Bluebonnet Electric Cooperative Inc

“A family relationship exists between employee officer, rachel ellis, and key employee, phillip ellis.”

“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”

“The cooperative has no committees with authority to act on behalf of the governing body. Therefore, and pursuant to form 990 instructions, the question has been answered "no".”

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

“Board members, officers, and employees of the cooperative are required to review and be familiar with the policies outlined in the cooperative's conflict of interest policy. Officers, board members and employees are required to disclose any action or situation that might violate the policy as soon as possible. Officers and board members are required to report any action or situation to the entire board of directors; employees are required to report any action or situation to management.”

“The board of directors use both an independent compensation consultant and compensation survey, and compares compensation reported on irs forms 990 for other electric cooperatives when determining the compensation of the ceo. The survey shows comparative salaries for ceo/general managers from cooperatives located in texas and the nation. Internal resources are also used to compare annual compensation within the industry annually. When determining salaries for other employees meeting the definition of officer, key and highly compensated employee, the ceo uses a web-based software that collects information from various industries, including the utility industry, in different parts of the country. The available data for utilities of similar size to and in the region of the cooperative, along with compensation data obtained from forms 990 of other electric cooperatives, is used to set appropriate market based salaries. This process is administered by the ceo and the human resources department.”

“The cooperative provides a summarized copy of the audited financial statements to the members of the cooperative at the annual meeting. The cooperative will provide a complete copy of the audited financial statements, conflict of interest policy, or governing documents to any member who requests a copy.”

“The compensation reported for the board of directors include health insurance premiums paid by the cooperative on their behalf.”

“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. Additionally, the cooperative 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 both plans are available to participating employees, including officers, key employees, and highly compensated employees, 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, key employees and highly compensated employees are comprised of actuarial increase in the defined benefit plan, the total amount contributed by the cooperative to the defined contribution plan and insurance paid on behalf of and for their benefit. In addition to the above pension plans, the cooperative also provides post-retirement health insurance benefits through an unfunded welfare benefit plan. The value of these benefits has not been estimated.”

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

“Although the cooperative is no longer a rural utilities service (rus) borrower, its accounting records are maintained in accordance with the rus uniform system of accounts (usoa) prescribed for rus electric borrowers. 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 its 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 total wages accrued and/or paid: total per lines 5-7 $16,772,765 less: director fees reported on forms 1099-misc (381,689) less: officer & key employee benefits included in line 5 (1,351,698) plus: salaries and wages allocated to nonoperating margin 150,478 plus: salaries and wages reported in power supply 530,556 plus: salaries and wages allocated to asset accounts 14,296,655 total wages accrued and/or paid $30,017,067”

“Administrative and general expense is comprised of the following: outside services employed $ 354,093 outside services employed - it 367,248 technology 889,220 dues and subscriptions 213,876 general maintenance 262,091 insurance 171,795 directors 371,651 property tax 276,036 other taxes 380,375 travel & transportation 99,801 administrative & general 429,242 salaries & benefits 6,578,951 total admin & general exp per financial statements $10,394,379 less: reclass of director fees to part ix, line 5 (381,689) less: reclass of labor to part ix, lines 5 & 7 (1,995,090) less: reclass of benefits to part ix, lines 8-10 (4,526,582) total admin & general expense per form 990, part ix $ 3,491,018”

“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 2020 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.”

“Patronage capital allocated or to be allocated 31,888,236. Patronage capital retired - total -6,731,646. Patronage capital retired - discount 1,169,628. Net decrease in memberships -28,125. Other comprehensive income(loss) provision for pensions and benefits -1,350,021. Equity method income(loss) from investment in subsidiary -27,938.”

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