2026-09-08T08:30:33-05:00 2025-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2025-01-01 740720615 KARNES ELECTRIC COOPERATIVE INC KARN 8307809292 PO BOX 7 KARNES CITY TX 78118 ERIC HALFMANN GENERAL MANAGER 8307809292 2026-09-01 1 PATRICK COOPER P00856177 8067473806 2026-09-01 X 2025 ERIC HALFMANN PO BOX 7 KARNES CITY TX 78118 142923586 0 X WWW.KARNESEC.ORG X 1938 TX TO PROVIDE QUALITY AND RELIABLE ELECTRIC SERVICE TO MEMBERS OF THE COOPERATIVE. 7 7 102 0 0 0 0 0 128894517 142231878 442963 353562 114638 338146 129452118 142923586 59574 47961 8117263 7419638 8774304 8582999 0 0 0 111499977 125319988 128451118 141370586 1001000 1553000 232888664 243646650 46033025 48986860 186855639 194659790 PROVIDING QUALITY SERVICE TO EMPOWER COMMUNITIES AND IMPROVE LIVES. 0 0 PROVIDING ELECTRIC POWER TO OUR MEMBERS AT COST ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. THERE WERE 23,687 ACTIVE SERVICES AT YEAR END. 0 0 0 0 0 0 0 1 0 1 0 1 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 28 0 102 1 0 0 0 0 0 139942166 961085 0 0 0 X 7 7 0 0 1 0 1 1 1 1 0 0 0 1 1 1 1 1 1 1 0 0 X ERIC HALFMANN GENERAL MANAGER 8307803952 1800 N US HWY 181 KARNES CITY TX 78118 X CLIF ROYAL SECRETARY/TREASURER 2.82 X X 35841 0 0 ROSS NIESCHWITZ VICE PRESIDENT 1.06 X 34891 0 0 PAUL BRYSCH JR PRESIDENT 6.43 X X 34287 0 0 BOYD VAUGHAN DIRECTOR 4.98 X 27891 0 0 FRANK GEYER JR ASST SECRETARY/TREASURER 6.48 X X 27857 0 0 LARRY SCHENDEL DIRECTOR 3.87 X X 19427 0 0 SCOTT MCCLAUGHERTY DIRECTOR 2.00 X 16654 0 0 ERIC HALFMANN GENERAL MANAGER 60.00 X 234972 0 52821 RANDY ORTIZ MAINTENANCE FOREMAN 55.41 X 187582 0 42909 RUSSELL KORZEKWA ENGINEERING MANAGER 40.15 X 170216 0 50813 PAUL RODRIGUEZ SERVICEMAN 52.82 X 176399 0 42119 JASON VYVLECKA FLEET FOREMAN 49.06 X 171212 0 44109 JESSE BENAVIDES OPERATIONS MANAGER 40.15 X 166242 0 44849 1303471 0 277620 38 0 1 0 SENDERO POWER LINE CONSTRUCTION INC PO BOX 2209 VICTORIA TX 77902 UTILITY CONSTRUCTION 4967672 JAMES POWER LINE CONSTRUCTION INC 43 SHOOTING CLUB ROAD BOERNE TX 78006 UTILITY CONSTRUCTION 3558005 IVM SOLUTIONS 2038 LEE ROAD 137 AUBORN AL 36832 ROW CLEARING 984395 SCHNEIDER ENGINEERING 191 MENGER SPRINGS PARKWAY BOERNE TX 78006 ENGINEERING 886766 OSMOSE UTILITIES PO BOX 736729 DALLAS TX 75373 POLE INSPECTIONS 297939 8 X SALES OF ELECTRICITY 221000 133653932 133653932 PATRONAGE DIVIDENDS 221000 8067511 8067511 SERVICE FEES 221000 510435 510435 142231878 310116 310116 283297 283297 43446 0 43446 43446 43446 POLE ATTACHMENT INCOME 221000 54849 54849 54849 142923586 142275324 0 648262 X 47961 7419638 484641 5485737 779501 1390889 442231 1025138 11373718 PURCHASED POWER 105642790 ADMIN & GENERAL EXPENSE 2974529 DISTRIBUTION EXPENSE 2760580 CONSUMER EXPENSE 1203398 339835 141370586 9521085 3399886 3000000 3000000 7014746 8354038 8808428 8148480 215395 309253 192517253 60197536 125568082 132319717 293957 293483 68696102 76513590 9770869 11308203 232888664 243646650 9076930 10633266 244993 482008 19235702 25521279 17475400 12350307 46033025 48986860 X 73170 73240 0 0 186782469 194586550 186855639 194659790 232888664 243646650 X 1553000 6251151 X X 0 1 X 0 0 0 1 X 1525307 1525307 33807936 