2013-11-14T09:41:42-06:00 2012-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2012-01-01 710027635 CARROLL ELECTRIC COOPERATIVE CORPORATION CARR 8704232161 PO BOX 4000 BERRYVILLE AR 72616 ROB BOAZ 8704232161 2013-11-13 1 WILLIAM M MILLER P00439459 8067473806 2013-11-13 X 2012 2016-02-25 16:41:14Z ROB BOAZ PO BOX 4000 BERRYVILLE AR 72616 154727820 0 X WWW.CARROLLECC.COM X 1937 AR TO SERVE OUR MEMBERS WITH SAFE, RELIABLE, AND CONVENIENT ELECTRICITY AT THE LOWEST POSSIBLE COST. 8 6 348 0 0 0 0 0 153304721 152100914 1759422 1504112 879802 791215 155943945 154396241 23405 24535 9163191 7870265 17424060 17576136 0 0 0 129333289 128925305 155943945 154396241 0 0 447448869 472214252 266318669 283221061 181130200 188993191 WE EXIST TO SERVE OUR MEMBERS WITH SAFE, RELIABLE, AND CONVENIENT ELECTRICITY AT THE LOWEST POSSIBLE COST. 0 0 SALES OF ELECTRIC POWER TO MEMBERS - 89,170 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 0 0 1 0 1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 83 0 348 1 0 0 0 0 0 145534484 3912958 0 X 8 6 1 0 0 0 1 1 1 1 1 0 0 1 1 1 1 1 1 1 1 0 X CHAD ALLEN 8704232161 920 HWY 62 SPUR BERRYVILLE AR 72616 ALAN HUNNICUTT 8.00 X X 23392 0 0 CARLA HATHORN 6.00 X X 25092 0 0 WINFRED PRIER 2.00 X X 23495 0 0 J NEFF BASORE 6.00 X 21312 0 0 KRISTY K ESTREM 4.00 X 30522 0 0 DAVID GLASS 5.00 X 29372 0 0 CHARLES R SHINN 3.00 X 24334 0 0 JOSEPH R SPIVEY 5.00 X 28902 0 0 CHARLES V BURDINE 12.00 X 5819 0 0 ROB BOAZ 55.00 X 310393 0 150534 CHAD ALLEN 45.00 X 131515 0 68171 KEAN STEELY 45.00 X 179461 0 54913 JAMES SANDERS 45.00 X 176940 0 66026 MICHAEL DODGE 45.00 X 170498 0 77680 DAVID BROCK 45.00 X 133471 0 52491 RAYMOND WHITE 45.00 X 121884 0 62680 LENORA SUE SULLIVAN 1.00 X 14846 0 0 1451248 0 532495 12 1 1 0 BARROWS EXCAVATION INC 49 CR 404 BERRYVILLE AR 72616 EXCAVATION 4630486 NABHOLZ CONSTRUCTION CORPORATION PO BOX 277 ROGERS AR 72757 CONSTRUCTION 3997564 SOUTHERN ELECTRIC CORPORATION 4374 MANGUM FLOWOOD MS 39232 CONSTRUCTION 3525821 FINLEY ENGINEERING COMPANY INC PO BOX 410412 KANSAS CITY MO 64141 ENGINEERING 1435182 POOR BOY TREE SERVICE INC 273 EAST 410TH ROAD FAIR PLAY MO 65649 DISTRIBUTION - LINE CLEARING 869341 18 X ELECTRIC ENERGY 221000 143316727 143316727 PATRONAGE DIVIDENDS 221000 7585388 7585388 SERVICE FEES 221000 994717 994717 SURGE SUPPRESSOR REVENUE 221000 204082 204082 152100914 1500339 1500339 5040 718281 0 0 5040 718281 723321 723321 14000 10227 3773 3773 3773 330028 321352 8676 8676 MISCELLANEOUS REVENUE 221000 59218 59218 59218 154396241 152168808 0 2227433 X 9285 15250 7870265 872853 10741007 2763946 2320129 878201 9728431 14008945 PURCHASED POWER 90200303 DISTRIBUTION EXPENSE 10426420 ADMIN AND GENERAL 3625606 CONSUMER ACCOUNTS 499810 435790 154396241 928328 781161 18400000 9442241 