2023-11-15T19:38:55-06:00 2022-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2022-01-01 740783753 MID-SOUTH ELECTRIC COOPERATIVE ASSOCIATION MID- 9368255100 PO BOX 970 NAVASOTA TX 778680970 ANDREW DALLMEYER SR. VICE PRESIDENT 9368255100 2023-11-15 1 ANDREW DALLMEYER 999009999 0 WILLIAM M MILLER P00439459 8067473806 2023-11-15 X 2 AAL1 IAL1 2022 2023-04-26 12:10:37Z MID-SOUTH SYNERGY KERRY KELTON PO BOX 970 NAVASOTA TX 778680970 151657653 0 X WWW.MIDSOUTHSYNERGY.COM X 1940 TX TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS OF THE COOPERATIVE. 8 7 207 0 -682 0 0 0 111904017 150132766 99149 -75774 301070 1292595 112304236 151349587 37 0 8620959 7953839 9626777 10291962 0 0 0 94937136 129976786 113184909 148222587 -880673 3127000 452923341 514894894 320393784 369362840 132529557 145532054 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 37,252 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 11,069 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 76 0 207 1 1 1 0 0 0 0 151896923 2713953 0 0 0 X 8 7 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 PAUL MALEK DIRECTOR 3.10 0.40 X 13691 0 0 KENNETH MCDOUGALD DIRECTOR 2.60 X 13913 0 0 DENNIS MCWHORTER DIRECTOR 9.00 X 42290 0 0 JAMES MORRISON VICE PRESIDENT 4.30 X X 18967 0 0 ROBERT PIERCE DIRECTOR 2.80 0.40 X 12916 0 0 MARSHALL SHIRLEY PRESIDENT 8.60 0.40 X X 36967 0 0 RUSSELL WATSON DIRECTOR 5.00 0.40 X 21411 0 0 JACK SHEPHERD SECRETARY/TREASURER 2.80 0.40 X X 13932 0 0 STEVE DRIVER DIRECTOR (OCT-DEC) 2.50 0.40 X 2767 0 0 KERRY KELTON GENERAL MANAGER/CEO 75.00 1.00 X 442544 0 153001 TROY MORRIS SR. VICE PRESIDENT 55.00 1.00 X 293535 0 131757 MICHAEL MCDOUGALD SR. VICE PRESIDENT 50.00 1.00 X 292748 0 114438 ANDREW DALLMEYER SR. VICE PRESIDENT 50.00 1.00 X 235612 0 96044 RUSSELL SMITH SR. VP CORPORATE COUNSEL 50.00 X 243486 0 34808 DENNIS GILMORE SR. VICE PRESIDENT 40.00 X 246352 0 40951 DAVID WILLIAMS VP OPERATIONS 45.00 X 227695 0 94824 BRANDON NORTHCUT VP TECHNOLOGY 50.00 X 177221 0 62292 MELANIE CABALLERO VP REG COMPLIANC & CLAIMS MGMT 55.00 X 165440 0 86606 CATHY BARKER VP HUMAN RESOURCES & SAFETY 50.00 X 152386 0 54707 DIANNE SECHELSKI VP BILLING 40.00 X 187657 0 63612 MICHAEL LONG SR. MANAGER PROJECTS 40.00 X 149243 0 64540 LACY OAKS BUILDING/GROUNDS 40.00 X 147631 0 42803 KIRT WELLS SAFETY MANAGER 40.00 X 141089 0 46671 FRANCISCO REYES JOURNEYMAN II 55.00 X 139639 0 52820 JUSTIN STAPLETON VICE PRESIDENT 40.00 X 137623 0 54324 3556755 0 1194198 49 0 1 0 NATIONAL ON DEMAND INC PO BOX 2407 BURLINGTON NC 27216 SMART GRID CONSTRUCTION 13498402 4C UNLIMITED 17734 FM 244 IOLA TX 77861 FIBER LINE WORK 4934379 BURLIN POWER LINES LLC 9225 N HWY 77 LEXINGTON TX 78947 OVERHEAD LINE CONTRACTOR 2642442 CONEXON LLC 2001 GRAND BLVD SUITE 700 KANSAS CITY MO 64108 SMART GRID CONSTRUCTION 2211694 BENTON TECHNICAL SERVICES INC PO BOX 168 SOUTH WILMINGTON IL 60474 FIBER LINE WORK 2012765 35 SALES OF ELECTRICITY 221000 136904844 136904844 BROADBAND REVENUE 517000 10397010 10397010 PATRONAGE DIVIDENDS 221000 2149065 2149065 SERVICE FEES 221000 673512 673512 OTHER PROGRAM REVENUE 221000 8335 8335 150132766 141188 141188 234863 10532 224331 224331 225013 -682 69449 286411 -216962 -216962 -216962 12170 11123 1047 1047 POLE ATTACHMENT INCOME 221000 1067217 1067217 1067217 151349587 150141864 -682 1208405 X 7953839 3774570 4379588 646725 874756 616323 8583426 13884927 PURCHASED POWER 90003569 CONSUMER EXPENSE 5380337 DISTRIBUTION EXPENSE 4812958 ADMIN & GENERAL EXPENSE 3960432 3351137 148222587 