2024-11-15T23:11:41-06:00 2023-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2023-01-01 740783753 MID-SOUTH ELECTRIC COOPERATIVE ASSOCIATION MID- 9368255100 PO BOX 970 NAVASOTA TX 778680970 ANDREW DALLMEYER SR. VICE PRESIDENT 9368255100 2024-11-15 1 0 WILLIAM M MILLER P00439459 8067473806 2024-11-15 X 2023 2024-10-15 13:58:12Z MID-SOUTH SYNERGY KERRY KELTON PO BOX 970 NAVASOTA TX 778680970 152191446 0 X WWW.MIDSOUTHSYNERGY.COM X 1940 TX TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS OF THE COOPERATIVE. 8 8 224 0 -679 0 0 0 150132766 145361894 -75774 -275566 1292595 6065016 151349587 151151344 0 0 7953839 7787218 10291962 11843043 0 0 0 129976786 129026153 148222587 148656414 3127000 2494930 514894894 562970321 369362840 405144419 145532054 157825902 THE COOPERATIVE'S AND ITS SUBSIDIARIES' MISSION IS TO PROVIDE QUALITY SERVICE (ELECTRICITY, WATER, WASTEWATER, INTERNET, & SOLAR) AT A REASONABLE PRICE, BRINGING VITAL SERVICES TO INCREASE BOTH THE QUALITY OF LIFE AND ECONOMIC HEALTH IN THE MID-SOUTH SYNERGY SERVICE AREA. 0 0 PROVIDING ELECTRIC ENERGY TO OUR MEMBERS ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. THERE WERE 40,525 ACTIVE SERVICES AT YEAR END. COMMUNICATIONS DIVISION:PROVIDING BROADBAND INTERNET SERVICES THROUGH THE CONSTRUCTION OF A FIBER OPTIC NETWORK. WHEN CUMULATIVE NET MARGINS DERIVED FROM MEMBER SALES OF BROADBAND INTERNET SERVICES EXCEED CUMULATIVE NET LOSSES FROM SUCH SALES, THE COOPERATIVE WILL ALLOCATE PATRONAGE CAPITAL TO THE MEMBERS. THERE WERE 12,476 SUBSCRIBERS AT YEAR END. 0 0 0 0 0 0 0 1 0 1 0 1 0 1 1 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 1 1 1 1 0 1 80 0 224 1 1 1 0 0 0 0 146331972 4068964 0 0 0 X 8 8 1 0 0 0 1 1 1 1 0 0 0 1 1 1 1 1 1 1 1 0 X ANDREW DALLMEYER SR VICE PRESIDENT 9368255175 7625 HIGHWAY 6 NAVASOTA TX 77868 X DENNIS MCWHORTER DIRECTOR 5.90 1.00 X 24063 0 0 JAMES MORRISON VICE PRESIDENT 4.50 1.00 X X 19618 0 0 KENNETH MCDOUGALD DIRECTOR 2.40 1.00 X 11149 0 0 MARSHALL SHIRLEY PRESIDENT 12.10 1.00 X X 40568 0 0 PAUL MALEK DIRECTOR 3.80 1.00 X 14322 0 0 ROBERT PIERCE DIRECTOR 1.00 1.00 X 10670 0 0 RUSSELL WATSON DIRECTOR 6.30 1.00 X 27927 0 0 STEVE DRIVER DIRECTOR 6.70 1.00 X 25768 0 0 KERRY KELTON GENERAL MANAGER/CEO 55.00 1.00 X 565620 0 130125 TROY MORRIS SR. VICE PRESIDENT 55.00 X 299326 0 103692 MICHAEL MCDOUGALD SR. VICE PRESIDENT 50.00 1.00 X 310216 0 93415 ANDREW DALLMEYER SR. VICE PRESIDENT 50.00 1.00 X 253812 0 79285 RUSSELL SMITH SR. VICE PRESIDENT 50.00 X 251278 0 29263 DAVID WILLIAMS VP - OPERATIONS 45.00 X 244863 0 80119 BRANDON NORTHCUT VP - TECHNOLOGY 50.00 X 204380 0 57870 JUSTIN STAPELTON VP - GOVERNMENT RELATIONS 40.00 X 199365 0 57118 CATHY BARKER VP - HR & SAFETY 55.00 X 180943 0 53872 MELANIE CABALLERO VP - COMPLIANCE 60.00 X 165740 0 85506 2849628 0 770265 68 0 1 0 NATIONAL ONDEMAND INC PO BOX 2407 BURLINGTON NC 27216 FIBER LINE CONTRACTOR 9835173 ASSOCIATED WIRING SOLUTIONS 13921HWY 105 W 252 CONROE TX 77304 FIBER LINE CONTRACTOR 3135478 BURLIN POWER LINES LLC 9225 N HWY 77 LEXINGTON TX 78947 OVERHEAD LINE CONTRACTOR 2712152 LINETEC SERVICES LLC 3921 INDEPENDENCE DR STE 104 ALEXANDRIA LA 71303 OVERHEAD