2013-11-15T10:19:37-06:00 2012-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2012-01-01 740783753 MID-SOUTH ELECTRIC COOPERATIVE ASSOCIATION MID- 9368255100 PO BOX 970 NAVASOTA TX 778680970 KERRY KELTON 9368255100 2013-11-15 1 Matt R Willis P00419741 8067473806 2013-11-15 2012 2016-03-07 17:11:31Z MID-SOUTH SYNERGY KERRY KELTON PO BOX 970 NAVASOTA TX 778680970 61315848 0 X WWW.MIDSOUTHSYNERGY.COM X 1940 TX TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS OF THE COOPERATIVE. 8 6 132 0 -1117 -1117 0 0 61125055 60422830 373868 414431 109112 127569 61608035 60964830 577 283 4128330 8004410 3831547 4056128 0 0 0 52231444 47418956 60191898 59479777 1416137 1485053 155353663 168842674 106502680 110536179 48850983 58306495 THE COOPERATIVE'S AND IT'S SUBSIDIARIES' MISSION IS TO PROVIDE QUALITY SERVICE (ELECTRICITY, WATER, WASTEWATER, & INTERNET) 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 - 24,706 ACTIVE SERVICES AT YEAR END WERE PROVIDED ELECTRICITY 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 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 1 1 1 0 1 40 0 132 1 1 1 0 0 0 0 60557481 1397988 0 X 8 6 1 0 1 0 1 1 1 1 1 0 0 1 1 1 1 1 1 1 1 0 X ANDREW DALLMEYER 9368255175 7625 HIGHWAY 6 NAVASOTA TX 77868 X MARSHALL SHIRLEY 3.60 X X 16945 0 0 JAMES D MORRISON 5.70 X X 23763 0 0 JACK B SHEPHERD 2.70 X X 13650 0 0 PAUL E MALEK 2.10 X 12670 0 0 RUSSELL WATSON 3.80 X 18820 0 0 DENNIS L MCWHORTER 3.80 X 16172 0 0 KENNETH MCDOUGALD 3.00 X 15595 0 0 ROBERT D PIERCE 3.40 X 16420 0 0 KERRY KELTON 50.00 X 241633 0 60499 DANIEL BETHAPUDI 40.00 X 151482 0 37345 TROY MORRIS 52.00 X 120241 0 32753 DIANNE SECHELSKI 50.00 X 117962 0 57923 MICHAEL MCDOUGALD 50.00 X 130197 0 31658 ANDREW DALLMEYER 50.00 X 88614 0 25649 DAVID WILLIAMS 45.00 X 98724 0 34846 ERIC COWEY 40.00 X 110524 0 21175 1193412 0 301848 6 0 1 0 C M JOSLIN CO INC P O BOX 647 CONROE TX 77305 RIGHT OF WAY CONTRACTOR 1404672 ASPLUNDH TREE EXPERT CO 708 BLAIR MILL ROAD WILLOW GROVE PA 19090 RIGHT OF WAY CONTRACTOR 1277377 FINWAY INC P O BOX 682 CONROE TX 77305 LINE CONSTRUCTION CONTRACTOR 806229 MCCORD ENGINEERING INC P O BOX 10047 COLLEGE STATION TX 77842 ENGINEERING 651934 H&B CONSTRUCTIONS LTD PO BOX 30 MONTGOMERY TX 77356 CONSTRUCTION 520467 7 ELECTRIC POWER SALES 221000 57590788 57590788 PATRONAGE DIVIDENDS 221000 2544577 2544577 CONNECT FEES 221000 287465 287465 60422830 293478 293478 54000 72568 9850 1714 44150 70854 115004 44150 -1714 72568 436367 315414 120953 120953 120953 36605 24040 12565 11968 597 60964830 60478948 -1117 486999 X 283 8004410 1363561 2002596 230020 236307 223644 4392185 4617926 PURCHASED POWER 29882165 DISTRIBUTION EXPENSE 4367633 ADMIN. & GENERAL EXP. 1968415 CUSTOMER ACCOUNTS 1073048 1117584 59479777 857864 1465469 11300672 14617822 86156 294805 1809835 493900 142080448 23422727 110403200 118657721 26946900 28969227 3949036 4343730 155353663 168842674 4325671 4682743 1355007 435597 46146 49876 94041229 100290064 6734627 5077899 106502680 110536179 X 1274600 1429445 0 0 47576383 56877050 48850983 58306495 155353663 168842674 X 1485053 7970459 X X 0 1 X 1 0 0 1 X 1183409 1183409 4540545 1400323 3140222 127876691 22022404 105854287 8479803 8479803 118657721 PATRONAGE CAPITAL - CFC 4585 C PATRONAGE CAPITAL - TEXAS ELECTRIC COOPERATIVES, INC. 388361 C PATRONAGE CAPITAL - BRAZOS