Medina Electric Cooperative Inc

“The cooperative had 8 board members at year end; all 8 are allowed to vote, however, the board president votes only in the case of a tie.”

“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 copy of the form 990 to the board for discussion and review. The discussion and review was performed at the board meeting immediately before filing the form 990.”

“Board members and officers are required to be familiar with the cooperative's conflict of interest policy. Board members and officers are required to disclose any action or situation that might violate the policy monthly to the full board of directors as soon as possible. Also, the finance committee reviews for potential conflicts quarterly.”

“In general, the board of directors annually approve a market based, performance driven compensation scale for the ceo. Specifically, the board of directors use an independent compensation consultant and a compensation survey when determining the compensation of the ceo. The survey shows comparative salaries for general managers from cooperatives located in texas and the nation. The board and the general manager use the expertise of an independent compensation consultant and a compensation survey when determining the compensation of the cooperative's other employees meeting the definition of officer. The survey includes salaries from similarly situated cooperatives throughout texas and the nation.”

“The cooperative provides a summarized copy of the audited financial statements to the members of the cooperative at the annual meeting. The cooperative's articles of incorporation and bylaws can be found on its website. 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.”

“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 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 and highly compensated employees is comprised of actuarial increase in the defined benefit plan, the total amount contributed by the cooperative to the defined contribution plan and insurance paid 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.”

“Pursuant to cooperative's bylaws and policies, the board of directors are paid or reimbursed a fixed fee and expenses for attending a: 1) board meeting, 2) function, meeting, or event involving/relating the cooperative, or 3) function, meeting, or event involving/relating to or enhancing the director's ability to serve in the role of director. The compensation is paid on a fair and equitable basis for time devoted and spent attending the events listed. The following data is supplemental information related to the board of directors' hours and compensation: total director compensation $ 168,000 total number of directors 9 total average compensation paid $ 18,667 total average hours per week 4.90 average compensation per hour $ 73.26 total director compensation as a % of revenue 0.11%”

“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.”

“In general, when an electric cooperative bases the patronage dividend calculation on its net book income/(loss), page 1, part i, line 19 - revenue less expenses - will be $0. For the current year, page 1, part i, line 19 reports net income of $936,807, which is the income statement effect of accrued unbilled revenue. The gaap basis financial statements include an accrual for unbilled revenue because the cooperative's billing cycle does not end on the last day of the month. Therefore, it has revenue in december of each year that it has earned but will not bill until the first billing cycle of the following year. The cooperative estimates this revenue and records it as accrued unbilled revenue in order to match the revenue with the year earned. However, the cooperative allocates the revenue to members in the year it is billed rather than when accrued. This timing difference is fair and equitable because it matches the patronage dividend allocated with the billing records used to allocate the margins. Due to the timing of when the cooperative allocates accrued unbilled revenue, page 1, part i, line 19 annually reports net income equal to the net increase in accrued unbilled revenue or a net loss equal to the net decrease in unbilled revenue. The following schedule is provided to further explain the impact of this transaction: add: unbilled revenue 12/31/24 $ 6,267,342 less: unbilled revenue 12/31/23 (5,330,536) (a) - increase equals amount on part i, line 19 $ 936,807 (b) - benefits paid to members (i.e. Patronage dividends), part i, line 14 $10,976,274 total 2024 net margin per financial statements (a + b) $11,913,081”

“The accounting records of the cooperative are maintained in accordance with the rural utilities service (rus) uniform system of accounts (usoa) as prescribed for 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 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 reconciles amounts reported on lines 5-7 to total wages accrued and/or paid: total per lines 5-7 $ 11,715,871 less: director fees reported on forms 1099-nec (168,000) less: employee officer benefits included in line 5 (533,733) plus: labor allocated to power 50,757 plus: salaries and wages allocated to nonoperating margin 4,192 plus: salaries and wages capitalized directly to plant 2,186,373 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 120,184 total wages accrued and/or paid $ 13,375,644”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 2,008,785 office supplies 563,786 outside services 387,726 insurances 406,520 directors 276,369 institutional and goodwill advertising 458,481 dues to associated organizations 118,635 annual meeting 94,790 miscellaneous general 1,873,910 regulatory commission 245,049 maintenance of general plant 913,058 total admin & general exp per financial statements $ 7,347,109 less: reclass of director fees to part ix, line 5 (168,000) less: reclass of labor to part ix, lines 5 & 7 (2,601,500) less: reclass of benefits to part ix, lines 8-10 (1,210,877) total admin & general expense per form 990, part ix $ 3,366,732”

“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 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). The allocation of patronage dividends should be made within a reasonable period of time 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 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.”

“Patronage capital allocated or to be allocated 10,976,274. Patronage capital retired - total -2,249,889. Patronage capital retired - discount 180,502. Net change in memberships 2,190. Other comprehensive income - adjustment for postretirement benefits 108,257.”

“The board of directors have assigned board members to an audit committee (finance committee) for overseeing the financial statement audit and selecting the independent auditor. Procedural changes did not occur during the year.”