South Plains Electric Cooperative Inc

“A business relationship exists between larry dale ancell (executive vp/gm) and benny nixon (director). All serve on the board of golden spread electric cooperative at the request of and for the benefit of the cooperative.”

“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 provided a copy of the form 990 to the board for discussion and review prior to filing.”

“A list of potential conflicts of interest is annually distributed to all officers and members of the board of directors. Each officer and director is required to review the list and disclose any conflicts.”

“The board of directors use a compensation survey when determining the compensation of the cooperative's general manager. The survey includes salaries from similar cooperatives throughout texas and the nation. The board and the general manager use a compensation survey when determining the compensation of the organization's other employees meeting the definition of officer 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. Annually the cooperative provides a copy of the audited balance sheet and income statement to the members of the cooperative with the annual report.”

“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, this plan covers substantially all employees of the dickens and gate city divisions. 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 employee officers 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 employee officers and highly compensated employees are comprised of 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.”

“Patronage dividends result from the purchase of wholesale power from generation & transmission cooperatives. 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.”

“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. The first adjustment is for the equity method income 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. The second adjustment is for the transfer of nonoperating losses to other equities, and the third adjustment is for the patronage dividends allocated or to be allocated by the cooperative to members. Whereas the form 990 requires such amounts to be reported as an expense, patronage dividends allocated or to be allocated are an increase in capital and equity, specifically patronage capital, on u.s. Gaap basis financial statements.”

“Although the cooperative is no longer 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 separatley 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 $13,987,904 less: director fees reported on forms 1099-nec (361,216) less: employee officer benefits reported on line 5 (473,452) plus: salaries and wages allocated to nonoperating margins 125,244 plus: salaries and wages capitalized directly to plant 4,947,701 plus: salaries and wages capitalized/expensed indirectly through clearing & other accounts 1,048,473 total wages accrued and/or paid $19,274,654”

“Other expenses is comprised of the following: administrative & general expense $ 2,086,000 customer service & information 184,429 other deductions 170,282 sales expense 312,002 other taxes 109,747 total other expenses per form 990, line 24e $ 2,862,460”

“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 $ 7,575,731 office supplies 401,192 rent 450,000 outside services 464,819 duplicate charges (credit) 198 dues to associated organizations 93,642 annual meeting 107,549 directors 465,252 miscellaneous general 48,216 maintenance of general plant 1,954,729 total admin & general exp per financial statements $11,561,328 less: reclass of expenses to part viii (110,250) less: reclass of director fees to part ix, line 5 (361,216) less: reclass of labor to part ix, lines 5 & 7 (5,903,829) less: reclass of benefits to part ix, lines 8-10 (3,100,033) total admin & general expense per form 990, part ix $ 2,086,000”

“Patronage capital allocated 3,463,753. Other comprehensive income provision for pensions and benefits -107,254. Equity method income from subsidiary 134,905.”

“The board of directors have assigned members to an audit committee to oversee the financial statement audit and select the independent financial statement auditor. Procedural changes did not occur during the year.”