ELECTRIC POWER COOPERATIVE, INC. 15520508 C CAPITAL TERM CERTIFICATES - CFC 493833 C CO-BANK E-STOCK 4126274 C SCHOLARSHIP FUND 70549 C ECONOMIC DEVELOPMENT FUND 11439 C OTHER INVESTMENTS 242284 C INVESTMENTS IN AFFILIATED COMPANY - MSEC 8111394 C 28969227 CONSUMER DEPOSITS 1409694 ACCRUED TAXES 532654 ACCRUED EMPLOYEE COMPENSATED ABSENCES 455462 ACCRUED INTEREST 384607 UNBILLED POWER COST 609000 OTHER CURRENT AND ACCRUED LIABILITIES 249471 TEXAS ESCHEAT 168142 GAIN ON RUS REACQUIRED DEBT 65426 POWER COST OVER RECOVERED 1159045 DUE TO AFFILIATED COMPANIES 44398 5077899 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. Description of Uncertain Tax Positions Under FIN 48: Part X, Line 2: ON JANUARY 1, 2009, THE COOPERATIVE 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 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, 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 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. X 1 1 X X X X 0 0 0 KERRY KELTON 209356 0 11155 0 21122 0 39357 0 21142 0 302132 0 0 0 DANIEL BETHAPUDI 136562 0 10095 0 4825 0 19966 0 17379 0 188827 0 0 0 TROY MORRIS 113514 0 5840 0 887 0 15149 0 17604 0 152994 0 0 0 DIANNE SECHELSKI 109105 0 5361 0 3496 0 52239 0 5684 0 175885 0 0 0 MICHAEL MCDOUGALD 123426 0 6347 0 424 0 14251 0 17407 0 161855 0 0 0 Supplemental Information Part III 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 CONTRIBUTION TO THE PLAN IN LIEU OF THE ACTUARIAL INCREASE ARE EXPENSED IN THE FINANCIAL STATEMENTS. KERRY KELTON ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 29,343 401(K) EMPLOYER MATCH 10,014 TOTAL COLUMN C: 39,357 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (29,343) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 31,619 TOTAL COOPERATIVE CASH CONTRIBUTION $ 41,633 DANIEL BETHAPUDI ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 13,658 401(K) EMPLOYER MATCH 6,308 TOTAL COLUMN C: 19,966 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (13,658) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 18,423 TOTAL COOPERATIVE CASH CONTRIBUTION 24,731 TROY MORRIS ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 10,080 401(K) EMPLOYER MATCH 5,069 TOTAL COLUMN C: 15,149 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (10,080) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 15,918 TOTAL COOPERATIVE CASH CONTRIBUTION 20,987 DIANNE SECHELSKI ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 47,454 401(K) EMPLOYER MATCH 4,785 TOTAL COLUMN C: 52,239 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (47,454) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 14,149 TOTAL COOPERATIVE CASH CONTRIBUTION 18,934 MICHAEL MCDOUGALD ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 8,791 401(K) EMPLOYER MATCH 5,460 TOTAL COLUMN C: 14,251 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN: (8,791) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN: 16,948 TOTAL COOPERATIVE CASH CONTRIBUTION 22,408 JOYCE SECHELSKI JOYCE SECHELSKI WAS EMPLOYED BY THE COOPERATIVE AND IS RELATED TO THE CMSO 60437 JOYCE SECHELSKI IS EMPLOYED BY THE COOPERATIVE AS AN EXECUTIVE ASSISTANT AND IS RELATED TO DIANNE SECHELSKI, THE CHIEF MEMBER SERVICE OFFICER OF THE COOPERATIVE 0 MICHAEL MCDOUGALD MICHAEL MCDOUGALD IS THE SON OF KENNETH MCDOUGALD 130197 MICHAEL MCDOUGALD IS AN OFFICER OF THE COOPERATIVE AND IS THE SON OF KENNETH MCDOUGALD, A MEMBER OF COOPERATIVE'S BOARD OF DIRECTORS 0 KENNETH MCDOUGALD KENNETH MCDOUGALD IS THE FATHER OF MICHAEL MCDOUGALD 15595 KENNETH MCDOUGALD IS A MEMBER OF THE COOPERATIVE'S BOARD OF DIRECTORS AND FATHER OF MICHAEL MCDOUGALD WHO IS AN OFFICER EMPLOYEE OF THE COOPERATIVE. 