Wells Rural Electric Company

“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. 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 presented a copy of the form 990 to the board for discussion and review prior to filing.”

“The board of directors and officers 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 survey when determining the compensation and a performance evaluation of the ceo. The survey shows comparative salaries for ceo/general managers from cooperatives located in nevada and the northwest. The ceo uses a compensation survey when determining the compensation of the organization's other officers. The survey includes salaries from similar cooperatives throughout nevada and the northwest.”

“The cooperative will provide a complete copy of the audited financial statements, conflict of interest policy, or governing documents to any member who requests a copy. Audited financial statements are also published in the ruralite magazine annually.”

“A family relationship exists between director scott egbert and employee spencer egbert; therefore, for form 990 reporting purposes, scott egbert is not considered independent.”

“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 officers and highly compensated employees is comprised of the 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 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.”

“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 income of $3,230,109, which is the effect of transferring non-operating margins to other equities. The following schedule is provided to further explain the impact of this transaction: (a) - net income on page 1, part i, line 19 $ 3,230,109 (b) - benefits paid to members (i.e. Patronage dividends), part i, line 14 $ 1,194,001 total 2024 net margin per financial statements (a + b) $ 4,424,110”

“Although the company is no longer a rural utilities service (rus) borrower, its accounting records are maintained in accordance with the 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 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.”

“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 $ 4,556,452 less: director fees reported on forms 1099-nec (271,512) less: employee officer benefits included in line 5 (571,413) plus: salaries and wages allocated to purchased power 239,665 plus: salaries and wages allocated to nonoperating margin 52,088 plus: salaries and wages capitalized directly to plant 909,408 plus: salaries and wages capitalized/expensed indirectly through clearing & other accounts 208,010 total wages accrued and/or paid $ 5,122,698”

“Administrative and general expense is comprised of the following: administrative & general salaries, benefits, & other $ 1,047,098 office supplies 169,332 outside services employed 334,836 injuries & damages 1,911 pension & benefits 41,856 regulatory commission 40,504 miscellaneous general 266,978 directors 520,826 annual & other meetings 161,480 dues & memberships 255,937 maintenance of general plant 913,450 total admin & general exp per financial statements $ 3,754,208 less: reclass of director fees to part ix, line 5 (271,512) less: reclass of labor to part ix, lines 5 & 7 (1,029,162) less: reclass of benefits to part ix, lines 8-10 (654,436) total admin & general expense per form 990, part ix $ 1,799,098”

“Other expenses are comprised of the following: electrical wiring & installation expense $ 217,658 taxes 3,262 transmission 96,419 other deductions 34,466 total other expenses per form 990 line 24e $ 351,805”

“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 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 1,194,001. Patronage capital retired - total -913,479. Unclaimed capital credits retained under state law-net 220,019. Oci - pensions and benefits -100,838.”

“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.”