2014-10-29T08:19:01-05:00 2013-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2013-01-01 750124533 BAILEY COUNTY ELECTRIC COOPERATIVE ASSOCIATION BAIL 8062724504 PO BOX 1013 MULESHOE TX 793471013 DAVID MARRICLE PRESIDENT/CEO 8062724504 2014-10-07 1 Matt R Willis P00419741 8067473806 2014-10-07 X 2013 2015-11-30 17:44:51Z DAVID MARRICLE PO BOX 1013 MULESHOE TX 793471013 35738783 0 X WWW.BCECOOP.COM X 1938 TX TO PROVIDE ELECTRIC POWER TO RURAL AREAS AT COST ON A COOPERATIVE BASIS. 7 7 49 0 0 0 0 0 33632702 35650101 66406 19595 8533 1939 33707641 35671635 1500 1500 3316772 2309766 2789617 3189388 0 0 0 27599752 30170981 33707641 35671635 0 0 75202036 78556072 36815343 38716439 38386693 39839633 THE COOPERATIVE'S RESPONSIBILITY AND AIM IS TO PROVIDE EXCELLENT AND INNOVATIVE CUSTOMER SERVICE AS REFLECTED IN TOP QUALITY ELECTRIC SERVICE RELIABILITY, AFFORDABLE RATES, EMPLOYEE TEAMWORK AND THE HIGHEST DEGREE OF INTEGRITY IN ALL COOPERATIVE ENDEAVORS. 0 0 SALE OF ELECTRIC ENERGY TO OUR MEMBERS - 7,682 ACTIVE SERVICES WERE PROVIDED POWER AT YEAR END AT COST ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. 0 0 0 0 0 0 0 1 0 1 0 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 29 0 49 1 0 0 0 0 0 33256985 575794 0 X 7 7 0 0 1 0 1 1 1 1 0 0 0 1 1 1 1 1 0 1 1 0 X DAVID MARRICLE 8062724504 610 E AMERICAN BLVD MULESHOE TX 79347 X DARRELL STEPHENS CHAIRMAN 1.40 X X 2645 0 0 KEITH HICKS VICE-CHAIRMAN 2.60 X X 23859 0 0 JERRY NICHOLS SECRETARY-TREASURER 1.00 X X 9656 0 0 BOB FOLEY DIRECTOR (01/2014 - 03/2014) 1.80 X 5000 0 0 LARRY CLAWSON DIRECTOR 2.00 X 23813 0 0 NOAH ESTRADA DIRECTOR 0.80 X 21018 0 0 KEITH LAYTON DIRECTOR 2.30 X 23287 0 0 RONNIE BARRETT DIRECTOR (03/2014 - 12/2014) 1.10 X 14597 0 0 DAVID MARRICLE PRESIDENT/CEO 40.00 X 116741 0 84692 JOE GUTIERREZ EQUIPMENT TECH SUPERVISOR 40.00 X 102579 0 67206 343195 0 151898 2 0 1 0 INTERSTATE ELECTRICAL CONTRACTORS 12421 W 49TH AVE UNIT 8 WHEATRIDGE CO 80033 BUILD NEW SUBSTATION 603827 SGS ENGINEERING LLC 401 50TH STREET LUBBOCK TX 79404 SYSTEM ENGINEERING, CONSULTING 165100 G&S CONSTRUCTION HC 5 BOX 45 MULESHOE TX 79347 CONSTRUCTION OF CONTROL ROOM, REPAIRS TO 103742 JEFF BOEHNING 2850 CR AA MULESHOE TX 79347 HAUL CALICHE TO SUBSTATIONS/DIRT WORK AT 100548 4 X ELECTRICITY SALES 221000 32916431 32916431 PATRONAGE DIVIDENDS 221000 2733670 2733670 35650101 38996 38996 100 0 100 100 100 38000 57401 -19401 -19401 -19401 11586 9747 1839 1839 35671635 35651940 0 19695 X 1500 2309766 325308 1715642 340713 670929 136796 883963 2388416 PURCHASED POWER 24923296 DISTRIBUTION EXPENSE 1343973 ADMIN & GENERAL EXP. 425993 CUSTOMER SERVICE 161427 43913 35671635 626408 272350 1500275 275 1501913 1113783 1503556 1567697 354759 333396 72776309 25239713 45018368 47536596 20671027 22835171 4025730 4896804 75202036 78556072 1728688 1400555 47820 22048 26454262 35405758 8584573 1888078 36815343 38716439 X 7995 7865 0 0 38378698 39831768 38386693 39839633 75202036 78556072 X 0 1452940 X X 0 0 0 0 1 X 250373 250373 4961843 516470 4445373 67284976 24723243 42561733 279117 279117 47536596 PATRONAGE CAPITAL - CFC 145042 C PATRONAGE CAPITAL - TEC 206710 C PATRONAGE CAPITAL - GOLDEN SPREAD ELECTRIC COOPERATIVE, INC. 21705893 C PATRONAGE CAPITAL - FIVE AREA TELEPHONE 8238 C PATRONAGE CAPITAL - LAMB COUNTY ELECTRIC 559 C PATRONAGE CAPITAL - NRTC 6917 C CAPITAL TERM CERTIFICATES - CFC 758652 C MEMBERSHIP FEE - NRUCFC 1000 C MEMBERSHIP FEE - TEC 50 C MEMBERSHIP FEE - NRTC 1000 C MEMBERSHIP FEE - COBANK 1000 C MEMBERSHIPS - OTHER 10 C OTHER INVESTMENTS 100 C 22835171 OTHER CURRENT AND ACCRUED ASSETS 9194 DEFERRED DEBITS 4887610 4896804 CONSUMER DEPOSITS 55527 POWER COST - OVERBILLED 1219912 ACCRUED INTEREST 89240 ACCRUED EMPLOYEE COMPENSATED ABSENCES 516668 ACCRUED TAXES 6731 1888078 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. Part X, Line 2: THE COOPERATIVE HAS ADOPTED THE "UNCERTAIN TAX POSITIONS" PROVISIONS OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. THE PRIMARY TAX POSITION OF THE COOPERATIVE IS THEIR FILING STATUS AS A TAX EXEMPT ENTITY. THE COOPERATIVE DETERMINED THAT IT IS MORE LIKELY THAN NOT THAT THEIR TAX POSITION WILL BE SUSTAINED UPON EXAMINATION BY THE INTERNAL REVENUE SERVICE, AND THAT ALL TAX BENEFITS ARE LIKELY TO BE REALIZED UPON SETTLEMENT WITH TAXING AUTHORITIES. X 1 1 X X 0 0 0 DAVID MARRICLE PRESIDENT/CEO 111225 0 0 0 5516 0 59261 0 25431 0 201433 0 0 0 JOE GUTIERREZ EQUIPMENT TECH SUPERVISOR 63417 0 0 0 39162 0 42098 0 25108 0 169785 0 0 0 FORM 990, 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. 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. DAVID MARRICLE ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $54,628 401(K) EMPLOYER MATCH 4,633 TOTAL COLUMN C: 59,261 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (54,628) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 25,080 TOTAL COOPERATIVE CASH CONTRIBUTION $29,713 JOE GUTIERREZ ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $39,423 401(K) EMPLOYER MATCH 2,675 TOTAL COLUMN C: 42,098 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (39,423) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 14,506 TOTAL COOPERATIVE CASH CONTRIBUTION $17,181 RYAN MARRICLE RYAN HAS A FAMILY RELATIONSHIP WITH THE PRESIDENT/CEO DAVID MARRICLE. 62085 RYAN IS AN EMPLOYEE OF THE COOPERATIVE. 0 TEXAS ELECTRIC COOPERATIVE INC CEO DAVID MARRICLE IS A BOARD MEMBER OF TEXAS ELECTRIC COOPERATIVE, INC. 715859 THE COOPERATIVE PURCHASES INVENTORY FROM TEXAS ELECTRIC COOPERATIVE, INC. 0 Form 990, Part VI, Section A, line 4 ARTICLE II SECTION 1 "ANNUAL MEETING" WAS AMENDED TO STATE THE ANNUAL MEETINGS WILL NOW BE HELD THE FOURTH TUESDAY OF AUGUST EACH YEAR. 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. THE DISPOSAL OF A SUBSTANTIAL PORTION OF THE COOPERATIVE'S ASSETS; 2. THE DISSOLUTION/LIQUIDATION OF THE COOPERATIVE; AND 3. THE MERGER OR CONSOLIDATION OF THE COOPERATIVE WITH ANOTHER ORGANIZATION. Form 990, Part VI, Section A, line 8b 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. Form 990, Part VI, Section B, line 11 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. Form 990, Part VI, Section B, line 12c ALL NEW EMPLOYEES