South Central Power Company

“Any person, firm, partnership, political subdivision, governmental agency or instrumentality, limited liability company, association, corporation or body politic shall become a member of the Cooperative by accepting electric or monthly recurring service from the Cooperative as evidenced by payment of an invoice for such service unless they specifically decline membership. Each member agrees to:(a) comply and be bound by the Articles of Incorporation and the Code of Regulations of the Cooperative;(b) provide the Cooperative without charge such easements and rights of way that allow for the distribution of electric energy to serve such member or other members or patrons of the Cooperative.”

“Each member shall be entitled to one (1) vote and no more upon each matter submitted to a vote of the members. The Secretary of the Board prepares a ballot for electing trustees which is mailed at least thirty (30) days prior to the annual meeting of members. The member votes, signs and returns the ballot. A Ballot Certification committee appointed by the Board of Trustees tabulate the votes and determine the successful candidates. The results are announced at the annual meeting of members.”

“Changes to the Code of Regulations of the organization are subject to approval by the members of the organization.”

“Copies of the Form 990 are distributed to each trustee at one of the regularly scheduled board meetings. The form is reviewed by them at this time.”

“Each year a questionnaire is given to each Officer, Director or Trustee and Key Employee asking them to confirm that they have access to and have read the cooperative's policy regarding conflicts of interest. If there are exceptions to the policy, they are to disclose it at that time.”

“The Cooperative retains an independent consultant and makes use of the annual National Compensation Survey of Rural Electric Distribution Systems from NRECA (National Rural Electric Cooperative Assoc.) to determine pay grades and pay ranges. Based on the recommendation of the consultant and the survey results, the Cooperative creates an annual Wage and Salary Plan that is submitted to the Board of Trustees for review and approval. Every employee is evaluated annually by their supervisor and compensated, within the Wage and Salary Plan, based on performance.”

“The Code of Regulations and the Annual Report with financial information can be accessed through the Cooperative's website. In addition, the Code of Regulations, Annual Report with financial information and the Conflict of Interest Policy are available upon request.”

“Per the instructions, Section 501(c)(12) organizations should report patronage dividends paid on Line 4-Benefits paid to or for members. As stated in the Code of Regulations, "The Cooperative is obligated to pay by credits to a capital account for each patron all such amounts in excess of operating costs and expenses." Within a reasonable time after the close of the fiscal year, the total value of Net Margins is allocated to each patrons account. This allocation of current year's Net Margins is what we are using to reflect the value of patronage dividends paid. The current policy is to retire the credits allocated to each patron after 20 years, provided the financial condition of the Cooperative will not be impaired by the retirement. Also, the Code of Regulations states "If any patron or former patron fails to claim any cash retirement of capital credits or other payment from the Cooperative within (4) years after the payment of the same has been made available to him by notice or check mailed to him at his last address furnished by him to the Cooperative, such failure shall be and constitutes an irrevocable assignment and gift by such patron of such capital credit or other payment to the Cooperative." After the (4) fourth year and proper notifications are made to the patron, the current policy is to reallocate these gifts or unclaimed capital credits in the current year to the current patrons. Each year reallocations are made, but the value of these reallocations is not included in Part IX-Line 4 for the current year since the amount reallocated would have been included in the Form 990 for the year in which they were originally allocated.”

“The other changes in net assets or fund balances is the Allocation of 2017 Patronage Capital (Capital Credits) of $18,189,880 and the Retirement of prior years Patronage Capital of ($8,905,449) for a net increase of $9,284,431.”