Swisher Electric Cooperative Inc

“Article v was amended to add section 4 organizational memerships to allow a non-natural entity or organization to apply or continue membership in the co-op pursuant to the requirements for membership specified in section 1 of article v. Article vii sections 7 & 8- proxy voting were elminated. Article viii section 3- board qualifications were amended to state that no person shall be eligible to become or remain a member of the board if they were not a resident in the area served by the cooperative for the preceding 12 months, have been employed by the cooperative within the previous 3 years, and have been convicted of a felony or misdemeanor which can be interpreted as a crime of moral turpitude. Article viii section 4-qualifications to remain a director was added to state that to remain a director, the incumbent must attend two-thirds or more of the regular meetings each year and should attend, during each three year term, at least three board-approved national, state or regional meetings, workshops and/or seminars related or pertaining to continuing education, training or industry informational updating. Article xi section 1 - officers was amended to state the offices of secretary and treasurer may be filled by one person at the discretion of the board. Article xi sections 6 & 8 - secretary and treasurer were amended to add the secretary and treaurer shall also have authority, with approval of the board, to delegate to a member of management the authority to appoint employees of the co-op to actually carry out certain administrative duties set forth in these sections. Article xiii section 5- patronage capital was amended to state before retiring any capital credited to any patron's account, the cooperative shall deduct any amount owed to the cooperative with interest. In addition, this section was amended to state any attempt to assign or transfer capital credits is subject to right of first refusal vested in the coop for a period of sixty days following notice.”

“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. The disposal of a substantial portion of the cooperative's assets.”

“From time to time the entire board will go into executive session for discussing items of a sensitive and confidential nature. When this occurs management and others in attendance are removed from the meeting room. Items discussed in executive session are not documented. However, actions taken by the board after executive sessions are adjourned are fully documented in the written minutes.”

“Management presented a copy of the form 990 to the board for discussion, review and approval prior to filing. The discussion and review was performed at the board meeting immediately before filing the form 990.”

“On an annual basis, the cooperative will require the board of directors and its employees to complete and sign our conflict of interest certification and disclosure form. The board of directors will also complete and sign the form 990 disclosure questionnaire. The signed copies will be kept in the personnel file for each individual.”

“The board of directors use a compensation survey when determining the compensation of the general manager. The survey shows comparative salaries for general managers from cooperatives located in texas and the nation. The board and the general manager use 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's by-laws and a summary of the annual financial statements are handed out to members at the annual, march membership banquet. The cooperative will provide a complete copy of the audited financial statements to any member who requests a copy. The cooperative's conflict of interest policy is available to the public upon request at the cooperative's headquarters. Finally, the cooperative's bylaws and annual meeting reports are available for viewing on the cooperative's website.”

“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. As part of the plan document, the cooperative provides a matching contribution up to 1% of a participating employee's salary. 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, meeting the eligibility requirements of such plans. The cooperative also provides health, dental, vision and life insurance to all employees, including officers, through a qualified plan. The amounts reported on part vii, column (f) for the officer is comprised of the actuarial increase in the defined benefit plan for the officer, the total amount contributed to the 401(k) pension plan and the insurance premiums paid for the benefit of the officer. 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 considers 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.”

“The accounting records of the cooperative are maintained in accordance with the uniform system of accounts as prescribed by the federal energy regulatory commission for class a and b electric utilities modified for electric borrowers of the rural utilities service(rus). The uniform system of accounting does not record expenses in the general expense categories provided on part ix lines 1 - 23. The cooperative will break out 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 will be reported on line 24 under the expense categories required by the uniform system of accounts.”

“Reconciliation of wages per return to total wages accrued and/or paid salaries and wages are allocated to asset, liability, and expense accounts based on the accounting system described above. In an effort to explain why the amounts reported on lines 5-7 do not agree to the total wages accrued and/or paid the following reconciliation is provided. Total per lines 5-7 $1,557,424 less directors fees reported on 1099-misc (135,951) less employee officer benefits included in line 5 (59,262) plus salaries and wages allocated to asset accounts 916,196 total wages accrued and/or paid $2,278,407”

“The following is a breakdown of the expenses reported as administrative and general expense on form 990, part ix, line 24. Office supplies and expense $111,981 outside services employed 66,833 injuries and damage insurance 29,823 directors expense 12,687 dues to associated organizations 34,941 employee travel 38,947 advertising 23,640 annual meeting expense 28,941 community public relations and area development 26,217 member services relations 30,806 maintenance of general plant 36,600 regulatory commission expense 38,682 miscellaneous general expense 75,812 total administrative and general expense per 990 $555,910”

“The form 990 instructions specifically state that the amount of patronage dividends paid to the members 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 members. The cooperative's tax exempt purpose is to provide electricity to its members 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 members. 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 members, and (3) in a fair and equitable basis 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 and is summarized as follows: (a) in order to induce patronage and to assure that the cooperative will operate on a nonprofit basis, the cooperative is obligated to account on a patronage basis to all its members for all amounts received and receivable from the furnishing of electric energy in excess of operating costs and expenses properly chargeable against such services (i.e. Margins from the provision of electric energy). (b) the margins from the provision of electric energy are received with the understanding that they are furnished by the members as capital. (c) the cooperative is obligated to pay by credits to a capital account for each member for all such margins. And (d) all such amounts credited to the capital account of any member shall have the same status as though they had been paid to the member in cash in pursuance of a legal obligation to do so and the member had then furnished to the cooperative corresponding amounts of capital. The amount reported on part ix, line 4 represents the amount of patronage capital that is either allocated or to be allocated to the members resulting from their purchase of electricity from the cooperative for the 2013 calendar year. As noted above, such amounts are allocated subsequent to year-end in a fair and equitable manner on the basis of patronage (i.e. Purchases). The amounts allocated are representative of the margins from the provision of electric energy to the members and are done pursuant to the olbigation that existed in the bylaws prior to the cooperative providing electricity to its members. Therefore, these amounts meet the definition of the term "patronage dividends paid". Please note, however, that because patronage dividends is the process by which the cooperative operates at cost with its members and thereby a key component to accomplishing its exempt purpose, the cooperative has reported the amount of its 2013 margin that has been or is to be allocated to the members subsequent to year-end. Such amounts are an expense for form 990 reporting and is not an expense for financial statements prepared in accordance with generally accepted accounting principles. As a result, the difference between the cooperative's gaap basis financial statements and the revenue less expenses reported on part i, line 19 is the amount of patronage dividends reported as benefits paid to members.”

“Retirement of patronage capital -798,725. Patronage capital assignable 3,778,164. Other comprehensive income - provision for pension & benefits 244,494.”

“The board as a whole is responsible for overseeing the financial statement audit and selecting the independent financial statement auditor.”