Grayson-Collin Electric

“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 board of directors perform an annual review and utilize internal resources when determining the compensation of the general manager. The board and the general manager utilize internal resources when determining the compensation of the cooperative's other employees meeting the definition of officer and key employee, if any.”

“The cooperative provides a summarized copy of the audited financial statements to the members of the cooperative at the annual meeting. The cooperative will provide a complete copy of the audited financial statements or governing documents to any member who requests a copy.”

“A family relationship exists between director jim copeland and employees brayden and olivia copeland; therefore, for form 990 reporting purposes, jim copeland is not considered independent.”

“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 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 eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers, key employees, and highly compensated employees is comprised of 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.”

“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.”

“In general, when an electric cooperative bases the patronage dividend calculation on its net book income/(loss), page 1, part i, line 19 - revenue less expenses - will be $0. For the current year, page 1 , part i, line 19 reports net income of $3,309,613 which is the income statement effect of accrued unbilled revenue, retention of non-operating margins, and equity method loss. Equity method loss is recorded in the cooperative's books and included in net margins. U.s. Gaap requires the cooperative to record on its books equity method income or loss from its wholly owned subsidiary. Equity method income/loss is not income for irs form 990 purposes as such has been reported as an other change in net assets. The gaap basis financial statements include an accrual for unbilled revenue because the cooperative's billing cycle does not end on the last day of the month. Therefore, it has revenue in december of each year that it has earned but will not bill until the first billing cycle of the following year. The cooperative estimates this revenue and records it as accrued unbilled revenue in order to match the revenue with the year earned. However, the cooperative allocates the revenue to members in the year it is billed rather than when accrued. This timing difference is fair and equitable because it matches the patronage dividend allocated with the billing records used to allocate the margins. Due to the timing of when the cooperative allocates accrued unbilled revenue, page 1, part i, line 19 reports net income equal to the net increase in accrued unbilled revenue or a net loss equal to the net decrease in unbilled revenue plus non-operating margins. The following schedule is provided to further explain the impact of these transactions: add: unbilled revenue 12/31/24 $ 4,700,000 less: unbilled revenue 12/31/23 (3,224,000) (a) - net increase of unbilled revenue $ 1,476,000 add: non-operating margins 1,833,613 (b) - part i, line 19 $ 3,309,613 (c) - less equity method loss (2,422,678) (d) - benefits paid to members (i.e. Patronage dividends), part i, line 14 $49,991,630 total 2024 net margin (b + c + d) $50,878,565”

“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 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 $12,334,650 less: directors fees reported on form 1099-nec (138,959) less: officer & key employee benefits included in line 5 (557,717) plus: salaries and wages capitalized directly to plant 3,225,652 plus: salaries and wages capitalized/expensed indirectly through clearing & other accounts 685,821 total wages accrued and/or paid $15,549,447”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 4,464,559 office supplies 514,628 outside services 505,327 general advertising 23,534 insurances 148,525 regulatory commission 381,618 directors 251,840 dues & memberships 114,097 annual meeting 254,331 maintenance of general plant 694,560 miscellaneous general 1,287,630 total admin & general exp per financial statements $ 8,640,649 less: reclass of director fees to part ix, line 5 (138,959) less: reclass of labor to part ix, lines 5 & 7 (3,327,146) less: reclass of benefits to part ix, lines 8-10 (759,546) total admin & general expense per form 990, part ix $ 4,414,998”

“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). 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.”

“Patronage capital allocated or to be allocated 49,991,630. Patronage capital retired - total -3,191,226. Patronage capital retired - discount -22,247. Net change in memberships 174,290. Other comprehensive income - provision for pension and benefits 604,892. Equity method income (loss) from sub -2,422,678.”

“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.”