Socorro Electric Cooperative Inc

“The cooperative had 7 trustees at the end of the year; all are allowed to vote. However, the board president votes only in the case of a tie.”

“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. Amendments to the articles of incorporation 5. Amendments to the bylaws”

“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".”

“The form 990 is reviewed first by the board president, ceo/general manager and accounting staff. After the initial review process, a draft is provided to the entire board of trustees for discussion and review at a meeting immediately preceding the filing of the form 990. After discussion and review, the form 990 is signed by the general manager and filed with the irs.”

“The board of trustees and officers are required to review and be familiar with the policies outlined in the cooperative's conflict of interest policy. The board of trustees and officers are required to disclose any action or situation that might violate the policy to the full board of trustees as soon as possible. The conflict of interest policy is reviewed by the cooperative's ethics committee on an annual basis.”

“When determining the compensation of the ceo/general manager, the board of trustees utilizes internal resources to obtain compensation data for general managers of other electric cooperatives located in the cooperative's geographic region. Adjustments to compensation are deliberated and approved by the board of trustees. Other than the general manager, the cooperative did not have any employees meeting the definition of officer or key employee. Therefore, and pursuant to form 990 instructions, line 15b has been answered "no".”

“The bylaws and articles of incorporation are posted on the cooperative's website. Additionally, and pursuant to section 10.13 of the bylaws, members have the right to inspect corporate records at reasonable times and places for proper purposes reasonably related to the member's interest in the cooperative.”

“The board of trustees considers the ceo/general manager to be both the top management official and the top financial official. Therefore, only the ceo/general manager is listed as a employee officer.”

“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. 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 officer 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 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 the 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 loss of $32,605, which is the income statement effect of accrued unbilled revenue, $36,270, and per form 990 instructions, reduced by net unrealized loss on investments, $3,665. 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 annually reports net income equal to the net increase in accrued unbilled revenue or a net loss equal to the net decrease in unbilled revenue. The following schedule is provided to further explain the impact of this transaction: add: unbilled revenue 12/31/21 $ 567.070 less: unbilled revenue 12/31/20 (603,340) (a) - net decrease in unbilled revenue $ (36,270) add: net unrealized loss on investments 3,665 net loss on page 1, part i, line 19 $ (32,605) (b) - benefits paid to members (i.e. Patronage dividends), part i, line 14 $ 1,504,883 total 2021 net margin per financial statements (a + b) $ 1,468,613”

“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 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.”

“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 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 2021 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.”

“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 $ 2,003,481 less: trustee fees reported on forms 1099-nec (39,768) less: employee officer benefits included in line 5 (79,279) plus: salaries and wages allocated to nonoperating margin 6,695 plus: salaries and wages capitalized directly to plant 459,208 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 113,297 total wages accrued and/or paid $ 2,463,634”

“Other expenses is comprised of the following: sales $ 7,404 administrative & general and other deductions 923 taxes 127,085 total other expenses per form 990, part ix $ 135,412”

“Patronage capital allocated or to be allocated 1,504,883. Patronage capital retired - total -410,303. Patronage capital retired - discount 20,584. Other comprehensive income - provision for pension & benefits 261.”

“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.”