LINE CONTRACTOR 2490016 4C UNLIMITED 17734 FM 244 IOLA TX 77861 FIBER LINE CONTRACTOR 2201083 25 SALES OF ELECTRICITY 221000 126893160 126893160 BROADBAND REVENUE 517000 14711412 14711412 PATRONAGE DIVIDENDS 221000 3027450 3027450 SERVICE FEES 221000 669645 669645 OTHER PROGRAM REVENUE 221000 60227 60227 145361894 93911 93911 236088 10529 225559 225559 226238 -679 650402 1019879 -369477 -369477 -369477 9596 9694 -98 -98 POLE ATTACHMENT INCOME 221000 5206625 5206625 BOND SECURITIZATION P'SHIP INCOME 221000 632930 632930 5839555 151151344 145851487 -679 5300536 X 7787218 2290117 6360214 1194010 1354231 644471 11208096 15968065 PURCHASED POWER 82968365 DISTRIBUTION EXPENSE 6468203 ADMIN & GENERAL EXPENSE 6364212 CONSUMER EXPENSE 5047468 1001744 148656414 2076011 2688498 412647 8556684 8155908 73630 73630 502323 975941 2057828 3537097 525264050 53449238 428322115 471814812 61620461 65143693 11273195 10580742 514894894 562970321 15173045 20347670 11058975 10655586 29412 29537 328144774 355700426 14956634 18411200 369362840 405144419 X 3852935 4162635 0 0 141679119 153663267 145532054 157825902 514894894 562970321 X 2494930 9798918 X X 0 1 X 0 0 0 1 X 8150867 8150867 30953049 6724912 24228137 411996156 46724326 365271830 74163978 74163978 471814812 PATRONAGE CAPITAL - CFC 735097 C PATRONAGE CAPITAL - TEC 1024799 C PATRONAGE CAPITAL - BEPC 35919205 C PATRONAGE CAPITAL - OTHER 449554 C CAPITAL TERM CERTIFICATES - CFC 481833 C COBANK E-STOCK 7898401 C SCHOLARSHIP FUND 10412 C ECONOMIC DEVELOPMENT FUND 10787 C OTHER INVESTMENTS 42007 C INVESTMENTS IN AFFILIATED COMPANY - MSEC 17369947 C INVESTMENTS IN BOND SECURITIZATION PARTNERSHIP 1201651 C 65143693 CONSUMER DEPOSITS 3289302 OTHER CURRENT AND ACCRUED LIABILITIES 1070780 DEFERRED CREDIT - UNCLAIMED PROPERTY 513336 DUE TO AFFILIATED COMPANIES 806407 ACCRUED OPERATING TAXES 1489790 POWER COST RECOVERY - OVERCOLLECTED 9722005 DEFERRED DEPOSITS 1519580 18411200 X PART IV, LINE 2B: PURSUANT TO SECTION 74.3013 OF THE TEXAS PROPERTY CODE, THE COOPERATIVE HAS ESTABLISHED A RURAL SCHOLARSHIP FUND WITH RETIREMENTS OF PATRONAGE CAPITAL, WHICH HAVE REMAINED UNCLAIMED FOR A PERIOD OF THREE YEARS. THE AMOUNTS DEPOSITED INTO THE RURAL SCHOLARSHIP FUND ARE REPORTED TO THE STATE OF TEXAS AND CAN ONLY BE USED FOR SCHOLARSHIPS TO ENABLE STUDENTS FROM RURAL AREAS TO ATTEND COLLEGE, TECHNICAL SCHOOL OR OTHER POST SECONDARY EDUCATION INSTITUTION. ANY AMOUNTS SO DEPOSITED INTO THE RURAL SCHOLARSHIP FUND ARE STILL PAYABLE TO THE PERSON TO WHOM THE ORIGINAL PAYMENT WAS MADE BUT UNCLAIMED. ALSO PURSUANT TO SECTION 74.3013 OF THE TEXAS PROPERTY CODE, THE COOPERATIVE HAS ESTABLISHED AN ECONOMIC DEVELOPMENT FUND WITH RETIREMENTS OF PATRONAGE CAPITAL, WHICH HAVE REMAINED UNCLAIMED FOR A PERIOD OF THREE YEARS. THE AMOUNTS DEPOSITED INTO THE ECONOMIC DEVELOPMENT FUND ARE REPORTED TO THE STATE OF TEXAS AND CAN ONLY BE USED FOR THE STIMULATION AND IMPROVEMENT OF BUSINESS AND COMMERCIAL ACTIVITY FOR ECONOMIC DEVELOPMENT IN RURAL COMMUNITIES. ANY AMOUNTS SO DEPOSITED INTO THE ECONOMIC DEVELOPMENT FUND ARE STILL PAYABLE TO THE PERSON TO WHOM THE ORIGINAL PAYMENT WAS MADE BUT UNCLAIMED. ALSO