National Rural Electric Cooperative Association

“Business relationships exist between some nreca officers and key employees who also serve as directors or officers of the following nreca subsidiaries and affiliated entities: (a) cooperating energy services - 3 officers (jeffrey connor, jim matheson, and veneicia lockhart) serve as officers and/or directors. (b) re advisers corporation and re investment corporation - 1 officer (jeffrey connor) serves as a director. (c) cooperating benefit administrators - 1 officer (veneicia lockhart) and 1 key employee (peter baxter) serve as officers and/or directors. (d) electric cooperative life insurance company - 1 officer (veneicia lockhart) and 1 key employee (peter baxter) serve as officers and/or directors. (e) nreca united - 3 officers (jeffrey connor, jim matheson, and veneicia lockhart) serve as officers and directors. (f) cooperating insurance services - 1 officer (veneicia lockhart) and 1 key employee (peter baxter) serve as officers and/or directors. (g) arkansas electric cooperative corporation - 1 director (mel coleman) is a shared director. (h) basin electric power cooperative - 1 director (reuben ritthaler) is a shared director. (i) kamo power - 1 director (timothy smith) is a shared director. (j) sho-me power - 1 director (christopher hamon) is a shared director. (k) western farmers electric cooperative - 1 director (timothy smith) is a shared director.”

“All nreca voting members must be entities whose operations are consistent, as determined by the board of directors, with the international cooperative alliance cooperative principles and the objectives of nreca and fall into one of the following three categories: (1) distribution (electric distribution cooperatives or nonprofit associations, nonprofit corporations, public utility districts, or government corporations or authorities located in a state, territory, possession or commonwealth of the u.s. And primarily engaged in furnishing electricity at retail to their consumers); (2) generation and transmission (cooperatives or nonprofit associations, nonprofit corporations, or public utility districts located in a state, territory, possession or commonwealth of the u.s. And primarily engaged in the marketing, generation and/or transmission of wholesale bulk electricity for sale to others for the purpose of resale); and (3) service members (organizations not actually engaged in the marketing, generation, transmission or distribution of electricity, but a significant number of whose voting members consist of nreca distribution, or generation and transmission voting members).”

“Nreca voting members are described in the schedule o, part vi, section a, line 6 description. The nreca voting members located in each state elect a member of the nreca board of directors every two years. Nreca has ten geographic regions within the united states. The nreca board of directors has an executive committee that includes a director elected by the directors from each region. When a nreca director position becomes vacant for any reason other than removal, the nreca director who represents the region on the nreca board of directors executive committee (or, if the previous nreca director was the member of the executive committee, then the nreca president) shall consult with voting members located in the state and appoint a new nreca director for the unexpired term or until the voting members located in the state elect a new nreca director for the unexpired term. If a position becomes vacant through removal, then the voting members located in the state from which the director was removed elect the new director for the unexpired term.”

“Nreca voting members are described in the schedule o, part vi, section a, line 6 description. The following governance decisions require the approval of nreca voting members: (1) articles of incorporation amendments; (2) bylaw adoption, amendment, or repeal, which includes changes to the methods of calculating the dues of distribution members, of generation and transmission members, and of statewide members; (3) expulsion of nreca members; (4) removal of a nreca director is subject to the approval of nreca voting member located in the state from which the director was elected; (5) a sale, lease, exchange, or certain dispositions of assets leaving the association without a significant continuing business activity; (6) merger; (7) domestication in a foreign jurisdiction; and (8) dissolution. Each nreca voting member has one vote.”

“The director of corporate accounting, senior vp of finance, and an outside tax consultant review the form 990 and supporting work papers in detail. The form 990 is then provided to the nreca board of directors through their electronic board portal for their review and comments in advance of the return being filed.”

“Each key employee is subject to a conflict of interest policy and required to annually complete and submit a conflict of interest certification and disclosure form to the finance department. In addition to the conflict of interest certification and disclosure form, each key employee annually submits a form 990 questionnaire to the senior vp of finance. Each director is required to annually complete and submit a conflict of interest certification and disclosure form. Director forms disclosing any material fact known to the director regarding any potential or actual violation of the policy are submitted to the office of general counsel, nreca president, nreca vice president, and nreca secretary-treasurer. Upon request of the president, executive committee, or any five directors, a special committee comprised of the executive committee members or the board determines whether a director complies with the policy. In making this determination, the committee or board notifies the director, with assistance from the office of general counsel the committee investigates and determines whether the director complies with the policy. If the committee determines the director does not comply with the policy, the committee makes a recommendation to the board and the board will determine whether the director complies with the policy. The director may comment, and the director may be required to be absent during consideration. If the board determines that a director fails to comply with the policy, then, unless the board determines otherwise for good cause, or the director complies with the policy within 30 days, the director is disqualified and no longer a director. In addition to the conflict of interest certification and disclosure form, each director annually completes and submits a form 990 questionnaire.”

“Line 15a (ceo compensation): the ceo evaluation committee of the board is responsible for making recommendations to the board concerning format and methods to properly evaluate the performance of the ceo. An outside consultant (e.g., quatt associates) reviews independent compensation studies annually to verify the ceo's compensation is within a competitive range for the ceo's of comparable organizations and provides this information to the committee. The committee reviews competitive ceo compensation survey data provided by the outside consultants and develops a salary and bonus recommendation that is presented to the full board. The board reviews and approves the ceo's compensation annually. Line 15b (other officers/key employee compensation): nreca's human resources department has a market pay tool that uses current pay data from purchased compensation studies to analyze salaries for positions within the organization. Nreca has written policies and procedures governing its salary increase process. The salary increase process is intended to enable managers to make rational decisions concerning salary actions within the association's budgeting constraints. However, it does not guarantee an increase to any employee. The salary process is comprised of the following steps: (1) approval of nreca's salary budget by the nreca board of directors; (2) completion of written annual performance summaries for each employee by his/her manager; (3) recommendation of salary increases or lump sum awards for individual employees based upon performance/contribution; (4) analysis, review, and approval of salary increase recommendations by human resources and the chief executive officer; and (5) communication of salary increase decisions to staff.”

“The nreca articles of incorporation, bylaws and audited financial statements are available to nreca voting members on the member-only section of cooperative.com, which is a website for nreca voting members and affiliated entities. The nreca articles of incorporation, bylaws, and conflict of interest policy are not available to the public. Nreca notifies voting members when the audited financial statements for the preceding fiscal year have been posted on cooperative.com. Nreca distributes a copy of its annual report to each nreca voting member and makes it available on the member-only section of cooperative.com, and also makes the annual report available to the public upon request. Nreca makes the form 990 available to the public on electric.coop.”

“Prior to 2018, nreca reported all senior leadership team (slt) members as key employees and did not evaluate each slt member using the specified responsibility test criteria. In 2018, only slt members who meet one of the responsibility tests described in the form 990 instructions are reported as key employee in part vii and schedule j.”

“Net income of subsidiaries 3,420,263.”

“This process has not changed from the prior year.”