Scott & White Hospital Brenham

“The organization is a Texas nonprofit membership organization in which Scott & White Healthcare, a tax exempt, Texas nonprofit corporation, is the sole member.”

“As disclosed in Part VI, Line 4, Baylor Scott & White Holdings, a Texas nonprofit corporation, is currently the sole member of Scott & White Healthcare ("SWHC") and SWHC is the sole member of the organization. Prior to October 1, 2013, SWHC had control and substantial reserved powers over the organization, including those to elect and remove the governing body of the organization. Effective October 1, 2013, SWHC transferred control and its reserved powers over the organization to Baylor Scott & White Health, LLC and subsequently to Baylor Scott & White Holdings on March 1, 2014. The Baylor Scott & White Holdings Board of Trustees is comprised of a majority of independent community representatives that provide leadership and governance to Baylor Scott & White Holdings and its affiliated tax exempt entities including, the filing organization, to ensure it is meeting its charitable purpose.”

“Prior to October 1, 2013, all rights and powers were reserved to the sole member, Scott & White Healthcare ("SWHC"), except only those rights and powers expressly set forth in the bylaws, required by state or federal law, or to meet the requirements and standards promulgated by joint commission. For example, the member's reserved rights and powers include, without limitation, approval of the organization's articles of incorporation and bylaws and amendments thereto, appointment and removal of members of the organization's governing body, approval of dissolutions and mergers, and other similar decisions over the organization. Effective October 1, 2013, SWHC transferred control and its reserved powers over the organization to Baylor Scott & White Health, LLC and subsequently to Baylor Scott & White Holdings on March 1, 2014.”

“The Form 990 is prepared and reviewed by Baylor Scott & White Health's ("BSWH") tax department. During the return preparation process the tax department works with other functional areas including finance, accounting, treasury, legal, human resources, and corporate compliance for advice, information and assistance to prepare a complete and accurate return. Upon completion, the Form 990 is reviewed by the organization's President, financial officer and/or other key officers. A complete final copy of the return is provided to the organization's governing body prior to filing with the IRS.”

“Persons with an actual or perceived ability to influence the organization have a duty to disclose annually and otherwise promptly as potential conflicts are identified, any familial, professional or financial relationships with entities or individuals that do, or seek to do business with the organization or that compete with the organization. These individuals include the organization's officers, governing body, management, physicians with administrative services agreements and other key personnel who interact with outside organizations or businesses on behalf of the organization. The BSWH Board of Trustees Audit and Compliance Committee and the BSWH Corporate Compliance Committee review all relevant disclosures submitted by these individuals to determine whether a conflict of interest exists and to determine an appropriate resolution, if necessary Any individual with a perceived or potential conflict is prohibited from voting or participating in the decision making process regarding such transaction with that individual.”

“The compensation review process is performed annually. All physician compensation is reviewed including pay, production data and total compensation. The physician compensation is then benchmarked against industry standards using data from ten different industry surveys. This review is performed by an independent consultant and presented to the Scott & White Healthcare Board of Trustees Compensation Committee. Scott & White Healthcare ("SWHC")(EIN: 26-4532547) is the sole corporate member of SWHB. System Officers along with regional Chief Executive Officers and Chief Medical Officers are reviewed annually. An independent consultant compares total compensation to benchmark surveys. The Scott & White Healthcare Board of Trustees Compensation Committee reviews the compensation and comparability data annually.”

“Process for making governing documents, conflict of interest policy, & financial statements available to the public: The organization's articles of incorporation and amendments thereto are made available to the public by the filing of those documents with the Texas Secretary of State. Also, the organization is included within the combined financial statements of BSWH that are made available to the public by the posting of those documents through DAC Bond and are attached to this return. The organization's other governing documents and conflicts of interest policy are not made available to the public.”

“While not formally adopted as of the organization's tax year end, written policies and procedures have been drafted by the organization that address the procedures followed with respect to written document retention and destruction compliance. The organization anticipates these procedures will be adopted within the next tax year.”

