Southwest Arkansas Electric Cooperative Corp

“Business relationship: kecia wolf (president/ceo) and alan green (director) both serve on the board of arkansas electric cooperative corporation (aecc) at the request of and for the benefit of the cooperative. Kecia wolf (president/ceo) and rusty pendergraft (director) both serve on the board of arkansas electric cooperatives, inc (aeci) at the request of and for the benefit of the cooperative.”

“The cooperative was formed by the members to provide electric 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”

“Management presented a copy of the form 990 to the board for discussion and review prior to filing.”

“Annually, the board policies: a) conflict of interest policy b) whistleblower policy and c) director's duties and standards of conduct; are reviewed at a board of directors meeting. The review is conducted by the cooperative's attorney.”

“The board of directors has a policy on the processes of performance appraisals, and development plan for the president and ceo. According to policy, a formal appraisal takes place annually. A review of compensation occurs during this formal process. The last formal appraisal occurred in october 2023, effective january 2024. An appraisal of the president's performance occurs informally on a monthly basis at board meetings. The last compensation review, performed by intandem, llc, occurred october 31, 2024. All non-union employees under the direction of the president are given annual appraisals. The president directly appraises the vice presidents. Depending on the appraisal and the board approved wage and salary plan, the appraised employee receives a salary increase. Upon approval of the board of directors, the wage and salary plan for non-union employees is updated annually by a wage and salary consultant. The wages and benefits of all union employees under the direction of the president are covered by a collective bargaining agreement. The current contract went into effect on august 1, 2022, and expires august 1, 2026. Any changes to the agreement are approved by the board of directors.”

“Governing documents, conflict of interest policy and financial statements are made available to the public upon request. Additionally, the cooperative's bylaws can be found on their website: www.swrea.com/about-us.”

“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. Employer contributions for the plan are available to participating employees, including officers, meeting the eligibility requirements of such plans. The cooperative also provides health, dental, vision 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 total amount contributed by the cooperative to the defined contribution plan and insurance paid on behalf of and for their benefit.”

“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.”

“The accounting records of the cooperative are maintained in accordance with the uniform system of accounts presecribed by the rural utilities services (rus). 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 $ 6,275,165 less: director fees reported on forms 1099-nec (323,034) less: employee officer benefits included in line 5 (394,265) plus: salaries and wages capitalized directly to plant 3,246,874 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 4,014 total wages accrued and/or paid $ 8,808,754”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 1,367,848 office supplies 535,963 outside services 250,588 insurances and damages 285,719 regulatory commission 137,458 directors 162,485 annual meeting expense 20,220 dues and subscriptions 149,652 misc general exp 128,189 maintenance of general plant 372,841 total admin & general exp per financial statements $ 3,410,963 less: reclass of donations to part ix, line 1 (7,850) less: reclass of director fees to part ix, line 5 (323,034) less: reclass of labor to part ix, lines 5 & 7 (808,674) less: reclass of benefits to part ix, lines 8-10 (624,555) total admin & general expense per form 990, part ix $ 1,646,850”

“Other expenses is comprised of the following: other deductions $ 1,339 merchandising expenses 1,038 provision for deferred income tax benefit (1,187,346) transmission 145,306 total other expenses per form 990, line 24e $(1,039,663)”

“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 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 calendar tax 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 cooperative's bylaws. The amount reported on 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 electricity from the cooperative for the 2024 calendar year. Because patronage dividends are the process by which the cooperative operates at cost with its patrons and thereby a key component to accomplishing its exempt purpose, the cooperative has reported such amounts as an expense for form 990 reporting. Patronage dividends are not an expense for financial statements prepared in accordance with generally accepted accounting principles, however.”

“All grants, sponsorships, and/or donations are made to non-profit and civic organizations that are located in the cooperative's service area, and are intended to improve the communities in which our members reside. Each grant, sponsorship, and/or donation made during the year was below the reporting threshold of schedule i, part ii.”

“Net change in memberships 1,340. Patronage capital retired -799,327. Unclaimed patronage capital retirement retained per state law 589,555. Equity method subsidiary investment for current year 1,200,859. Cumulative equity method investment in subsidiary for prior years 3,890,380. Cumulative provision for deferred income tax expense for prior years -2,350,265. Other comprehensive income - pensions & benefits -304,205. Patronage capital allocated or to be allocated 13,527,122. Audited financial statements were prepared by an independent accountant for the cooperative's financial statement audit year-end of september 30th. The tax return has been and continues to be prepared based on a calendar tax year-end of december 31.”

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