Central Texas 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”

“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, review and approval prior to filing. The discussion and review was performed at the board meeting immediately before filing the form 990.”

“On an annual basis, the cooperative requires the board of directors, principal officers, and committee members to complete and sign a conflict of interest certification and disclosure form. The board of directors also complete and sign the form 990 disclosure questionnaire. All individuals are required to disclose any action or situation that might violate the policy to the full board as soon as possible. Periodic reviews are done to ensure compliance with the cooperative conflict of interest policies.”

“At the beginning of the year, the ceo meets with the cooperative's governing board and sets specific written goals for the upcoming year. These goals are incorported into a matrix that is used for review and evaluation of the ceo's performance. If the board determines that the written goals have been met, the ceo's compensation is set in an amount comparable to the average of the median of ceo compensation for regional electric cooperatives of similar size according to the most current compensation survey conducted by the national rural electric cooperative association. The ceo uses the national rural electric cooperative association compensation survey when determining the compensation of the cooperative's other employees meeting the definition of officer and key employee, if any. The survey includes salaries from similar 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 bylaws are also available on cooperative's 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 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.”

“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 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 total wages accrued and/or paid: total per lines 5-7 $ 4,660,098 less: director fees reported on form 1099-misc (107,091) less: officer employee benefits reported on line 5 (191,465) plus: salaries and wages capitalized directly to plant 2,560,302 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 580,214 total wages accrued and/or paid $ 7,502,058”

“Administrative and general expense is comprised of the following: administrative & general $ 1,346,286 office supplies 186,715 outside services employed 140,983 insurance 369,509 regulatory commission 103,517 dues 110,446 directors 173,206 maintenance of general plant 67,753 miscellaneous general 289,297 total admin & general exp per financial statements $ 2,787,712 less: reclass of non-operating admin expense (66,600) less: reclass of director fees to part ix, line 5 (107,091) less: reclass of labor to part ix, lines 5 & 7 (830,032) less: reclass of benefits to part ix, lines 8-10 (414,955) total admin & general expense per form 990, part ix $ 1,369,034”

“Other expenses is comprised of the following: transmission $ 26,734 other deductions 100,378 taxes - other 151,954 total other expenses per form 990 line 24e $ 279,066”

“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 2017 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. All donations 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 assignable 5,077,871. Patronage capital retired - total -1,107,195. Patronage capital retired - discount 211,182. Net change in memberships 14,290. Other comprehensive income - post retirement benefits -119,402. Equity method income from subsidiary 133,691.”

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