for each position placement within the salary schedule. The ceo and hr director discuss the final recommendations of the compensation committee and establish actual salaries payable based on the financial wherewithal of the company.”

“These documents are available upon written request at the company's main officer. In addition, the cooperative provides a treasurer's report including a financial summary at the annual meeting.”

“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 and highly compensated employees, meeting the eligibility requirements of such plans. The cooperative also provides health 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 actuarial increase in the defined benefit plan, the total amount contributed by the cooperative to the defined contribution plan and the insurance premiums paid for their benefit.”

“Patronage dividends 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.”

“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 $ 7,738,062 less: director fees reported on forms 1099-nec (282,350) less: employee officer benefits included in line 5 (254,574) plus: salaries & wages allocated to purchased power 373,156 plus: salaries & wages capitalized directly to plant 1,898,819 plus: salaries & wages capitalized/expensed indirectly through clearing & other accounts 1,964,065 total wages accrued and/or paid $11,437,178”

“Administrative and general expense is comprised of the following: administrative & general salaries, benefits & other $ 3,011,993 office supplies 280,026 outside services employed 223,918 insurance & damages 260,665 community service 108,657 utilities 57,008 miscellaneous general 236,216 directors 660,684 trainings & meetings 194,269 dues to associated organizations 302,499 maintenance of general plant 1,198,595 advertising 18,759 total admin & general exp per financial statements $ 6,553,289 less: reclass of trustee fees to part ix, line 5 (282,350) less: reclass of labor to part ix, lines 5 & 7 (2,043,710) less: reclass of benefits to part ix, lines 8-10 (950,779) total admin & general expense per form 990, part ix $ 3,276,450”

“Although the cooperative is no longer a rural utility services (rus) borrower, the accounting records of the cooperative 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 its 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.”

“Other expenses is comprised of the following: consumer accounts & service expense $ 3,166,456 water department operations 767,605 miscellaneous non-operating sales expense 103,560 total other expense before reclassifications $ 4,037,621 less: reclass of labor to part ix, lines 5 & 7 (1,538,051) less: reclass of benefits to part ix, lines 8-10 (715,535) total other expense per form 990, part ix $ 1,784,035”

“Net change in memberships 8,900. Rounding adjustment -1. Book-tax adjustment: dividends received from equity method investment -1,619,000. Book-tax adjustment: equity method income from subsidiary 440,600.”

“The board of directors have assigned members to an audit committee to oversee the financial statement audit and select the independent financial statement auditor. Procedural changes did not occur during the year.”