AND DIRECTORS ARE REQUIRED TO SIGN A CONFLICT OF INTEREST CERTIFICATION WHEN THEY BEGIN EMPLOYMENT WITH THE COOPERATIVE. ALL EMPLOYEES, DIRECTORS AND OFFICERS ARE REQUIRED TO REVIEW AND BE FAMILIAR WITH THE POLICIES OUTLINED IN THE COOPERATIVE'S CONFLICT OF INTEREST POLICY AND ARE REQUIRED TO DISCLOSE ANY ACTION OR SITUATION THAT MIGHT VIOLATE THE POLICY TO THE FULL BOARD OF DIRECTORS AS SOON AS POSSIBLE. THE PRESIDENT/CEO REGULARLY THE MONITORS AND ENFORCES THIS POLICY. Form 990, Part VI, Section B, line 15 THE BOARD OF DIRECTORS USE A COMPENSATION SURVEY WHEN DETERMINING THE COMPENSATION OF THE GENERAL MANAGER. THE SURVEY SHOWS COMPARATIVE SALARIES FOR GENERAL MANAGERS FROM COOPERATIVES LOCATED IN TEXAS AND THE NATION. THE BOARD AND THE GENERAL MANAGER USE 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 TEXAS AND THE NATION. Form 990, Part VI, Section C, line 19 THE COOPERATIVE PROVIDES A SUMMARIZED COPY OF THE AUDITED FINANCIAL STATEMENTS TO THE MEMBERS OF THE COOPERATIVE AT THE ANNUAL MEETING. A COPY OF THE COOPERATIVE BY-LAWS ARE PROVIDED (1) TO EVERY NEW MEMBER AT THE TIME OF THEIR MEMBERSHIP 2) TO ALL MEMBERS WHEN AN ADMENDMENT IS MADE TO THE COOPERATIVE BY-LAWS, AND (3) ARE AVAILABLE ON THE COOPERATIVE'S WEBSITE. 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, Part VI, Section A Line 1 THE COOPERATIVE HAS 7 BOARD MEMBERS; ALL 7 ARE ALLOWED TO VOTE, HOWEVER THE BOARD PRESIDENT VOTES ONLY IN THE CASE OF A TIE. 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. AS PART OF THE PLAN DOCUMENT, THE COOPERATIVE PROVIDES A MATCHING CONTRIBUTION FROM 1% TO 4% OF A PARTICIPATING EMPLOYEE'S BASE SALARY. 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, MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS. THE COOPERATIVE ALSO PROVIDES HEALTH AND LIFE INSURANCE TO ALL EMPLOYEES, INCLUDING OFFICERS, THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE OFFICER IS COMPRISED OF THE ACTUARIAL INCREASE IN THE DEFINED BENEFIT PLAN FOR THE OFFICER, THE TOTAL AMOUNT CONTRIBUTED TO THE 401(K) PENSION PLAN AND THE INSURANCE PREMIUMS PAID FOR THE BENEFIT OF THE OFFICER. Form 990, Part VII, Section A THE BOARD OF DIRECTORS CONSIDERS THE PRESIDENT/CEO TO BE BOTH THE TOP MANAGEMENT OFFICIAL AND THE TOP FINANCIAL OFFICIAL. THEREFORE, ONLY THE PRESIDENT/CEO IS LISTED AS AN EMPLOYEE OFFICER. 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 THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE UNIFORM SYSTEM OF ACCOUNTS AS PRESCRIBED BY THE FEDERAL ENERGY REGULATORY COMMISSION FOR CLASS A AND B ELECTRIC UTILITIES MODIFIED FOR ELECTRIC BORROWERS OF THE RURAL UTILITIES SERVICE(RUS). THE UNIFORM SYSTEM OF ACCOUNTING DOES NOT RECORD EXPENSES IN THE GENERAL EXPENSE CATEGORIES PROVIDED ON PART IX LINES 1 - 23. THE COOPERATIVE WILL BREAK OUT 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 WILL BE REPORTED ON LINE 24 UNDER THE EXPENSE CATEGORIES REQUIRED BY THE UNIFORM SYSTEM OF ACCOUNTS. 