PURSUANT TO SECTION 74.3013 OF THE TEXAS PROPERTY CODE, THE COOPERATIVE HAS ESTABLISHED AN ENERGY EFFICIENCY ASSISTANCE FUND WITH RETIREMENTS OF PATRONAGE CAPITAL, WHICH HAVE REMAINED UNCLAIMED FOR A PERIOD OF THREE YEARS. THE AMOUNTS DEPOSITED INTO THE ENERGY EFFICIENCY ASSISTANCE FUND ARE REPORTED TO THE STATE OF TEXAS AND CAN ONLY BE USED TO ASSIST MEMBERS OF AN ELECTRIC COOPERATIVE IN REDUCING THEIR ENERGY CONSUMPTION AND ELECTRICITY BILLS. ANY AMOUNTS SO DEPOSITED INTO THE ENERGY EFFICIENCY ASSISTANCE FUND ARE STILL PAYABLE TO THE PERSON TO WHOM THE ORIGINAL PAYMENT WAS MADE BUT UNCLAIMED. PART X, LINE 2: THE COOPERATIVE FOLLOWS THE "UNCERTAIN TAX POSITIONS" PROVISIONS OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. THE PRIMARY TAX POSITION OF THE COOPERATIVE IS ITS FILING STATUS AS A TAX EXEMPT ENTITY. THE COOPERATIVE DETERMINED THAT IT IS MORE LIKELY THAN NOT THAT ITS TAX POSITION WILL BE SUSTAINED UPON EXAMINATION BY THE INTERNAL REVENUE SERVICE (IRS), OR OTHER STATE TAXING AUTHORITY, AND THAT ALL TAX BENEFITS ARE LIKELY TO BE REALIZED UPON SETTLEMENT WITH TAXING AUTHORITIES. PART IX: THE AMOUNT OF OTHER ASSETS ON FORM 990, PAGE 11, PART X, LINE 15 DOES NOT EQUAL OR EXCEED 5% OF THE TOTAL ASSETS ON FORM 990, PAGE 11, PART X, LINE 16, COLUMN B. CONSEQUENTLY, IN ACCORDANCE WITH IRS INSTRUCTIONS, SCHEDULE D, PART IX HAS BEEN LEFT BLANK. X X X X 0 0 0 KERRY KELTON GENERAL MANAGER/CEO 394287 0 23517 0 147816 0 101407 0 28718 0 695745 0 0 0 MICHAEL MCDOUGALD SR. VICE PRESIDENT 231574 0 13682 0 64960 0 61108 0 32307 0 403631 0 0 0 TROY MORRIS SR. VICE PRESIDENT 229873 0 13666 0 55787 0 69976 0 33716 0 403018 0 0 0 ANDREW DALLMEYER SR. VICE PRESIDENT 217575 0 12563 0 23674 0 49216 0 30069 0 333097 0 0 0 DAVID WILLIAMS VP - OPERATIONS 167620 0 15188 0 62055 0 50187 0 29932 0 324982 0 0 0 RUSSELL SMITH SR. VICE PRESIDENT 188986 0 10749 0 51543 0 27094 0 2169 0 280541 0 0 0 BRANDON NORTHCUT VP - TECHNOLOGY 162291 0 10238 0 31851 0 26771 0 31099 0 262250 0 0 0 JUSTIN STAPELTON VP - GOVERNMENT RELATIONS 124870 0 7733 0 66762 0 24393 0 32725 0 256483 0 0 0 MELANIE CABALLERO VP - COMPLIANCE 129234 0 8345 0 28161 0 55098 0 30408 0 251246 0 0 0 CATHY BARKER VP - HR & SAFETY 126450 0 7786 0 46707 0 23177 0 30695 0 234815 0 0 0 PART II, COLUMN C: INCLUDED IN THIS AMOUNT IS THE INCREASE IN ACTUARIAL VALUE OF BENEFITS PAYABLE UNDER A DEFINED BENEFIT RETIREMENT PLAN. THE CONTRIBUTION RATE FOR PARTICIPANTS IN THE NRECA R&S DEFINED BENEFIT PENSION PLAN ARE THE SAME FOR ALL INDIVIDUALS IN THIS MULTI-EMPLOYER PLAN. THE CHANGE IN ACTUARIAL VALUE FOR EACH PARTICIPANT, HOWEVER, VARIES WITH AGE, YEARS OF SERVICE AND THE CURRENT INTEREST RATE ENVIRONMENT. IN OTHER WORDS, THE OLDER A PLAN PARTICIPANT IS, THE GREATER THE INCREASE IN THAT INDIVIDUAL'S CHANGE IN ACTUARIAL VALUE, ALL OTHER THINGS BEING EQUAL. BECAUSE THIS RELATES TO A MULTI-EMPLOYER PLAN, CASH CONTRIBUTIONS TO THE PLAN IN LIEU OF THE ACTUARIAL INCREASE ARE EXPENSED IN THE FINANCIAL STATEMENTS. KERRY KELTON: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 74,860 EMPLOYER CONTRIBUTION TO 401(K) PLAN 26,547 TOTAL REPORTED IN COLUMN C $ 101,407 