Continental Divide Electric Cooperative Inc

“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. 4. By-law changes.”

“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.”

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

“The board of directors use a compensation committee, a compensation survey, and look at other external written employment contracts for comparison when determining the compensation of the general manager. The survey shows comparative salaries for general managers from similarly situated cooperatives located in new mexico and the nation. The board and the general manager use a compensation committee and 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 similar cooperatives throughout new mexico and the nation. The union contract wage increase provision is also used as a resoure.”

“The cooperative provides a summarized copy of the audited financial statements to the members of the cooperative at the annual meeting. The cooperative will provide a complete copy of the audited financial statements or governing documents to any member who requests a copy. The cooperative by-laws are also available on the cooperative's website.”

“Independent directors: claudio romero per irs form 990 instructions is not an independent director because he is on the board of tri-state generation and transmission association, inc. The cooperative purchases its electric energy from tri-state. The cooperative is a member of tri-state, as such mr. Romero is the cooperative's representative on tri-state's board. Mr. Romero has no ownership interest in tri-state and receives no direct or indirect benefit from the cooperative doing business with tri-state.”

“Written document retention and destruction policy: the cooperative does not have a written document retention and destruction policy in place, but follows the rus recommendations regarding document retention and destruction.”

“The cooperative has 9 board members; all 9 are allowed to vote, however the board president votes only in the case of a tie.”

“To provide detail regarding officer's other compensation: in order to provide retirement benefits to its employees, the cooperative participates in a defined benefit plan. Contributions to this plan are based on the full funding limitation of such plan. Employer contributions to the plan are available to participating employees, including officers, meeting the eligibility requirements of the plan. The cooperative also provides health and life insurance to all employees, including officers, through a qualified plan. The amount reported on part vii column (f) for the officers is the total amount contributed by the cooperative to the pension plan and insurance paid on behalf of and for benefit of the officers.”

“Patronage dividends: 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.”

“Accounting system: 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 the total wages paid and or accrued: 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 paid and or accrued the following reconciliation is provided. Total per lines 5-7 $3,281,681 less directors fees reported on 1099-misc (93,420) less officers and key employee benefits reported on line 5 (66,799) plus salaries and wages allocated to nonoperating margins 1,087 plus salaries and wages allocated to asset accounts 1,665,151 reconciliation to the toal wages paid and or accrued $4,787,700”

“Breakdown of expenses included in administrative and general: 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 $ 69,731 transportation 58,701 outside services employed 210,860 dues and subscriptions 171,929 regulatory commission expense 233,515 director mileage expense 74,474 allocated it department expense (474,161) data processing 118,540 operating and maintenance supplies 87,914 utilities and telephone 53,721 annual meeting 18,389 miscellaneous expense 85,928 total administrative and general expense per 990 $ 709,541”

“Benefits paid to members: 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.”

“Patronage capital retired -1,047,025. Other comprehensive income-provision for pension and benefits 3,198,383. Patronage capital assigned 3,894,549.”

“Audit committee: the board as a whole is responsible for overseeing the financial statement audit and selecting the independent financial statement auditor”