Mountain Parks Electric Inc

“During the year, the cooperative amended article vii, section 2(h). This section was amended to clarify that the cooperative's reasonable effort of publishing a list of unclaimed patronage capital checks will be posted on the cooperative's website rather than newspapers.”

“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. Nominations and elections are conducted by the geographical voting district to which the members are assigned. All voting is done on a one member one vote basis within each district.”

“The following acts require approval of the members of the cooperative: 1. Amendments to articles of incorporation 2. Amendments to bylaw articles iii (sections 4 and 5), article iv and article vii, section 1 pertaining to voting quorums, number of board members and districts, and the requirement to operate on a nonprofit basis for the mutual benefit of the members, respectively 3. Dissolution/liquidation of the cooperative 4. Disposal of a substantial portion of the cooperative's assets 5. Merger or consolidation of the cooperative with another organization additionally, mpei bylaws reserve to its membership the power to remove directors from the board by a vote of 10% of the membership, with no requirement for board approval. The bylaws also allow members to call a meeting by a petition signed by at least 50 members.”

“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.”

“The board of directors and staff annually review the conflict of interest policy in a board meeting. Any conflicts are made known if they exist.”

“The board of directors use a compensation survey when determining the compensation of the cooperative's general manager. The survey is produced by the statewide association and includes salaries from similarly situated cooperatives throughout colorado. 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 employee, if any. The survey includes salaries from similarly situated cooperatives throughout colorado 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. Finally, the annual report and bylaws can be found 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. Employer contributions to the plan are made pursuant to the plan document. These employer contributions are available to participating employees meeting the eligibility requirements, including officers and highly compensated employees. 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 and highly compensated employees are comprised of the total amount contributed to the defined contribution pension plan and the insurance premiums paid for their benefit. In addition to the above plans, the cooperative also provides post-retirement health insurance benefits through an unfunded welfare benefit plan. Benefits payable under the plan were curtailed and capped as of january 1, 2015.”

“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 net loss of $59,351 reported on part i, line 19 - revenue less expenses is the result of the cooperative allocating $2,241,206 of patronage dividends to the patrons even though the net book income is $2,215,902. Since the amount of the patronage dividend is reported as an expense on form 990, the difference between the two amounts results in a net loss. The primary reason for the loss is due to the cooperative adopting a revenue deferral plan during 2017 in accordance with accounting standards codification 980 "regulated operations and was approved by the rural utilities services as the primary lender. The net effect for 2017 is a reduction of net income for the year of $500,000 and the recognition of a regulatory liability of the same amount. The $500,000 in revenue will be recognized annually over the years 2019 through 2021 and is designed to control rates by helping to offset the potential increase in power cost. Regardless of the rate decisions to defer revenue, the amounts deferred are assignable to 2017 patrons as patronage dividends. This can be done when the revenue is recognized or in the year the patrons were billed for the revenue. Since the impact is the same to the patrons, the cooperative chose to allocate patronage dividends that includes the $500,000 of revenue deferred pursuant to the plan. Going forward, patronage dividends will be calculated by reversing out the effect of revenue recognized between 2019 through 2021 pursuant to the plan. To assist with understanding the net loss and difference between net income of the cooperative and the patronage dividends allocated to the patrons, the 2017 patronage dividend is calculated as follows: net margins per audited financial statements $ 2,215,902 plus: equity method income(loss) from subsidiary (34,047) plus: increase in deferred revenue 500,000 less: non-operating interest and rental income retained (440,649) part i, line 14 - benefits paid to members $ 2,241,206”

“The accounting records of the cooperative are maintained in accordance with the rural utilities service (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.”

“Administrative and general expense is comprised of the following: administrative & general $ 871,026 office supplies 782,459 outside services 83,771 injuries & damages 347,442 annual & other meetings 48,601 miscellaneous general 95,532 duplicate charge (credit) (98,000) maintenance of general plant 221,014 directors 117,648 dues & subscriptions 87,642 total admin & general exp per financial statements $ 2,554,135 less: reclass of director fees to part ix, line 5 (84,850) less: reclass of labor to part ix, lines 5 & 7 (847,904) less: reclass of benefits to part ix, lines 8-10 (252,933) less: reclass of ubi tax & tower expense (2,066) total admin & general expense per form 990, part ix $ 1,366,382”

“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 the total wages accrued and/or paid: total per lines 5-7 $ 4,281,054 less: director fees reported on form 1099-misc (84,850) less: employee officer benefits included in line 5 (86,091) plus: salaries and wages allocated to nonoperating margins 5,458 plus: salaries and wages capitalized directly to plant 749,027 plus: salaries and wages capitalized/expensed 405,275 total wages accrued and/or paid $ 5,269,873”

“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 allocated to the patrons resulting from their purchase of electricity from the cooperative for the 2017 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.”

“Equity method income from subsidiary corporation 34,047. Donated capital 360. Patronage capital assignable 2,241,206. Patronage capital retired - total -1,680,107. Patronage capital retired - discount 484.”

“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.”