Fayette Electric Cooperative Inc

“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;”

“From time to time the entire board will go into executive session for discussing items of a sensitive and confidential nature. When this occurs management and others in attendance are removed from the meeting room. Items discussed in executive session are not documented. However, actions taken by the board after executive sessions are adjourned are fully documented in the written minutes.”

“Management presented a copy of the form 990 to board for discussion, review and approval prior to filing. The discussion and review was performed at the board meeting immediately before the filing of the form 990.”

“The board must annually disclose, sign and attest to any conflict of interests between such board member and the cooperative. The cooperative's bylaws address how a board member would be in conflict if such board member holds a public office for which a salary is paid or is employed by or financially interested in a competing business or enterprise from which the cooperative buys from or sells to.”

“The board of directors use a compensation survey when determining the compensation of the general manager. The survey shows comparative salaries of such positions from texas and the nation. The board of directors and the general manager use a compensation survey when determining the compensation of the other officers and key employees, if any. The survey shows comparative salaries of such positions from texas and the nation.”

“The cooperative will provide a complete copy of its governing documents, conflict of interest policy and audited financial statements to any member who requests a copy of any such document. The cooperative provides annually a copy of the audited balance sheet and income statement to the members of the cooperative in the notice of annual meeting mailed to all members and at the annual meeting. Finally, the by-laws are available on the cooperative's website.”

“The organization 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 the plan are available to participating employees, including officers and highly compensated employees (hce's), meeting the eligibility requirements of such plans. The organization also provides health, dental and life insurance to all employees, including officers and hce's, through a qualified plan. The amounts reported on part vii, column (f) for the officer and hce's are comprised of the actuarial increase in the defined benefit plan and insurance paid on behalf of and for benefit of the officer and hce's.”

“The board of directors considers the general manager to be both the top management official and the top financial official. Therefore, only the general manager is listed as an employee officer.”

“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 electric service provided by the organization to its members.”

“The accounting records of the cooperative are maintained in accordance with the uniform system of accounts as prescribed by the federal energy regulatory commission for class a and b utilities modified for electric borrowers of the national rural utilities cooperative finance corporation (cfc). The uniform system of accounts 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 uniform system of accounts.”

“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 $ 1,890,132 less directors fees reported on 1099-misc (129,107) less employee officer benefits included in line 5 (75,527) plus salaries and wages allocated to nonoperating margin 719 plus salaries and wages capitalized directly to plant 551,005 plus salaries and wages capitalized/expensed indirectly through clearing and other accounts 202,691 total wages accrued and/or paid $ 2,439,913”

“Administrative and general expense is comprised of the following: office supplies and expense $ 202,694 outside services employed 87,768 injuries and damages 22,251 christmas bonus and svc awards 12,216 regulatory commission 52,914 associate member dues 51,478 director expense 22,540 maintenance of general plant 164,495 miscellaneous administrative and general 112,817 total administrative and general expense per 990 $ 729,173”

“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 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 2015 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.”

“The cooperative previously included accrued expenses comprised of (1) accrued employee compensated absences, (2) accrued taxes, (3) accrued interest and (4) accrued payroll as components of other liabilities on line 25 of part x. However, for the 2015 calendar year, the cooperative began reporting these amounts on line 17. To increase consistency, accrued expenses in the amount of $658,908 for the 2014 calendar year have been reclassed from line 25 to line 17.”

“Net change in membership equities 7,445. Retirement of patronage capital -1,588,794. Patronage capital assignable 2,438,344.”

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