2005 Margins Allocated
2005 Margins Allocated
At the April Board Meeting, the Board of Directors approved the Audited Financial Statements of the Cooperative for 2005. Your cooperative had margins of $990,807 for 2005. The Board also approved the allocation of $814,097 of patronage dividends to the membership based on those margins.
You will be receiving a postcard from the Cooperative with your individual allocation. Please don’t confuse the allocation of patronage with the retirement of patronage. The allocation of patronage is the process by which the Board assigns your portion of the cooperative’s earnings or margins for the prior year to your individual patronage account. Your individual allocation is based on the amount of business you did with the cooperative in 2005. The cooperative retains these dollars to invest in building new facilities and equipment and upgrading existing facilities. Your patronage represents your equity or ownership of the cooperative.
Typically, the cooperative uses your deferred patronage for 15 to 20 years before it is retired. Patronage is retired when it is paid out in the form of cash to the members. Based on the financial condition of the cooperative, the Board of Directors decides how much of the cooperative’s deferred patronage to retire or pay out each year. The board generally makes the decision on how much patronage to retire at the May board meeting. This retirement is distributed at the annual meeting in August or mailed in September to those members who are unable to attend the annual meeting.
In addition to the $814,097 allocated to the membership, the board also allocated $150,816 to the cooperative’s Contingency Fund, $9,908 to the cooperative’s Education Fund, and $15,986 to the cooperative’s Surplus Fund. The allocation of margins to these funds is established by Article X, Section 1 of the cooperative’s Articles of Incorporation, and Chapter 499 Section 30 of the Code of Iowa. These funds are to provide for a reasonable reserve for depreciation, bad debts contingent losses and promoting cooperation.