2318131 2076011 412647 7064132 8556684 73630 73630 438063 502323 5304310 2057828 471058793 42736678 366480088 428322115 58678557 61620461 12566430 11273195 452923341 514894894 11317252 15173045 11434437 11058975 27002 29412 290434381 328144774 7180712 14956634 320393784 369362840 X 3513140 3852935 0 0 129016417 141679119 132529557 145532054 452923341 514894894 X 3127000 9875497 X X 0 1 X 0 0 0 1 X 8150867 8150867 30397001 5843823 24553178 296381008 36892855 259488153 136129917 136129917 428322115 PATRONAGE CAPITAL - CFC 612220 C PATRONAGE CAPITAL - TEC 768375 C PATRONAGE CAPITAL - BEPC 35919205 C PATRONAGE CAPITAL - OTHER 427672 C CAPITAL TERM CERTIFICATES - CFC 484609 C COBANK E-STOCK 7108505 C SCHOLARSHIP FUND 10412 C ECONOMIC DEVELOPMENT FUND 10787 C OTHER INVESTMENTS 42008 C INVESTMENTS IN AFFILIATED COMPANY - MSEC 15667946 C INVESTMENTS IN BOND SECURITIZATION PARTNERSHIP 568722 C 61620461 CONSUMER DEPOSITS 2916551 UNBILLED POWER COST 2293000 OTHER CURRENT AND ACCRUED LIABILITIES 671906 DEFERRED CREDIT - UNCLAIMED PROPERTY 513336 DUE TO AFFILIATED COMPANIES 265765 ACCRUED OPERATING TAXES 1276327 POWER COST RECOVERY - OVERCOLLECTED 6314047 DEFERRED DEPOSITS 705702 14956634 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 APPROVED BY 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 APPROVED BY 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 APPROVED BY 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 0 0 X X X X 0 0 0 KERRY KELTON GENERAL MANAGER/CEO 354437 0 22352 0 65755 0 128749 0 24252 0 595545 0 0 0 TROY MORRIS SR. VICE PRESIDENT 206805 0 27892 0 58838 0 105859 0 25898 0 425292 0 0 0 MICHAEL MCDOUGALD SR. VICE PRESIDENT 205238 0 27439 0 60071 0 86714 0 27724 0 407186 0 0 0 ANDREW DALLMEYER SR. VICE PRESIDENT 186709 0 25329 0 23574 0 70403 0 25641 0 331656 0 0 0 DAVID WILLIAMS VP OPERATIONS 155669 0 15433 0 56593 0 69475 0 25349 0 322519 0 0 0 DENNIS GILMORE SR. VICE PRESIDENT 61100 0 179432 0 5820 0 33262 0 7689 0 287303 0 0 0 RUSSELL SMITH SR. VP CORPORATE COUNSEL 170884 0 26445 0 46157 0 34708 0 100 0 278294 0 0 0 MELANIE CABALLERO VP REG COMPLIANC & CLAIMS MGMT 123895 0 8586 0 32959 0 65207 0 21399 0 252046 0 0 0 DIANNE SECHELSKI VP BILLING 159354 0 7547 0 20756 0 42469 0 21143 0 251269 0 0 0 BRANDON NORTHCUT VP TECHNOLOGY 137724 0 9376 0 30121 0 35926 0 26366 0 239513 0 0 0 MICHAEL LONG SR. MANAGER PROJECTS 114175 0 7663 0 27405 0 41131 0 23409 0 213783 0 0 0 CATHY BARKER VP HUMAN RESOURCES & SAFETY 111470 0 7684 0 33232 0 30895 0 23812 0 207093 0 0 0 FRANCISCO REYES JOURNEYMAN II 120838 0 6010 0 12791 0 29483 0 23337 0 192459 0 0 0 JUSTIN STAPLETON VICE PRESIDENT 112177 0 7631 0 17815 0 29757 0 24567 0 191947 0 0 0 LACY OAKS BUILDING/GROUNDS 65669 0 74073 0 7889 0 27820 0 14983 0 190434 0 0 0 KIRT WELLS SAFETY MANAGER 105640 0 6985 0 28464 0 32257 0 14414 0 187760 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 $ 106,861 EMPLOYER CONTRIBUTION TO 401(K) PLAN 21,888 TOTAL REPORTED IN COLUMN C $ 128,749 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (106,861) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 52,466 EXPENSE TO THE COOPERATIVE $ 74,354 TROY MORRIS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 85,359 EMPLOYER CONTRIBUTION TO 401(K) PLAN 20,500 TOTAL REPORTED IN COLUMN C $ 105,859 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (85,359) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 36,530 EXPENSE TO THE COOPERATIVE $ 57,030 MICHAEL MCDOUGALD: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 