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 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. Therefore, and pursuant to form 990 instructions, the question has been answered "no".”

“Management and paid preparer review drafts of form 990 prior to e-filing. Board reviews annual filings at monthly meetings.”

“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 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 general manager uses 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 bylaws are also available on the cooperative's website.”

“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 purchases of 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.”

“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 a net loss of $391,634, which is comprised of unallocated broadband divisional losses to be recovered from future broadband divisional margins, and the income statement effect of accrued unbilled revenue and equity method income. Equity method income is recorded on the cooperative's books and included in net margins. U.s. Gaap requires the cooperative to record on its books equity method income from its wholly owned subsidiary. Equity method income is not income for irs form 990 purposes and as such has been reported as an other change in net assets. 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 margins. The following schedule is provided to further explain the impact of this transaction: add: unbilled revenue 12/31/20 $ 731,010 less: unbilled revenue 12/31/19 (871,845) (a) - net decrease in unbilled revenue $ (140,835) (b) - less: equity method income from subsidiary $ (104,951) (c) - less: unallocated broadband division loss $ (145,848) net loss on page 1, part i, line 19 (a + b + c) $ (391,634)”

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

“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 $ 5,486,643 less: trustee fees reported on forms 1099-nec (73,095) less: officer & key employee benefits reported on line 5 (260,484) plus: salaries and wages allocaed to nonoperating margins 1,375 plus: salaries and wages capitalized directly to plant 1,121,571 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 282,625 total wages accrued and/or paid $ 6,558,635”

“Administrative and general expense is comprised of the following: administrative & general salaries, benefits, & other $ 1,982,259 office supplies & postage 193,891 operating & maintenance supplies 51,254 outside services employed 360,808 native american row 500 transportation 35,927 dues & subscriptions 238,688 regulatory commission 319,200 trustees 96,945 annual meeting 4,479 utilities & telephone 63,451 miscellaneous general 54,036 total admin & general exp per financial statements $ 3,401,438 less: reclass of trustee fees to part ix, line 5 (73,095) less: reclass of labor to part ix, lines 5 & 7 (1,578,339) less: reclass of benefits to part ix, lines 8-10 (619,526) total admin & general expense per form 990, part ix $ 1,130,478”

“Pursuant to 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 and 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 2020 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.”

“All grants, sponsorships, and/or donations are made to non-profit and civic organizations that are located in the cooperative's service area, and are intended to improve the communities in which our members reside. Each grant, sponsorship, and/or donation made during the year was below the reporting threshold of schedule i, part ii.”

“Patronage capital allocated or to be allocated 1,284,492. Other comprehensive income-provision for pension and benefits 653,782. Equity method income from subsidiary 104,951.”

“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.”