2014-11-10T17:15:36-06:00 2013-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2013-01-01 750204684 CONCHO VALLEY ELECTRIC COOPERATIVE INC CONC 3256556957 PO BOX 3388 SAN ANGELO TX 769023388 KELLY LANKFORD GENERAL MANAGER / CEO 3256556957 2014-11-03 1 Matt R Willis P00419741 8067473806 2014-11-03 X 2013 2015-11-30 17:44:51Z KELLY LANKFORD PO BOX 3388 SAN ANGELO TX 769023388 31704792 0 X WWW.CVEC.COOP X 1940 TX TO PROVIDE ELECTRIC ENERGY TO RURAL AREAS AT COST ON A COOPERATIVE BASIS. 6 6 68 0 0 0 0 0 27558554 31415414 97924 97734 81383 48054 27737861 31561202 24281 26706 3212324 3923446 3857058 3289994 0 0 0 20521036 24217147 27614699 31457293 123162 103909 79470233 88060503 47036995 51848814 32433238 36211689 THE COOPERATIVE IS COMMITTED TO PROVIDING SAFE, RELIABLE ELECTRIC SERVICE AT THE LOWEST PRACTICAL COST AND TO MEETING THE CHANGING NEEDS OF ITS MEMBERSHIP WITH A WELL TRAINED, QUALITY WORK FORCE AND WITH THE USE OF SOUND BUSINESS PRACTICES. 0 0 SALES OF ELECTRIC POWER TO MEMBERS - 13,458 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 0 1 1 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 20 0 1 68 1 0 0 0 0 0 35344118 975225 0 X 6 6 0 0 0 0 1 1 1 1 0 0 0 1 1 1 1 1 1 1 1 0 X KELLY LANKFORD CEO 3256556957 2530 PULLIAM ST SAN ANGELO TX 769054401 X JEFF COPELAND PRESIDENT 10.80 X X 2600 0 0 WAYNE KLATTENHOFF VICE-PRESIDENT 3.90 X X 3000 0 0 THOMAS CARTER SECRETARY-TREASURER 9.60 X X 4950 0 0 FRANK HOELSCHER DIRECTOR 8.00 X 6000 0 0 DARYL SCHNIERS DIRECTOR 9.10 X 7450 0 0 RALPH WILLBERG DIRECTOR 4.30 X 4550 0 0 KELLY LANKFORD EXECUTIVE VP/CEO 44.00 X 144890 0 40125 VICTOR THOMPSON MANAGER ENGINEERING/OPERAT 41.50 X 105136 0 57551 278576 0 97676 2 0 1 0 TECHLINE CONSTRUCTION PO BOX 674086 DALLAS TX 75267 LINE CONSTRUCTION 1474899 BIRD ELECTRIC ENTERPRISES INC 8787 IH 20 EASTLAND TX 76448 LINE CONSTRUCTION 568907 WESTERN TOWERS PO BOX 2040 SAN ANGELO TX 76902 TOWER SPACE RENTAL FOR METERING SYSTEM 226690 POLE INSPECTION OF WEST TEXAS PO BOX 252 MERTZON TX 76941 POLE INSPECTION AND GPS TAGGING 161207 NISC PO BOX 1147 MANDAN ND 58554 METERING, ACCOUNTING, BILLING SOFTWARE F 106361 6 X ELECTRIC ENERGY 221000 28898253 28898253 PATRONAGE DIVIDENDS 221000 2517161 2517161 31415414 97734 97734 19764 0 19764 19764 19764 139185 143590 -4405 -4405 BILLING SERVICES 221000 32695 32695 32695 31561202 31443704 0 117498 X 26706 3923446 213565 1938106 481332 505462 151529 1567903 2552163 COST OF PURCHASED POWER 17269418 DISTRIBUTION EXPENSE 1439700 ADMIN AND GENERAL 733282 CUSTOMER ACCOUNTS 605574 49107 31457293 651956 1175048 2933992 3521674 540537 725679 423037 2112358 90880790 27303867 59877426 63576923 14914589 16796429 128696 152392 79470233 88060503 2153081 2579025 102503 125833 43462812 45878789 1318599 3265167 47036995 51848814 X 128480 133990 0 0 32304758 36077699 32433238 36211689 79470233 88060503 X 103909 3674542 X X 0 0 0 0 1 X 44014 44014 3702998 1080170 2622828 85940652 26223697 59716955 1193126 1193126 63576923 CFC CAPITAL TERM CERTIFICATES 950238 C PATRONAGE CAPITAL - TEC, NRTC AND CFC 1676785 C GOLDEN SPREAD ELECTRIC - PATRONAGE CAPITAL 11384703 C OTHER MEMBERSHIPS IN ASSOCIATED ORGANIZATIONS 2060 C GOLDEN SPREAD ELECTRIC - CONTRIBUTED CAPITAL 1782643 C CFC CAPITAL MEMBER SECURITIES 1000000 C 16796429 CONSUMER DEPOSITS AND DEFERRED CREDITS 386977 OTHER CURRENT AND ACCRUED LIABILITIES 616089 DEFERRED CREDITS 2262101 3265167 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. Part X, Line 2: THE COOPERATIVE FOLLOWS THE PROVISIONS OF UNCERTAIN TAX POSITIONS AS ADDRESSED IN FASB ACCOUNTING STANDARDS CODIFICATION 740-10-65-1. 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. SCHEDULE D Part IX THE AMOUNT OF OTHER ASSETS ON FORM 990, PAGE 11, PART X, LINE 15 DOES NOT EQUAL OR EXCEED 5 PERCENT 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. 