14200310 28157152 4477901 4153364 22208 41861 468459457 116820978 341787058 351638479 62469401 68549815 5163663 9450179 447448869 472214252 11647711 2552149 218002781 249905084 36668177 30763828 266318669 283221061 X 1658830 1690105 0 0 179471370 187303086 181130200 188993191 447448869 472214252 X 0 7862991 X X 0 0 1 1 0 0 5438625 5438625 20189815 2659840 17529975 412003085 114161138 297841947 30827932 30827932 351638479 CAPITAL TERM CERTIFICATES 1868706 C PATRONAGE CAPITAL - AECC 62062248 C PATRONAGE CAPITAL - AECI 2763436 C PATRONAGE CAPITAL - CFC 885188 C PATRONAGE CAPITAL - COBANK 154622 C PATRONAGE CAPITAL - ARESIT 313130 C MEMBERSHIPS 2720 C ENERGY RESOURCE CONSERVATION LOANS 231 C FEDERATED RURAL ELECTRIC INSURANCE 499534 C 68549815 CUSTOMER DEPOSITS 4145085 PROVISION FOR PENSIONS AND BENEFITS 3199493 ACCRUED TAXES 4354085 ACCRUED INTEREST 310771 PATRONAGE CAPITAL PAYABLE 10255224 ACCRUED COMPENSATION 2474932 DEFERRED CREDITS 5466895 OTHER ACCRUED LIABILITIES 557343 30763828 X Description of Uncertain Tax Positions Under FIN 48: 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 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. Form 990, Schedule D, Page 3, 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 SCHOLARSHIPS FOR POST SECONDARY EDUCATION 16 15250 EACH HIGH SCHOOL IN THE COOPERATIVE'S SERVICE TERRITORY SELECTS ONE SCHOLARSHIP RECIPIENT. THE RECIPIENT IS CHOSEN BY THE COUNSELOR OF EACH RESPECTIVE HIGH SCHOOL. UPON ENROLLMENT BY THE SCHOLARSHIP RECIPIENT, THE COOPERATIVE THEN PAYS THE COLLEGE OR UNIVERSITY DIRECTLY. ALL GRANTS 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 0 1 X X X 0 0 0 ROB BOAZ 307872 0 162 0 2359 0 132870 0 17664 0 460927 0 0 0 CHAD ALLEN 129319 0 1470 0 726 0 54101 0 14070 0 199686 0 0 0 KEAN STEELY 170109 0 7776 0 1576 0 40470 0 14443 0 234374 0 0 0 JAMES SANDERS 166450 0 7434 0 3056 0 47923 0 18103 0 242966 0 0 0 MICHAEL DODGE 167386 0 1857 0 1255 0 60777 0 16903 0 248178 0 0 0 DAVID BROCK 131269 0 1439 0 763 0 37732 0 14759 0 185962 0 0 0 RAYMOND WHITE 118009 0 1523 0 2352 0 47995 0 14685 0 184564 0 0 0 LENORA SUE SULLIVAN 14846 0 0 0 0 0 0 0 0 0 14846 0 0 0 Supplemental Information Part III Part I, Line 1A THE CEO RECEIVES THE TRAVEL FOR COMPANION BENEFIT AS APPROVED BY THE BOARD ON AN AS NEEDED BASIS. 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. ARKANSAS ELECTRIC COOPERATIVE INC THE PRESIDENT/CEO AND A DIRECTOR OF THE COOPERATIVE SERVE ON AECI'S BOARD. 3406214 THE COOPERATIVE PURCHASES ELECTRIC UTITILITY SUPPLIES FROM AECI ON A PATRONAGE BASIS. 0 ARKANSAS ELECTRIC COOPERATIVE CORPORATION THE PRESIDENT/CEO AND A DIRECTOR OF THE COOPERATIVE SERVE ON AECC'S BOARD. 