72,759 EMPLOYER CONTRIBUTION TO 401(K) PLAN 13,955 TOTAL REPORTED IN COLUMN C $ 86,714 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (72,759) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 36,574 EXPENSE TO THE COOPERATIVE $ 50,529 ANDREW DALLMEYER: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 52,754 EMPLOYER CONTRIBUTION TO 401(K) PLAN 17,649 TOTAL REPORTED IN COLUMN C $ 70,403 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (52,754) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 32,983 EXPENSE TO THE COOPERATIVE $ 50,632 DAVID WILLIAMS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 56,726 EMPLOYER CONTRIBUTION TO 401(K) PLAN 12,749 TOTAL REPORTED IN COLUMN C $ 69,475 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (56,726) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 26,663 EXPENSE TO THE COOPERATIVE $ 39,412 DENNIS GILMORE: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 30,160 EMPLOYER CONTRIBUTION TO 401(K) PLAN 3,102 TOTAL REPORTED IN COLUMN C $ 33,262 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (30,160) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 9,634 EXPENSE TO THE COOPERATIVE $ 12,736 RUSSELL SMITH: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 17,117 EMPLOYER CONTRIBUTION TO 401(K) PLAN 17,591 TOTAL REPORTED IN COLUMN C $ 34,708 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (17,117) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 25,803 EXPENSE TO THE COOPERATIVE $ 43,394 MELANIE CABALLERO: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 52,627 EMPLOYER CONTRIBUTION TO 401(K) PLAN 12,580 TOTAL REPORTED IN COLUMN C $ 65,207 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (52,627) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 22,365 EXPENSE TO THE COOPERATIVE $ 34,945 DIANNE SECHELSKI: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 27,837 EMPLOYER CONTRIBUTION TO 401(K) PLAN 14,632 TOTAL REPORTED IN COLUMN C $ 42,469 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (27,837) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 19,848 EXPENSE TO THE COOPERATIVE $ 34,480 BRANDON NORTHCUT: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 22,257 EMPLOYER CONTRIBUTION TO 401(K) PLAN 13,669 TOTAL REPORTED IN COLUMN C $ 35,926 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (22,257) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 23,738 EXPENSE TO THE COOPERATIVE $ 37,407 MICHAEL LONG: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 29,087 EMPLOYER CONTRIBUTION TO 401(K) PLAN 12,044 TOTAL REPORTED IN COLUMN C $ 41,131 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (29,087) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 19,583 EXPENSE TO THE COOPERATIVE $ 31,627 CATHY BARKER: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 28,948 EMPLOYER CONTRIBUTION TO 401(K) PLAN 1,947 TOTAL REPORTED IN COLUMN C $ 30,895 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (28,948) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 19,008 EXPENSE TO THE COOPERATIVE $ 20,955 FRANCISCO REYES: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 17,836 EMPLOYER CONTRIBUTION TO 401(K) PLAN 11,647 TOTAL REPORTED IN COLUMN C $ 29,483 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (17,836) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 13,947 EXPENSE TO THE COOPERATIVE $ 25,594 JUSTIN STAPLETON: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 19,518 EMPLOYER CONTRIBUTION