0 COLE SHIRLEY COLE SHIRLEY IS EMPLOYED BY THE COOPERATIVE AND IS RELATED TO PRESIDENT 10040 COLE SHIRLEY IS EMPLOYED BY THE COOPERATIVE AND IS RELATED TO MARSHALL SHIRLEY, PRESIDENT OF COOPERATIVE'S BOARD OF DIRECTORS 0 Form 990, Part VI, Section A, line 2 MICHAEL MCDOUGALD IS AN OFFICER OF THE COOPERATIVE AND IS THE SON OF KENNETH MCDOUGALD, A MEMBER OF COOPERATIVE'S BOARD OF DIRECTORS. Form 990, Part VI, Section A, line 4 DURING THE 2012 TAX YEAR, THE COOPERATIVE'S BYLAWS WERE AMENDED TO FURTHER DETAIL APPLICABLE DIRECTOR QUALIFICATIONS IN ITS CONFLICT OF INTEREST POLICY. 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. THE DISPOSAL OF A SUBSTANTIAL PORTION OF THE COOPERATIVE'S ASSETS. 4. CHANGE IN THE ARTICLES OF INCORPORATION. 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 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 FORM 990S 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 GENERAL MANAGER USES THE EXPERTISE OF AN INDEPENDENT COMPENSATION CONSULTANT AND 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 WILL PROVIDE A COMPLETE COPY OF THE AUDITED FINANCIAL STATEMENTS, CONFLICT OF INTEREST POLICY, OR GOVERNING DOCUMENTS TO ANY MEMBER WHO REQUESTS A COPY. TO PROVIDE DETAIL REGARDING EMPLOYEE OFFICER'S OTHER COMPENSATION 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 4% 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 EMPLOYEE OFFICERS AND HIGHLY COMPENSATED EMPLOYEES, MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS. THE COOPERATIVE ALSO PROVIDES HEALTH AND LIFE INSURANCE TO ALL EMPLOYEES, INCLUDING EMPLOYEE OFFICERS AND HIGHLY COMPENSATED EMPLOYEES, THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE EMPLOYEE OFFICER AND HIGHLY COMPENSATED EMPLOYEE IS COMPRISED OF THE ACTUARIAL INCREASE IN THE DEFINED BENEFIT PLAN FOR THE EMPLOYEE OFFICER AND HIGHLY COMPENSATED EMPLOYEE, THE TOTAL AMOUNT CONTRIBUTED TO THE 401(K) PENSION PLAN AND THE INSURANCE PREMIUMS PAID FOR THE BENEFIT OF THE EMPLOYEE OFFICER AND HIGHLY COMPENSATED EMPLOYEE. ALL BENEFITS ARE FOR EMPLOYEES ONLY. THE BOARD OF DIRECTORS DO NOT RECEIVE ANY OF THE BENEFITS LISTED ABOVE. PATRONAGE DIVIDENDS 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. ACCOUNTING SYSTEM 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. 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. RECONCILIATION OF WAGES PER RETURN TO FORM W-3 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 W-3 THE FOLLOWING RECONCILIATION IS PROVIDED. TOTAL PER LINES 5-7 $3,366,157 LESS DIRECTORS FEES REPORTED ON 1099-MISC (134,035) LESS OFFICER'S BENEFITS REPORTED ON LINE 5 (280,673) PLUS SALARIES AND WAGES ALLOCATED TO ASSET ACCOUNTS 3,520,497 NET INCREASE IN ACCRUED PAYROLL 65,164 RECONCILIATION TO W-3 $6,537,110 BREAKDOWN OF EXPENSES INCLUDED IN ADMINISTRATIVE AND GENERAL 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 SUPPLIES AND EXPENSE $ 500 OUTSIDE SERVICES EMPLOYED 215,055 SAFETY 508,511 EMPLOYEE TRAINING 240,881 MAINTENANCE OF GENERAL PLANT 186,559 REGULATORY COMMISSION EXPENSE 92,564 MISCELLANEOUS GENERAL EXPENSE 724,345 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $1,968,415 BENEFITS PAID TO MEMBERS FORM 990, PART IX, LINE 4 THE FORM 990 INSTRUCTIONS SPECIFICALLY STATE THAT THE AMOUNT OF PATRONAGE DIVIDENDS PAID TO THE MEMBERS (HEREINAFTER REFERRED TO AS PATRONS) SHOULD BE REPORTED ON PART IX, LINE 4 AS "BENEFITS PAID TO MEMBERS". 