Navarro County Electric Cooperative Inc

“The cooperative has 7 board members; all 7 are allowed to vote.”

“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 trustees. 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 filing the form 990.”

“Once a conflict of interest is determined to be present, all actions go through upper management or board of directors approval.”

“The board of directors use the expertise of a compensation survey when determining the compensation of the general manager. The survey shows comparative salaries for general managers from similarly situated cooperatives located in texas and the nation. The board and the general manager use the expertise of a compensation survey when determining the compensation of the cooperative's 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 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. Annually, the cooperative provides a copy of the audited balance sheet and income statement to the members of the cooperative with the annual report. The annual report and bylaws can also be found on the cooperative's website: www.navarroec.com.”

“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, vision and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers and highly compensated employees is comprised of actuarial increase in the defined benefit plan and insurance paid on behalf of and for their benefit.”

“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.”

“The cooperative annually provides each employee officer and director who served on the board during the year a questionnaire. The completed questionnaires are used to complete the applicable questions on the form 990 pertaining to business relationships among directors, officers, and key employees, as well as to determine if there are any transactions which must be reported in detail on schedule l - "transactions with interested persons". If the cooperative was unable to obtain a completed questionnaire, the cooperative relied upon the completed information for the prior year. The cooperative was unable to obtain a completed questionnaire for employee officers billy jones, courtney sadberry, and kim derden who are no longer with the cooperative. Therefore, their prior year questionnaires were relied upon while preparing the return. There were no known changes from 2023 to 2024.”

“Although the cooperative is no longer an rus borrower, the accounting records are maintained in accordance with the rural utilities service (rus) uniform system of accounts (usoa). The usoa does not record expenses in the general expense categories provided on part ix lines 1-23. The cooperative separetly states 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 $ 3,493,695 less: director fees reported on forms 1099-nec (241,214) less: employee officer benefits reported on line 5 (326,187) plus: salaries and wages capitalized directly to plant 1,086,234 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 85,888 total wages accrued and/or paid $ 4,098,416”

“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.”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 668,232 office supplies 102,281 outside services 421,747 insurances 74,952 regulatory commission expense 99,716 miscellaneous general 218,300 employee benefits 36,305 utilities 71,480 directors 308,488 annual meeting 24,588 dues and subscriptions 64,231 maintenance of general plant 76,528 total admin & general exp per financial statements $ 2,166,848 less: reclass of director fees to part ix, line 5 (241,214) less: reclass of labor to part ix, lines 5 & 7 (444,223) less: reclass of benefits to part ix, lines 8-10 (184,130) total admin & general expense per form 990, part ix $ 1,297,281”

“Net change in memberships 3,980. Patronage capital assignable 1,575,425. Patronage capital retired - total -1,878,821.”