Guadalupe Valley Electric Cooperative

“The cooperative has 11 board members; all 11 are allowed to vote; however, the board chairman votes only in the case of a tie. Per irs form 990 instructions, director borgfeld is not an independent director due to a family relationship with an employee of the cooperative.”

“A family relationship exists between director lewis borgfeld and officer sean alvarez.”

“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 by district.”

“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 reviewed the form 990 prior to filing and presented a copy of the return to the board subsequent to filing.”

“The cooperative does not have a formal conflict of interest policy, however, limitations on the board of directors are defined in the cooperative's bylaws. The organization regularly and consistently monitors and enforces compliance with such policies. A questionnaire was answered by all board members.”

“The board of directors use a compensation survey and compare compensation reported on other cooperatives' irs forms 990 when determining the compensation of the ceo. The survey shows comparative salaries for general managers/ceos from similarly situated cooperatives located in texas and the nation. The board and the ceo use the a compensation survey when determining the compensation of the cooperatives' 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's bylaws, annual report and financial statements are available on its website at www.gvec.org.”

“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. Employer contributions to the plan 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 and life insurance to all employees through a qualified plan. The amounts reported on part vii, column (f) for the officers, key and highly compensated employees are comprised of the total amount contributed to the 401(k) pension plan and the insurance premiums 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.”

“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.”

“Revenue less expenses as reported on page 1, part i, line 19 differs from the total net margins reported on the cooperative's audited financial statements due to book to tax adjustments required to conform to the form 990 instructions. One such adjustment, the equity method income is recorded on the cooperative's books and included in total net margins. U.s. Gaap requires the cooperative to record on its books the equity method income from its wholly owned subsidiary. Equity method income is not income for irs form 990 purposes and as such has been reported as an other change in net assets. Non-refundable aid to construction and other adjustments required for the calculation of unrelated business income are other book-tax adjustments included in the form 990.”

“The accounting records of the cooperative are maintained in accordance with the rus uniform system of accounts (usoa) as prescribed by the federal energy regulatory commission for class a and b electric utilities. 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 $26,688,806 less: director fees reported on forms 1099-nec (455,633) less: employee officer benefits included in line 5 (263,427) less: key employee benefits included in line 5 (198,639) plus: salaries & benefits allocated to purchased power 975,766 plus: salaries & wages capitalized directly to plant 9,617,405 plus: salaries & wages capitalized/expensed indirectly through clearing & other accounts 2,769,656 total wages accrued and/or paid $39,133,934”

“Administrative and general expense is comprised of the following: administrative & general salaries, benefits & other $ 4,585,971 office supplies 1,533,806 outside services employed 916,205 injuries & damages 2,282,246 pensions & benefits 3,330,074 regulatory commission 1,028,140 advertising 1,458,184 miscellaneous general 622,218 district & annual meetings 321,511 dues to associated organizations 146,077 directors 392,550 utilities 529,859 maintenance of general plant 2,319,703 total admin & general exp per financial statements $19,466,544 less: reclass of director fees to part ix, line 5 (455,633) less: reclass of labor to part ix, lines 5 & 7 (5,551,668) less: reclass of benefits to part ix, lines 8-10 (1,728,512) total admin & general expense per form 990, part ix $11,730,731”

“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 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.”

“Other expenses is comprised of the following: consumer expense $ 2,397,617 distribution expense 6,149,565 intercompany management services expense 999,631 other deductions 202,608 transmission expense 1,013,759 total other expenses per form 990, part ix $10,763,180”

“Patronage capital allocated or to be allocated 23,503,569. Patronage capital retired - total -15,557,843. Patronage capital retired - discount 12,631,587. Oci - pension & benefits -660,771. Equity method income from subsidiaries 204,283. Net change in memberships 66,064. Patronage capital escheated -2,028,316. Ubi book-tax difference - contributions in aid of construction & other adj -266,450.”