“The organization did not make any changes to its governing documents during the tax year, however, effective October 1, 2013, Baylor Health Care System, a Texas nonprofit corporation ("BHCS"), and Scott & White Healthcare ("SWHC"), a Texas nonprofit corporation, consummated their affiliation pursuant to an Affiliation Agreement (the "Agreement") dated June 19, 2013. BHCS and SWHC formed Baylor Scott & White Holdings ("BSW Holdings"), a Texas nonprofit corporation. While the receipt of the Internal Revenue Service (IRS) tax-exempt and public charity determination letter for BSW Holdings was pending, BHCS and SWHC formed a Texas limited liability company, Baylor Scott & White Health LLC ("BSW Holdings LLC"). On December 31, 2013, BSW Holdings received a favorable determination letter from the IRS regarding their tax-exempt and public charity status. Effective March 1, 2014, BSW Holdings LLC was merged into BSW Holdings. BSW Holdings is now the sole member of BHCS and SWHC and has control and substantial reserved powers over all BHCS and SWHC material affiliates including the organization. xas nonprofit corporation.”

“Scott & White Hospital Brenham ("SWHB") does not file Forms 1096 or 1099. All expenditures for goods and services are made by Scott & White Memorial Hospital, which has filed all required reporting forms.”

“Employees of the Scott & White Healthcare System are employed by Scott & White Memorial Hospital (EIN: 74-1166904) or Scott & White Clinic (EIN: 74-2958277). This is done to achieve parity and consistency in compensation and benefits offered to employees and to reduce administration costs. Consistent with this practice, employee Forms W-2 are filed by Scott & White Memorial Hospital or Scott & White Clinic. For financial reporting purposes, compensation, benefits and other employee costs are assigned to the Scott & White affiliate for which services are rendered. Oversight of and responsibility for the activities of employees are vested in the board of directors and management of the Scott & White Healthcare subsidiary to which such employees are assigned. All required employment forms have been filed by Scott & White Memorial Hospital and Scott & White Clinic.”

“Other Purchased Services: Program service expenses 3,933,831. Management and general expenses 103,615. Fundraising expenses 0. Total expenses 4,037,446. Contract Labor : Program service expenses 1,839,746. Management and general expenses 1,390. Fundraising expenses 0. Total expenses 1,841,136. Lab : Program service expenses 220,406. Management and general expenses 0. Fundraising expenses 0. Total expenses 220,406. Repairs: Program service expenses 443,027. Management and general expenses 5,957. Fundraising expenses 0. Total expenses 448,984. Corporate Services : Program service expenses 0. Management and general expenses 1,285,876. Fundraising expenses 0. Total expenses 1,285,876.”

“Transfer to/from SWMH-Liability Reserve -336,037. Change in Pension Fund Valuation 4,788,404. Loss on Extinguishment of Debt -254,328. Subsidiary Earnings -531,679. Change in Net Assets of Supporting Foundation 684,153. Change in accounting in subsidiary -1,772,953. Other Changes in Net Assets -33,397.”

“As a result of the changes in the governance structure described in Part VI, Line 4, the oversight and selection process of the organization's audit and compilation of its financial statements including the selection of the independent accountant was transferred to the Audit and Compliance Committee of Baylor Scott & White Health LLC effective October 1, 2013 and subsequently transferred to Baylor Scott & White Holdings on April 1, 2014.”

“Disclosure Statement Related to Forms 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, Filed on Behalf of the Taxpayer: Under the constructive ownership rules of IRC Sections 958(a) and (b). The taxpayer is required to file Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, as a Category 5 filer with respect to certain controlled foreign corporations (CFCs). These filing requirements are or will be satisfied through the filing of Forms 5471 for these CFCs by other U.S. taxpayers identified below who have the same filing requirement. Taxpayer Name: Scott & White Memorial Hospital Taxpayer Address: 2401 S. 31st Street Temple, TX 76508 Taxpayer Identification Number of U.S. tax return with which the Forms 5471 were or will be filed: 74-1166904 IRS Service Center where U.S. tax return was or will be filed: Ogden Taxpayer Name: Baylor Health Care System Taxpayer Address: 2001 Bryan Street Suite 2200 Dallas, TX 75201 Taxpayer Identification Number of U.S. tax return with which the Forms 5471 were or will be filed: 75-1812652 IRS Service Center where U.S. tax return was or will be filed: Ogden”