Cooke County Electric Cooperative Association

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

“All officers, directors, and employees are required to review and be familiar with the policies outlined in the cooperative's employee-ethics policy and are required to disclose any action or situation that might violate the policy to the general manager as soon as possible. The general manager regularly monitors and enforces this policy.”

“The board of directors annually evaluates and sets the compensation of the general manager. The general manager uses a compensation survey when determining the compensation of the organization's 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 each new member with a copy of its by-laws, which are also located on its website at www.cceca.com. Upon revision, bylaws are mailed to all members. The cooperative will also provide a complete copy of its conflict of interest policy and audited financial statements to any member who requests a copy of any such document. Additionally, the cooperative annually publishes its audited balance sheet and income statement in the co-op power magazine prior to each annual meeting. Members receive a copy of the magazine, including other information specific to the cooperative.”

“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, long term disability and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers and the highly compensated employee, is the total amount contributed by the cooperative to the defined contribution plan and the insurance paid on behalf of and 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 by individual has not been estimated.”

“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 not 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.”

“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.”

“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 for the 2017 calendar year. Because patronage dividends is 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.”

“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 $ 2,828,659 less: directors fees reported on form 1099-misc (106,500) less: employee officer benefits reported on line 5 (89,743) plus: salaries and wages capitalized directly to plant 1,128,939 plus: salaries and wages capitalized/expensed indirectly through clearing & other accounts 200,026 total wages accrued and/or paid $ 3,961,381”

“Administrative & general expense is comprised of the following: administrative & general $ 1,437,735 office supplies 331,699 outside services 218,909 regulatory commission 65,872 directors 114,963 public relations 180,630 dues 19,410 annual meeting 32,964 miscellaneous general 72,335 donations 45,004 maintenance of general plant 186,741 total admin & general exp per financial statements $ 2,706,262 less: reclass of labor to part ix, lines 5 & 7 (968,991) less: reclass of benefits to part ix, lines 8-10 (500,429) less: reclass of director fees to part ix, line 5 (106,500) less: reclass of donations to part ix, line 1 (45,004) total admin & general expense per form 990, part ix $ 1,085,338”

“Other expenses is comprised of the following: operating taxes $ 25,815”

“Patronage capital assignable 3,477,813. Patronage capital retired -557,049. Patronage capital retired - reclaimed -276. Other comprehensive income provision for pensions and benefits 1,204,200.”

“The board as a whole is responsible for overseeing the financial statement audit and selecting the independent financial statement auditor. Procedural changes did not occur during the year.”