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 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 PATRONS FOR ALL AMOUNTS RECEIVED AND RECEIVABLE FROM THE FURNISHING OF ELECTRIC POWER AND ENERGY IN EXCESS OF OPERATING COSTS AND EXPENSES PROPERLY CHARGEABLE AGAINST SUCH SERVICES (I.E. MARGINS FROM THE PROVISION OF ELECTRIC POWER AND ENERGY). (B) THE MARGINS FROM THE PROVISION OF ELECTRIC POWER AND ENERGY ARE RECEIVED WITH THE UNDERSTANDING THAT THEY ARE FURNISHED BY THE PATRONS AS CAPITAL. (C) THE COOPERATIVE IS OBLIGATED TO PAY BY CREDITS TO A CAPITAL ACCOUNT FOR EACH PATRON FOR ALL SUCH MARGINS. AND (D) ALL SUCH AMOUNTS CREDITED TO THE CAPITAL ACCOUNT OF ANY PATRONS SHALL HAVE THE SAME STATUS AS THOUGH THEY HAD BEEN PAID TO THE PATRON IN CASH IN PURSUANCE OF A LEGAL OBLIGATION TO DO SO AND THE PATRON 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 PATRONS RESULTING FROM THEIR PURCHASE OF ELECTRICITY FROM THE COOPERATIVE FOR THE 2012 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 POWER AND ENERGY TO THE PATRONS AND ARE DONE PURSUANT TO THE OLBIGATION THAT EXISTED IN THE BYLAWS PRIOR TO THE COOPERATIVE PROVIDING ELECTRICITY TO ITS PATRONS. 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 PATRONS AND THEREBY A KEY COMPONENT TO ACCOMPLISHING ITS EXEMPT PURPOSE, THE COOPERATIVE HAS REPORTED THE AMOUNT OF ITS 2012 MARGIN THAT HAS BEEN OR IS TO BE ALLOCATED TO THE PATRONS 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. TO PROVIDE DETAIL REGARDING OTHER EXPENSES FORM 990, Part IX, Line 24 THE FOLLOWING IS A BREAKDOWN OF THE EXPENSES REPORTED AS OTHER EXPENSES ON FORM 990, PART IX, LINE 24: SALES EXPENSE $ 503,400 MISCELLANEOUS GENERAL EXPENSE 614,184 TOTAL OTHER EXPENSES PER FORM 990, LINE 24 $ 1,117,584 Changes in Net Assets or Fund Balances: Form 990, Part XI, line 9: NET CHANGE IN MEMBERSHIPS 154,845. NET INCOME FROM EQUITY METHOD INVESTMENTS 111,122. RETIREMENT OF CAPITAL CREDITS -299,918. PATRONAGE CAPITAL ASSIGNABLE 8,004,410. AUDIT COMMITTEE Form 990, Part XII, Line 2C THE BOARD OF DIRECTORS HAVE ASSIGNED MEMBERS TO AN AUDIT COMMITTEE TO OVERSEE THE FINANCIAL STATEMENT AUDIT AND SELECT THE INDEPENDENT FINANCIAL STATEMENT AUDITOR. MID-SOUTH SYNERGY CHARITABLE FOUNDATION 7625 HWY 6 NAVASOTA TX 77868 274376574 GRANTS AND SCHOLARSHIPS TX 501(c)(3) Line 7 N/A 1 MSEC ENTERPRISES INC & SUBSIDIARIES PO BOX 970 NAVASOTA TX 77868 742847683 RETRO FITTING METERS TX N/A C 2830401 20329499 1.00000 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 1 1 MSEC ENTERPRISES INC & SUBSIDIARIES - INTEREST A 267061 GENERAL LEDGER MSEC ENTERPRISES INC & SUBSIDIARIES - NET AR LOAN ADVANCE S 2224370 GENERAL LEDGER MSEC ENTERPRISES INC & SUBSIDIARIES - NET AP LOAN PAYABLE R 27953 GENERAL LEDGER MSEC ENTERPRISES INC & SUBSIDIARIES O 439291 GENERAL LEDGER MSEC ENTERPRISES INC & SUBSIDIARIES Q 354385 GENERAL LEDGER MID-SOUTH CHARITABLE FOUNDATION INC - NA LESS THAN 50000 O