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. IN AN EFFORT TO EXPLAIN WHY THE AMOUNTS REPORTED ON LINES 5-7 DO NOT AGREE TO THE TOTAL WAGES ACCRUED AND/OR PAID THE FOLLOWING RECONCILIATION IS PROVIDED. TOTAL PER LINES 5-7 $2,040,950 LESS DIRECTORS FEES REPORTED ON 1099-MISC (123,875) LESS EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (84,692) PLUS SALARIES AND WAGES ALLOCATED TO ASSET ACCOUNTS 943,515 PLUS SALARIES AND WAGES ALLOCATED TO NONOPERATIVE MARGINS 5,175 TOTAL WAGES ACCRUED AND/OR PAID $2,781,073 Form 990, Part IX, Line 24 THE FOLLOWING IS A BREAKDOWN OF THE EXPENSES REPORTED AS ADMINISTRATIVE AND GENERAL EXPENSE ON FORM 990, PART IX, LINE 24 OUTSIDE SERVICES EMPLOYED $ 74,579 OFFICE AND SUPPLIES 109,615 DIRECTORS' EXPENSE 35,351 ANNUAL MEETING EXPENSES 45,475 INSTITUTIONAL AND GOODWILL ADVERTISING 32,082 MEMBER EDUCATION AND YOUTH PROGRAM 22,872 DUES TO ASSOCIATED ORGANIZATIONS 33,199 UTILITY COMMISSION RELATED EXPENSE 32,374 MAINTENANCE OF GENERAL PLANT 40,446 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $425,993 Form 990, Part IX, Line 4 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. THE COOPERATIVE'S TAX EXEMPT PURPOSE IS TO PROVIDE ELECTRICITY TO ITS MEMBERS 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 MEMBERS. 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 MEMBERS, AND (3) IN A FAIR AND EQUITABLE BASIS 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 MEMBERS 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 MEMBERS AS CAPITAL. (C) THE COOPERATIVE IS OBLIGATED TO PAY BY CREDITS TO A CAPITAL ACCOUNT FOR EACH MEMBER FOR ALL SUCH MARGINS. AND (D) ALL SUCH AMOUNTS CREDITED TO THE CAPITAL ACCOUNT OF ANY MEMBER SHALL HAVE THE SAME STATUS AS THOUGH THEY HAD BEEN PAID TO THE MEMBER IN CASH IN PURSUANCE OF A LEGAL OBLIGATION TO DO SO AND THE MEMBER 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 MEMBERS RESULTING FROM THEIR PURCHASE OF ELECTRICITY FROM THE COOPERATIVE FOR THE 2013 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 MEMBERS AND ARE DONE PURSUANT TO THE OLBIGATION THAT EXISTED IN THE BYLAWS PRIOR TO THE COOPERATIVE PROVIDING ELECTRICITY TO ITS MEMBERS. 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 MEMBERS AND THEREBY A KEY COMPONENT TO ACCOMPLISHING ITS EXEMPT PURPOSE, THE COOPERATIVE HAS REPORTED THE AMOUNT OF ITS 2013 MARGIN THAT HAS BEEN OR IS TO BE ALLOCATED TO THE MEMBERS 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. 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. Form 990, Part XI, line 9: PATRONAGE CAPITAL RETIRED -775,697. NET DECREASE IN MEMBERSHIPS -130. NET CHANGE IN OTHER EQUITIES 7,232. PATRONAGE CAPITAL HELD BY COOPERATIVE RETIRED -114,003. PATRONAGE CAPITAL ASSIGNABLE 2,309,766. RECLASSIFICATION OF CUSTODIAL SCHOLARSHIP AND ENERGY EFFICIENCY ACCOUNTS 25,772. Form 990, Part XII, Line 2 AUDITED FINANCIAL STATEMENTS WERE PREPARED BY AN INDEPENDENT ACCOUNTANT FOR THE COOPERATIVE'S FISCAL YEAR END OF SEPTEMBER 30TH. THE TAX RETURN HAS BEEN AND CONTINUES TO BE PREPARED BASED ON A CALENDAR YEAR END OF DECEMBER 31. THE BOARD AS A WHOLE IS RESPONSIBLE FOR OVERSEEING THE FINANCIAL STATEMENT AUDIT AND SELECTING THE INDEPENDENT FINANCIAL STATEMENT AUDITOR.