Deaf Smith 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. Amendments to the articles of incorporation 2. Disposal of a substantial portion of the cooperative's assets 3. Dissolution/liquidation of the cooperative 4. Merger or consolidation of the cooperative with another organization”

“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.”

“The board utilizes internal resources and a compensation survey when determining the compensation of the cooperative's general manager and key employees, if any. The survey includes salaries from similar 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. The cooperative mails a copy of the audited balance sheet and income statement to the members of the cooperative in the annual meeting notice.”

“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, key employees, and highly compensated employees, meeting the eligibility requirements of such plans. The cooperative also provides health, dental, and life insurance to all employees, including officers, key employees, and highly compensated employees, through a qualified plan. The amounts reported on part vii, column (f) for the officer, key employees, or highly compensated employees is comprised of the 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. 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.”

“The board of directors consider the general manager to be both the top management official and the top financial official. Therefore, only the general manager is listed as an employee officer.”

“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 an 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 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.”

“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.”

“All grants, sponsorships, and/or donations are made to non-profit and civic organizations that are located in the cooperative's service area, and 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.”

“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 $ 3,810,886 less: director fees reported on forms 1099-nec (213,468) less: employee officer and key employee benefits reported on line 5 (173,736) plus: salaries and wages allocated to non-operating margins 804 plus: salaries and wages capitalized directly to plant 1,285,069 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 516,590 total wages paid and/or accrued $ 5,226,145”

“Administrative and general expenses is comprised of the following: administrative & general salaries, benefits, & other $ 696,803 office supplies 246,901 outside services employed 51,455 property insurance 125,820 injuries and damages 16,834 pension and benefits 384,683 advertising 46,052 directors 285,637 dues paid to associated organizations 32,643 miscellaneous general 137,544 maintenance of general plant 192,372 duplicate charges - credit (21,954) total admin & general exp per financial statements $ 2,194,790 less: reclass of donations to part ix, line 1 (7,696) less: reclass of director fees to part ix, line 5 (213,468) less: reclass of labor to part ix, lines 5 & 7 (652,318) less: reclass of benefits to part ix, lines 8-10 (312,719) total admin & general expense per form 990, part ix $ 1,008,589”

“Other expenses is comprised of the following: consumer accounts & sales $ 153,264 customer service & information 52,400 other deductions 3,008 total other expenses per form 990, line 24e $ 208,672”

“Patronage capital allocated or to be allocated 7,027,951. Other comprehensive income(loss) provision for pensions and benefits -621,234. Patronage capital retired - total -7,023,505.”

“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.”