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (74,860) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 54,351 EXPENSE TO THE COOPERATIVE $ 80,898 MICHAEL MCDOUGALD: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 45,711 EMPLOYER CONTRIBUTION TO 401(K) PLAN 15,397 TOTAL REPORTED IN COLUMN C $ 61,108 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (45,711) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 35,018 EXPENSE TO THE COOPERATIVE $ 50,415 TROY MORRIS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 47,476 EMPLOYER CONTRIBUTION TO 401(K) PLAN 22,500 TOTAL REPORTED IN COLUMN C $ 69,976 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (47,476) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 34,976 EXPENSE TO THE COOPERATIVE $ 57,476 ANDREW DALLMEYER: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 30,232 EMPLOYER CONTRIBUTION TO 401(K) PLAN 18,984 TOTAL REPORTED IN COLUMN C $ 49,216 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (30,232) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 31,579 EXPENSE TO THE COOPERATIVE $ 50,563 DAVID WILLIAMS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 36,372 EMPLOYER CONTRIBUTION TO 401(K) PLAN 13,815 TOTAL REPORTED IN COLUMN C $ 50,187 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (36,372) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 28,127 EXPENSE TO THE COOPERATIVE $ 41,942 RUSSELL SMITH: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 8,820 EMPLOYER CONTRIBUTION TO 401(K) PLAN 18,274 TOTAL REPORTED IN COLUMN C $ 27,094 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (8,820) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 28,823 EXPENSE TO THE COOPERATIVE $ 47,097 BRANDON NORTHCUT: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 10,993 EMPLOYER CONTRIBUTION TO 401(K) PLAN 15,778 TOTAL REPORTED IN COLUMN C $ 26,771 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (10,993) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 28,263 EXPENSE TO THE COOPERATIVE $ 44,041 JUSTIN STAPELTON: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 8,972 EMPLOYER CONTRIBUTION TO 401(K) PLAN 15,421 TOTAL REPORTED IN COLUMN C $ 24,393 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (8,972) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 21,349 EXPENSE TO THE COOPERATIVE $ 36,770 MELANIE CABALLERO: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 42,246 EMPLOYER CONTRIBUTION TO 401(K) PLAN 12,852 TOTAL REPORTED IN COLUMN C $ 55,098 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (42,246) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 23,038 EXPENSE TO THE COOPERATIVE $ 35,890 CATHY BARKER: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 18,928 EMPLOYER CONTRIBUTION TO 401(K) PLAN 4,249 TOTAL REPORTED IN COLUMN C $ 23,177 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (18,928) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 21,496 EXPENSE TO THE COOPERATIVE $ 25,745 MICHAEL MCDOUGALD FAMILY RELATIONSHIP - DIRECTOR (K. MCDOUGALD) 310216 EMPLOYMENT 0 KENNETH MCDOUGALD FAMILY RELATIONSHIP - OFFICER (M. MCDOUGALD) 11149 DIRECTOR 0 FORM 