Central New Mexico Electric 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 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 5. Amendment to the bylaws”

“The cooperative has no committees with authority to act on behalf of the governing body.”

“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 the filing of the form 990.”

“The cooperative requires each board member to review the conflict of interest policy every two years and sign off that they have reviewed and understand the respective policy. Additionally, every two years the board conducts a policy review to determine if changes to the policy should be made.”

“The board of trustees determines the compensation of the ceo by taking into consideration previously established financial goals established for the prior year. The board and the ceo determine the compensation of the organization's other employees meeting the definition of officer.”

“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. The cooperative provides annually a copy of the audited balance sheet and income statement to the members of the cooperative at the annual meeting. Bylaws are available 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, with years of service taken into consideration. Employer contributions to the plan 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 the total amount contributed by the cooperative to the defined contribution plan and insurance premiums 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 organization 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 $167,164, which is the income statement effect of accrued unbilled revenue. 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 12/31/24 $ 1,879,518 less: unbilled revenue 12/31/23 (2,046,682) (a) - decrease equals amount on part i, line 19 $ (167,164) (b) - benefits paid to members (i.e. Patronage dividends), part i, line 14 $ 3,705,205 total 2024 net margin per financial statements (a + b) $ 3,538,041”

“During 2024, the cooperative began providing broadband services to members on a patronage basis.”

“The accounting records of the cooperative 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 separately reports salaries and wages, employee benefits and payroll taxes that are allocated in accordance with the 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 $ 4,211,953 less: trustee fees reported on forms 1099-nec (101,455) less: employee officer benefits reported on line 5 (122,887) plus: salaries and wages allocated to nonoperating margins 82,355 plus: salaries and wages capitalized directly to plant 833,970 plus: salaries and wages capitalized/expenses indirectly through clearing or other accounts 327,404 total wages accrued and/or paid $ 5,231,340”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits, & other $ 1,367,861 office supplies 713,540 outside services 126,657 injuries and damages 168,904 employee awards and other 24,056 regulatory commission 176,109 trustees 227,606 miscellaneous general 95,102 advertising 16,706 maintenance of general plant 140,774 dues and subscriptions 230,143 annual meeting 32,903 broadband 163,393 total admin & general exp per financial statements $ 3,483,754 less: reclass of donations to part ix, line 1 (294) less: reclass of trustee fees to part ix, line 5 (101,455) less: reclass of labor to part ix, lines 5 & 7 (1,037,842) less: reclass of benefits to part ix, lines 8-10 (376,984) less: unrelated business income tax (7,875) total admin & general expense per form 990, part ix $ 1,959,304”

“Other expenses are comprised of the following: amortization $ 126,311 consumer 778,956 dispatch center 132,375 transmission 7,905 total other expenses per form 990, line 24e $ 1,045,547”

“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.”

“Patronage capital allocated or to be allocated 3,705,205. Patronage capital retired -273,251. Other comprehensive income - provision for pensions and benefits”

“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.”