TO 401(K) PLAN 10,239 TOTAL REPORTED IN COLUMN C $ 29,757 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (19,518) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 17,975 EXPENSE TO THE COOPERATIVE $ 28,214 LACY OAKS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 27,820 EMPLOYER CONTRIBUTION TO 401(K) PLAN (0) TOTAL REPORTED IN COLUMN C $ 27,820 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (27,820) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 7,814 EXPENSE TO THE COOPERATIVE $ 7,814 KIRT WELLS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 21,189 EMPLOYER CONTRIBUTION TO 401(K) PLAN 11,068 TOTAL REPORTED IN COLUMN C $ 32,257 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (21,189) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 17,885 EXPENSE TO THE COOPERATIVE $ 28,953 MICHAEL MCDOUGALD FAMILY RELATIONSHIP - DIRECTOR (K. MCDOUGALD) 292748 EMPLOYMENT 0 KENNETH MCDOUGALD FAMILY RELATIONSHIP - OFFICER (M. MCDOUGALD) 13913 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 $3,127,000, WHICH IS THE INCOME STATEMENT EFFECT OF ACCRUED UNBILLED REVENUE AND POWER COST. 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 12/31/22 $ 8,111,000 LESS: UNBILLED REVENUE AND POWER COST 12/31/21 (4,984,000) NET INCREASE IN UNBILLED REVENUE AND POWER COST $ 3,127,000 (A) - NET INCOME ON PAGE 1, PART I, LINE 19 $ 3,127,000 (B) - BENEFITS PAID TO MEMBERS (I.E. PATRONAGE DIVIDENDS), PART I, LINE 14 $ 7,953,839 2022 NET MARGIN PER FINANCIAL STATEMENTS (A + B + C) $11,080,839 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. EMPLOYEE OFFICER DENNIS GILMORE AND KEY EMPLOYEE DIANE SECHELSKI ARE NO LONGER WITH THE COOPERATIVE AND THEIR QUESTIONNAIRES WERE NOT OBTAINED. THEREFORE, THEIR PRIOR QUESTIONNAIRE WAS RELIED UPON WHILE PREPARING THE RETURN. THERE WERE NO KNOWN CHANGES FROM 2021 TO 2022. 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 $ 8,154,158 LESS: DIRECTOR FEES REPORTED ON FORMS 1099-NEC (176,854) LESS: EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (933,040) PLUS: SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 4,875,981 PLUS: SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING AND OTHER ACCOUNTS 3,269,079 TOTAL WAGES ACCRUED AND/OR PAID $15,189,324 FORM 990, PART IX, LINE 24: ADMINISTRATIVE & GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL SALARIES, BENEFITS, & OTHER $ 2,987,175 OFFICE SUPPLIES 236,576 OUTSIDE SERVICES 79,096 DIRECTORS 318,409 SAFETY/TRAINING 1,236,959 MEETINGS 101,021 REGULATORY COMMISSION EXPENSES 222,246 MAINTENANCE OF GENERAL PLANT 1,292,650 MISCELLANEOUS GENERAL EXPENSE 1,270,989 TOTAL ADMIN & GENERAL EXP PER FINANCIAL STATEMENTS $ 7,745,121 LESS: RECLASS OF TOWER EXPENSE TO PART VIII, LINE 6B (682) LESS: RECLASS OF DIRECTOR FEES TO PART IX, LINE 5 (176,854) LESS: RECLASS OF LABOR TO PART IX, LINES 5 & 7 (2,512,057) LESS: RECLASS OF BENEFITS TO PART IX, LINES 8-10 (1,095,096) TOTAL ADMIN & GENERAL EXPENSE PER FORM 990, PART IX $ 3,960,432 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 2022 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 $ 2,556,077 SALES 709,896 TAXES 52,550 OTHER DEDUCTIONS 32,614 TOTAL OTHER EXPENSES PER FROM 990, LINE 24E $ 3,351,137 FORM 990, PART XI, LINE 9: NET CHANGE IN MEMBERSHIPS 339,796. NET INCOME FROM EQUITY METHOD INVESTMENTS 1,581,862. PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 7,953,839. 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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