990, PART I: 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 $2,494,930, WHICH IS THE INCOME STATEMENT EFFECT OF ACCRUED UNBILLED REVENUE AND POWER COST AND THE RETENTION OF NON-OPERATING MARGINS. THE GAAP BASIS FINANCIAL STATEMENTS INCLUDE AN ACCRUAL FOR UNBILLED REVENUE AND POWER COST 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 AND POWER COST, PAGE 1, PART I, LINE 19 ANNUALLY REPORTS NET INCOME EQUAL TO THE NET INCREASE IN ACCRUED UNBILLED REVENUE AND POWER COST OR A NET LOSS EQUAL TO THE NET DECREASE IN UNBILLED REVENUE AND POWER COST. THE FOLLOWING SCHEDULE IS PROVIDED TO FURTHER EXPLAIN THE IMPACT OF THIS TRANSACTION: ADD: UNBILLED REVENUE AND POWER COST 12/31/23 $ 9,973,000 LESS: UNBILLED REVENUE AND POWER COST 12/31/22 (8,111,000) NET INCREASE IN UNBILLED REVENUE AND POWER COST $ 1,862,000 ADD: RETENTION OF NON-OPERATING MARGINS 632,930 (A) - NET INCOME ON PAGE 1, PART I, LINE 19 $ 2,494,930 (B) - BENEFITS PAID TO MEMBERS (I.E. PATRONAGE DIVIDENDS), PART I, LINE 14 $ 7,787,218 2023 NET MARGIN PER FINANCIAL STATEMENTS (A + B) $10,282,148 FORM 990, PART VI, SECTION A, LINE 2 KENNETH MCDOUGALD, DIRECTOR, HAS A FAMILY RELATIONSHIP WITH MICHAEL MCDOUGALD, EMPLOYEE OFFICER. FORM 990, PART VI, SECTION A, LINE 6 THE COOPERATIVE WAS FORMED BY THE MEMBERS TO PROVIDE ELECTRIC SERVICE AT COST ON A COOPERATIVE BASIS. FORM 990, PART VI, SECTION A, LINE 7A THE MEMBERS OF THE COOPERATIVE VOTE ON THE BOARD OF DIRECTORS. ELECTIONS ARE DONE ON A ONE MEMBER ONE VOTE BASIS. FORM 990, PART VI, SECTION A, LINE 7B 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 FORM 990, PART VI, SECTION A, LINE 8B 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". FORM 990, PART VI, SECTION B, LINE 11B MANAGEMENT PRESENTED A COPY OF THE FORM 990 TO THE BOARD FOR DISCUSSION AND REVIEW PRIOR TO FILING. FORM 990, PART VI, SECTION B, LINE 12C ON AN ANNUAL BASIS, THE COOPERATIVE WILL REQUIRE THE BOARD OF DIRECTORS AND ITS OFFICERS TO COMPLETE AND SIGN A CONFLICT OF INTEREST CERTIFICATION AND DISCLOSURE FORM. THE BOARD OF DIRECTORS WILL ALSO COMPLETE AND SIGN THE FORM 990 DISCLOSURE QUESTIONNAIRE. THE SIGNED COPIES WILL BE KEPT IN THE PERSONNEL FILE FOR EACH INDIVIDUAL. FORM 990, PART VI, SECTION B, LINE 15 THE BOARD OF DIRECTORS USE THE EXPERTISE OF AN INDEPENDENT COMPENSATION CONSULTANT, A COMPENSATION SURVEY AND COMPARE COMPENSATION REPORTED ON OTHER COOPERATIVE'S IRS FORMS 990 WHEN DETERMINING THE COMPENSATION OF THE GENERAL MANAGER/CEO. THE SURVEY SHOWS COMPARATIVE SALARIES FOR GENERAL MANAGERS/CEOS FROM COOPERATIVES LOCATED IN TEXAS AND THE NATION. THE GENERAL MANAGER/CEO USES THE EXPERTISE OF AN INDEPENDENT COMPENSATION CONSULTANT, A COMPENSATION SURVEY AND COMPARE COMPENSATION REPORTED ON OTHER COOPERATIVE'S IRS FORMS 990 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 TEXAS AND THE NATION. FORM 990, PART VI, SECTION C, LINE 19 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. FORM 990, PARTS VI & VII: THE COOPERATIVE ANNUALLY PROVIDES EACH DIRECTOR WHO SERVED ON THE BOARD DURING THE YEAR A QUESTIONNAIRE. THE COMPLETED QUESTIONNAIRES ARE USED TO COMPLETE THE APPLICABLE QUESTIONS ON THE FORM 