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 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 with another cooperative organization; 3. Disposal of a substantial portion of the cooperative's assets; 4. Amendments to the articles of incorporation; and 5. Amendments to bylaws.”

“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.”

“The board of trustees, 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 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 on an annual basis.”

“The board of trustees 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 resource.”

“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.”

“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.”

“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 and highly compensated employees, meeting the eligibility requirements of the plan. The cooperative also provides health and life insurance to all eligible employees through a qualified plan. The amount reported on part vii column (f) for the officers and highly compensated employees is the actuarial increase of benefits accrued under the defined benefit pension plan and insurance paid 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 cooperative to its members.”

“The accounting records of the cooperative are maintained in accordance with the rus uniform system of accounts as prescribed for electric borrowers of the rural utilities service (rus). The uniform system of accounts 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 uniform system of accounts.”

“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 $ 3,440,236 less directors fees reported on 1099-misc (113,390) less officers and key employee benefits reported on line 5 (125,852) plus salaries and wages capitalized directly to plant 877,081 plus salaries and wages capitalized/expensed indirectly through clearing and other accounts 764,348 total wages accrued and/or paid: $ 4,842,423”

“Administrative and general expense is comprised of the following: office supplies & expenses $ 56,968 operating & maintenance supplies 178,363 outside services employed 129,000 native american row 309,564 transportation 56,337 data processing expense 131,600 allocated it department expenses (527,875) dues & subscriptions 178,859 regulatory commission expense 242,403 trustee mileage expense 77,057 annual meeting expense 22,832 utilities & telephone 67,682 miscellaneous general expense 64,064 total administrative & general expenses per 990 $ 986,854”

“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 (hereinafter referred to as 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 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 patrons 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 patrons as capital. (c) the cooperative is obligated to pay by credits to a capital account for each patron for all such margins. And (d) all such amounts credited to the capital account of any patron shall have the same status as though they had been paid to the patron in cash in pursuance of a legal obligation to do so and the patron 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 patrons resulting from their purchase of electricity from the cooperative for the 2014 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 patrons and are done pursuant to the obligation that existed in the bylaws prior to the cooperative providing electricity to its patrons. 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 patrons and thereby a key component to accomplishing its exempt purpose, the cooperative has reported the amount of its 2014 margin that has been or is to be allocated to the patrons 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 (gaap). 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.”

“Other expenses is comprised of the following: transmission $ 3,477 total other expenses per form 990 $ 3,477”

“Other comprehensive income-provision for pension and benefits -2,530,098. Patronage capital retired -963,271. Patronage capital assigned 3,874,376.”

“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.”