90200303 THE COOPERATIVE PURCHASES WHOLESALE ELECTRICITY FROM AECC ON A PATRONAGE BASIS 0 Form 990, Part VI, Section A, line 2 BUSINESS RELATIONSHIP JOSEPH SPIVEY (DIRECTOR) AND DAVID GLASS (DIRECTOR) SHARE A BUSINESS RELATIONSHIP. ALAN HUNNICUTT (DIRECTOR) AND KRISTY ESTREM (DIRECTOR) SHARE A BUSINESS RELATIONSHIP. ROB BOAZ (PRESIDENT/CEO) AND ALAN HUNNICUTT (DIRECTOR) BOTH SERVED ON THE BOARD OF ARKANSAS ELECTRIC COOPERATIVE, INC. AT THE REQUEST OF AND FOR THE BENEFIT OF THE COOPERATIVE. ROB BOAZ (PRESIDENT/CEO) AND CARLA HATHORN (DIRECTOR) BOTH SERVED ON THE BOARD OF ARKANSAS ELECTRIC COOPERATIVE CORPORATION AT THE REQUEST OF AND FOR THE BENEFIT OF THE COOPERATIVE. 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 VIA UNITED STATES MAIL ON A ONE MEMBER ONE VOTE BASIS. MEMBERS COMPLETE AND RETURN WRITTEN BALLOTS IN A SEALED ENVELOPE ADDRESSED TO THE SECRETARY OF THE COOPERATIVE. 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; 3. THE MERGER OR CONSOLIDATION OF THE COOPERATIVE WITH ANOTHER ORGANIZATION; AND 4. AMENDMENTS TO THE ARTICLES OF INCORPORATION. Form 990, Part VI, Section B, line 11 MANAGEMENT PROVIDED A COPY OF THE FORM 990 TO THE BOARD PRIOR TO FILING. THE BOARD DISCUSSES AND REVIEWS THE COMPLETED TAX RETURN AT THE BOARD MEETING SUBSEQUENT TO FILING OF THE FORM 990. Form 990, Part VI, Section B, line 12c ALL DIRECTORS AND KEY EMPLOYEES MUST ANNUALLY REVIEW THE CONFLICT OF INTEREST POLICY AND SIGN A CONFLICT OF INTEREST CERTIFICATION AND DISCLOSURE FORM AND DELIVER THE COMPLETED, SIGNED FORM TO THE CHAIRMAN OR THE PRESIDENT/CEO. Form 990, Part VI, Section B, line 15 THE BOARD OF DIRECTORS USE A COMPENSATION SURVEY AND COMPARE COMPENSATION REPORTED ON OTHER COOPERATIVE'S IRS FORM 990S WHEN DETERMINING THE COMPENSATION OF THE PRESIDENT/CEO. THE SURVEY SHOWS COMPARATIVE SALARIES FOR PRESIDENTS/CEOS FROM SIMILARLY SITUATED COOPERATIVES LOCATED IN ARKANSAS AND THE NATION. THE BOARD AND THE PRESIDENT/CEO 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 SIMILARLY SITUATED COOPERATIVES THROUGHOUT ARKANSAS AND THE NATION. Form 990, Part VI, Section C, line 19 THE ARTICLES OF INCORPORATION AND THE BYLAWS OF THE COOPERATIVE ARE PROVIDED IN WRITTEN OR ELECTRONIC FORM UPON REQUEST. THE ANNUAL FINANCIAL REPORT IS DISTRIBUTED TO ALL MEMBERS IMMEDIATELY PRIOR TO THE ANNUAL MEETING OF THE MEMBERS. ANY MEMBER, UPON REQUEST, IS PROVIDED A COMPLETE COPY OF THE COOPERATIVE'S AUDIT REPORT. INDEPENDENT DIRECTORS Form 990, Part VI, Line 1b THE COOPERATIVE IS A MEMBER OF AND PURCHASES ELECTRIC UTILITY SUPPLIES AND INVENTORY FROM THE ARKANSAS ELECTRIC COOPERATIVE, INC. (AECI). AS A MEMBER, THE COOPERATIVE APPOINTED DIRECTOR ALAN HUNNICUTT TO REPRESENT ITS INTERESTS ON THE BOARD OF AECI DURING 2012. BECAUSE DIRECTOR HUNNICUTT SERVED ON THE BOARD OF AECI, HE IS CONSIDERED TO BE "NOT INDEPENDENT" PER IRS FORM 990 