990 PERTAINING TO BUSINESS RELATIONSHIPS AMONG DIRECTORS, OFFICERS, AND KEY EMPLOYEES, AS WELL AS TO DETERMINE IF THERE ARE ANY TRANSACTIONS WHICH MUST BE REPORTED IN DETAIL ON SCHEDULE L - "TRANSACTIONS WITH INTERESTED PERSONS". IF THE COOPERATIVE WAS UNABLE TO OBTAIN A COMPLETED QUESTIONNAIRE, THE COOPERATIVE RELIED UPON THE COMPLETED INFORMATION FOR THE PRIOR YEAR. DIRECTOR ROBERT PIERCE IS NO LONGER WITH THE COOPERATIVE AND HIS QUESTIONNAIRE WAS NOT OBTAINED. THEREFORE, HIS PRIOR QUESTIONNAIRE WAS RELIED UPON WHILE PREPARING THE RETURN. THERE WERE NO KNOWN CHANGES FROM 2022 TO 2023. FORM 990, PART VII, COLUMN F: 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 AND LIFE INSURANCE TO ALL EMPLOYEES, INCLUDING OFFICERS AND HIGHLY COMPENSATED EMPLOYEES, THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE EMPLOYEE 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. ALL BENEFITS ARE FOR EMPLOYEES ONLY. THE BOARD OF DIRECTORS DO NOT RECEIVE ANY OF THE BENEFITS LISTED ABOVE. FORM 990, PART VIII, LINE 2: 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. FORM 990, PART IX: ALTHOUGH THE COOPERATIVE IS NO LONGER A RURAL UTILITIES SERVICE (RUS) BORROWER, ITS ACCOUNTING RECORDS 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 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. FORM 990, PART IX, LINES 5-7: 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 $ 8,650,331 LESS: DIRECTOR FEES REPORTED ON FORMS 1099-NEC (174,085) LESS: EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (435,780) PLUS: SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 5,370,032 PLUS: SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING AND OTHER ACCOUNTS 4,252,963 TOTAL WAGES ACCRUED AND/OR PAID $17,663,461 FORM 990, PART IX, LINE 24: ADMINISTRATIVE & GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL SALARIES, BENEFITS, & OTHER $ 3,114,699 OFFICE SUPPLIES 429,722 OUTSIDE SERVICES 162,693 DIRECTORS 338,898 SAFETY/TRAINING 1,721,222 MEETINGS 161,167 REGULATORY COMMISSION EXPENSES 218,000 MAINTENANCE OF GENERAL PLANT 1,283,964 MISCELLANEOUS GENERAL EXPENSE 2,969,315 TOTAL ADMIN & GENERAL EXP PER FINANCIAL STATEMENTS $10,399,680 LESS: RECLASS OF TOWER EXPENSE TO PART VIII, LINE 6B (679) LESS: RECLASS OF DIRECTOR FEES TO PART IX, LINE 5 (174,085) LESS: RECLASS OF LABOR TO PART IX, LINES 5 & 7 (2,660,209) LESS: RECLASS OF BENEFITS TO PART IX, LINES 8-10 (1,206,310) TOTAL ADMIN & GENERAL EXPENSE PER FORM 990, PART IX $ 6,358,397 FORM 990, PART IX, LINE 4: 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 2023 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. FORM 990, PART IX, LINE 24E: OTHER EXPENSES ARE COMPRISED OF THE FOLLOWING: INTERNET EXPENSE - MSEC $ 60,406 SALES 648,005 TAXES 34,168 OTHER DEDUCTIONS 258,479 TOTAL OTHER EXPENSES PER FROM 990, LINE 24E $ 1,001,058 FORM 990, PART XI, LINE 9: NET CHANGE IN MEMBERSHIPS 309,700. NET INCOME FROM EQUITY METHOD INVESTMENTS 1,702,000. PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 7,787,218. FORM 990, PART XII, LINE 2C: 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. 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