Nueces Electric Cooperative Inc

“Article i, section 3(g), joint membership, of the cooperative's bylaws was amended to include the statement "the one seeking to serve on the board meets the qualifications for such office". Article i, section 8, membership lists, of the cooperative's bylaws was amended to include the statement "contractors providing business services to the cooperative may receive membership information in order to perform their work for the cooperative, following their execution of the cooperative's confidentiality agreement". Article iii, section 2, special meetings, of the cooperative's bylaws was amended to include the statement "special meetings may be called by a minimum of 10% of the members. Those members calling for a special meeting shall submit properly completed petitions in the forms as provided by the cooperative. The cooperative shall also provide filing and verification instructions to those members. No petition will be considered if it is dated 90 days prior to the date submitted". Article iii, section 4, quorum, of the cooperative's bylaws was amended to replace "presented by proxy" to "by mail in ballot". Article iii, section 6, proxies, of the cooperative's bylaws was removed. Article iii, section 7(2), order of business, of the cooperative's bylaws was amended to exlude the statement "reading of notice of the meeting and proof of due publication or mailing thereof, or the waiver or waivers of notice of the meetings as the case may be". Article iv, section 2, qulification and tenure of office, of the cooperative's bylaws was amended to include "no member shall be eligble to serve on the board of directors who is (1) employed by or engaged in any business that competes with the business of the cooperative; or (2) employed by or engaged in any business that sells a material amount of supplies to the cooperative. No member shall be eligible to serve on the board of directors who is a current employee of the cooperative or a former member of the cooperative whose termination of employment with the cooperative occurred less than five (5) years prior to seeking nomination. No member shall be eligible to serve on the board of directors who is a close relative of an employee ("close relative" being a spouse, child, including adoptive and step-child, parent, including step-parent , and or adoptive parent, sibling, including step-sibling, and/or adoptive sibling, or an inlaw of said child, parent or sibling), or have had such a close relative employed at the cooperative within five (5) years of the date of the individual's prospective election to the board. No member shall be eligible to serve on the board of directors who is a director or employee of another distribution electric cooperative, and must not have been an employee or director of the distribution electric cooperative for a minimum of five (5) years after their tenure at such cooperative has ended". This section was further amended to include "no member shall be eligible to serve on the board of directors unless that member is qualified to enter into a legally enforceable contract. Directors shall also comply with all corporate policies and/or director requirements regarding conduct of the board members and continued eligibility to serve on the board of directors, as adopted by a majority vote of the board of directors from time to time. Article iv, section 5, election of directors of the cooperative's bylaws was amended to include or a third party election manager as determined by the board of directors". Article iv, section 6(a), removal of directors, of the cooperative's bylaws was amended to include "the petition shall include the stated purpose for the removal of the director(s), the charges against the director(s), and if one or more directors are removed to select their successors. The petition shall also specify the place, time and date to consider the charges which shall not be less than forty (40) days after the filing of the petition. The petition can request t”

“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 the board for discussion, review and approval prior to filing.”

“Officers, directors, and key employees are required to disclose immediately any relationships considered to be a possible conflict of interest.”

“The board of directors use the expertise of an independent compensation consultant and a compensation survey when determining the compensation of the general manager. The survey shows comparative salaries for general managers from similarly situated 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 and key employees, if any. The survey includes salaries from similarly situated cooperatives throughout 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. Annually the cooperative provides a copy of the audited balance sheet and income statement to the members of the cooperative with the annual report. Additionally, the by-laws, articles of incorporation and annual financial reports may be found on the cooperative's website.”

“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 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 rus uniform system of accounts as prescribed for electric borrowers of the rural utilities services (rus). 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 the total wages accrued and/or paid: total per lines 5-7 $ 3,663,900 less directors fees reported on 1099-misc (220,759) less employee officer benefits reported on line 5 (285,304) plus salaries and wages capitalized directly to plant 1,312,903 plus salaries and wages capitalized/expensed indirectly through clearing and other accounts 976,743 total wages accrued and/or paid $ 5,447,483”

“The following is a breakdown of the expenses reported as administrative and general expense on form 990, part ix, line 24 office and supplies $ 518,772 outside services 246,387 workmen's comp, general liability and other insurance 377,078 regulatory commission expenses 322,287 director expenses 111,759 dues to associated organizations 53,839 annual meeting expenses 192,538 advertising expenses 1,356,467 maintenance of general plant 314,597 miscellaneous general expenses 16,594 total administrative and general expense per 990 $3,510,318”

“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 following is a breakdown of the expenses reported on form 990, part ix, line 24 as other expense distribution expense - other contract $ 915,675 property taxes 1,298,821 other deductions 581,703 total other expenses per form 990 $ 2,796,199”

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

“The cooperative previously included accrued expenses (comprised of "accrued employee compensated absences", " accrued interest and "other current accrued liabilites") 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 in accordance with form 990 instructions. To increase consistency, accrued expenses in the amount of $1,476,487 for the 2014 calendar year have been reclassed from line 25 to line 17.”

“Net change in memberships 7,115. Gain on retired patronage capital 130,409. Patronage capital retired -1,860,399. Patronage capital assignable 10,332,368.”

“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.”