INSTRUCTIONS. HOWEVER, DIRECTOR HUNNICUTT HAD NO OWNERSHIP INTEREST IN AECI AND RECEIVED NO DIRECT OR INDIRECT BENEFIT FOR THE COOPERATIVE DOING BUSINESS WITH AECI. THE COOPERATIVE ALSO IS A MEMBER OF AND PURCHASES ELECTRIC ENERGY FROM THE ARKANSAS ELECTRIC COOPERATIVE CORPORATION (AECC). AS A MEMBER, THE COOPERATIVE APPOINTED DIRECTOR CARLA HATHORN TO REPRESENT ITS INTERESTS ON THE BOARD OF AECC DURING 2012. BECAUSE DIRECTOR HATHORN SERVED ON THE BOARD OF AECC, SHE IS CONSIDERED TO BE "NOT INDEPENDENT" PER IRS FORM 990 INSTRUCTIONS. HOWEVER, DIRECTOR HATHORN HAD NO OWNERSHIP INTEREST IN AECC AND RECEIVED NO DIRECT OR INDIRECT BENEFIT FOR THE COOPERATIVE DOING BUSINESS WITH AECC. PATRONAGE DIVIDENDS 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 DIVIDENDS AND 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 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. 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 $ 11,613,860 LESS DIRECTORS FEES REPORTED ON 1099-MISC (212,240) LESS OFFICER BENEFITS REPORTED ON LINE 5 (218,705) PLUS SALARIES AND WAGES ALLOCATED TO ASSET ACCOUNTS 4,967,844 RECONCILIATION TO W-3 $ 16,150,759 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 AND SUPPLIES $ 772,998 OUTSIDE SERVICES 430,066 REGULATORY COMMISSION EXPENSE 284,718 DUPLICATE CHARGES (85,904) DIRECTORS EXPENSES 46,016 OFFICE BUILDING MAINTENANCE 760,700 MISCELLANEOUS GENERAL AND ADMINISTRATIVE 1,417,012 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $3,625,606 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. 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 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 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 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 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 ENERGY TO THE PATRONS AND ARE DONE PURSUANT TO THE OBLIGATION 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 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 THE AMOUNT OF ITS 2012 MARGIN THAT HAS BEEN 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 24E THE FOLLOWING IS A BREAKDOWN OF THE EXPENSES REPORTED AS OTHER EXPENSES ON FORM 990, PART IX, LINE 24E TRANSMISSION EXPENSE 425,918 MISCELLANEOUS GENERAL EXPENSE 9,872 TOTAL OTHER EXPENSES PER FORM 990, LINE 24E $ 435,790 Changes in Net Assets or Fund Balances: Form 990, Part XI, line 9: NET CHANGE IN MEMBERSHIPS 31,275. PATRONAGE CAPITAL ASSIGNED 7,870,265. UNCLAIMED PATRONAGE CAPITAL CREDITS RETAINED PER STATE LAW -348,352. OTHER COMPREHENSIVE INCOME 309,803. INDEPENDENT AUDIT Form 990, Part XII, Line 2B AUDITED FINANCIAL STATEMENTS WERE PREPARED BY AN INDEPENDENT ACCOUNTANT FOR THE COOPERATIVE'S FISCAL YEAR END OF FEBRUARY 28TH. 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.