0 SCHEDULE I, PART II ALL GRANTS, SPONSORSHIPS AND DONATIONS ARE MADE TO NON-PROFIT AND CIVIC ORGANIZATIONS THAT ARE LOCATED IN THE COOPERATIVE'S SERVICE AREA. ALL DONATIONS ARE INTENDED TO IMPROVE THE COMMUNITIES IN WHICH OUR MEMBERS RESIDE. X X X X 0 0 0 KELLY LANKFORD EXECUTIVE VP/CEO 130173 0 0 0 14717 0 31612 0 8513 0 185015 0 0 0 VICTOR THOMPSON MANAGER ENGINEERING/OPERAT 103290 0 0 0 1846 0 40092 0 17459 0 162687 0 0 0 FROM 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. KELLY LANKFORD ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $27,261 401(K) EMPLOYER MATCH 4,351 TOTAL COLUMN C: 31,612 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (27,261) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 35,331 TOTAL COOPERATIVE CASH CONTRIBUTION $39,682 VICTOR THOMPSON ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $36,722 401(K) EMPLOYER MATCH 3,370 TOTAL COLUMN C: 40,092 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (36,722) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 30,351 TOTAL COOPERATIVE CASH CONTRIBUTION $33,721 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. Form 990, Part VI, Section B, line 12c ALL DIRECTORS AND EMPLOYEES ARE REQUIRED TO DISCLOSE ANY CONFLICT OF INTEREST TO THE EXECUTIVE VP/CEO AS SOON AS POSSIBLE. Form 990, Part VI, Section B, line 15 THE BOARD OF DIRECTORS USE A COMPENSATION SURVEY, INDEPENDENT COMPENSATION CONSULTANT AND COMPARE COMPENSATION REPORTED ON OTHER COOPERATIVE'S IRS FORM 990 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, INDEPENDENT COMPENSATION CONSULTANT AND COMPARE COMPENSATION REPORTED ON OTHER COOPERATIVE'S IRS FORM 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 PROVIDES A COPY OF ITS BY-LAWS TO ALL NEW MEMBERS WHO SIGN UP FOR SERVICE. THE BY-LAWS CAN ALSO BE FOUND ON THE COOPERATIVE'S WEBSITE: WWW.CVEC.COOP. THE COOPERATIVE WILL ALSO PROVIDE A COMPLETE COPY OF ITS GOVERNING DOCUMENTS, CONFLICT OF INTEREST POLICY, AND AUDITED FINANCIAL STATEMENTS TO ANY MEMBER WHO REQUESTS A COPY OF ANY SUCH DOCUMENT. THE COOPERATIVE PROVIDES ANNUALLY A COPY OF THE AUDITED BALANCE SHEET AND INCOME STATEMENT TO THE MEMBERS OF THE COOPERATIVE AT THE ANNUAL MEETING. Form 990, Part VI, Section A, Line 1 ALL SIX OF THE COOPERATIVE'S DIRECTORS ARE ELIGIBLE TO VOTE. THE PRESIDENT'S VOTE WILL BE THE DECIDING VOTE IF THERE IS 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 UP TO 3% OF A PARTICIPATING EMPLOYEE'S 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, DENTAL, 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. 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. Form 990, Part VII, Section A THE BOARD OF DIRECTORS CONSIDERS THE CEO TO BE BOTH THE TOP MANAGEMENT OFFICIAL AND THE TOP FINANCIAL OFFICIAL. THEREFORE, ONLY THE CEO IS LISTED AS AN EMPLOYEE OFFICER. Form 990, Part VIII, Line 2B 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 $2,151,671 LESS DIRECTORS FEES REPORTED ON 1099-MISC (28,550) LESS EMPLOYEE OFFICER BENEFITS REPORTED ON LINE 5 (40,125) PLUS SALARIES AND WAGES ALLOCATED TO ASSET ACCOUNTS 1,784,013 TOTAL WAGES ACCRUED AND/OR PAID $3,867,009 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 OFFICE AND SUPPLIES $202,548 OUTSIDE SERVICES 128,093 PUBLIC UTILITY ASSESSMENT 42,847 ASSOCIATION DUES 46,171 ADVERTISING 2,359 DIRECTORS EXPENSES 44,064 ANNUAL MEETING EXPENSES 71,927 MAINTENANCE OF GENERAL PLANT 44,683 CAPITAL CREDIT EXPENSE 10,934 MISCELLANEOUS GENERAL EXPENSE 139,656 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $ 733,282 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: OTHER COMPREHENSIVE INCOME - PROVISION FOR PENSIONS AND BENEFITS 80,900. NET INCREASE IN MEMBERSHIPS 5,510. PATRONAGE CAPITAL RETIRED -335,314. PATRONAGE CAPITAL ASSIGNABLE 3,923,446. 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.