4630628 29177308 148277002 55566908 92710094 8907008 8907008 132319717 PATRONAGE CAPITAL - STEC 73081688 C PATRONAGE CAPITAL - TEC 1824119 C PATRONAGE CAPITAL - CFC 122346 C PATRONAGE CAPITAL - COBANK 249999 C PATRONAGE CAPITAL - NRTC 162970 C PATRONAGE CAPITAL - CRC 10463 C OTHER INVESTMENTS IN ASSOCIATED ORGANIZATIONS 49634 C CAPITAL TERM CERTIFICATES - CFC 948327 C PATRONAGE CAPITAL - NISC 64044 C 76513590 ACCRUED OPERATING TAXES 778810 CONSUMER DEPOSITS 3898696 DEFERRED CREDITS - ADVANCES FOR CONSTRUCTION 5975049 DEFERRED CREDITS - UNCLAIMED PATRONAGE CAPITAL 1670433 DEFERRED CREDITS - OTHER 27319 12350307 X 142792367 0 142792367 131219 131219 142923586 133819729 0 133819729 7550857 7550857 141370586 PART IV, LINE 2B: PURSUANT TO SECTION 74.3013 OF THE TEXAS PROPERTY CODE, THE COOPERATIVE HAS ESTABLISHED A RURAL SCHOLARSHIP FUND WITH AMOUNTS DESIGNATED UNCLAIMED UNDER TEXAS STATE LAW. 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 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 (IRS), AND THAT ALL TAX BENEFITS ARE LIKELY TO BE REALIZED UPON SETTLEMENT WITH TAXING AUTHORITIES. PART XI, LINE 4B - OTHER ADJUSTMENTS: OTHER DEDUCTIONS RECLASSIFIED TO EXPENSES 131,219. PART XII, LINE 4B - OTHER ADJUSTMENTS: PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 7,419,638. OTHER DEDUCTIONS RECLASSIFIED FROM NON-OPERATING MARGINS 131,219. PART VII: THE AMOUNT OF INVESTMENTS - OTHER SECURITIES ON FORM 990, PAGE 11, PART X, LINE 12 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 VII HAS BEEN LEFT BLANK. 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. PART XII, LINE 4B: FOR THE AUDITED FINANCIAL STATEMENTS, THE AMOUNT OF PATRONAGE DIVIDENDS PAID OR ALLOCATED TO THE MEMBERS IS REPORTED AS AN INCREASE IN EQUITY AND NOT AS AN EXPENSE. THEREFORE, NET INCOME PER THE AUDITED FINANCIAL STATEMENTS IS REPORTED GROSS OF THE AMOUNT OF PATRONAGE DIVIDENDS THAT ARE EITHER ALLOCATED OR TO BE ALLOCATED AT THE TIME THE AUDITED FINANCIAL STATEMENTS ARE PREPARED. HOWEVER, BECAUSE THE ALLOCATION OF PATRONAGE DIVIDENDS IS ONE ASPECT OF HOW THE COOPERATIVE FULFILLS ITS TAX EXEMPT PURPOSE OF OPERATING ON A COOPERATIVE BASIS, THE AMOUNT OF PATRONAGE DIVIDENDS EITHER ALLOCATED OR TO BE ALLOCATED TO THE MEMBERS IS REPORTED ON FORM 990, PART IX, LINE 4 AS "BENEFITS PAID TO MEMBERS". X 1 1 X X 0 0 0 ERIC HALFMANN GENERAL MANAGER 199166 0 19667 0 16139 0 19796 0 33025 0 287793 0 0 0 RANDY ORTIZ MAINTENANCE FOREMAN 104361 0 69598 0 13623 0 11242 0 31667 0 230491 0 0 0 RUSSELL KORZEKWA ENGINEERING MANAGER 148542 0 0 0 21674 0 18441 0 32372 0 221029 0 0 0 PAUL RODRIGUEZ SERVICEMAN 102584 0 58961 0 14854 0 9304 0 32815 0 218518 0 0 0 JASON VYVLECKA FLEET FOREMAN 107547 0 40593 0 23072 0 11100 0 33009 0 215321 0 0 0 JESSE BENAVIDES OPERATIONS MANAGER 146200 0 0 0 20042 0 11417 0 33432 0 211091 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 ENVIORNMENT. 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. ERIC HALFMANN: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 13,821 EMPLOYER CONTRIBUTION TO 401(K) PLAN 5,975 TOTAL REPORTED IN COLUMN C $ 19,796 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (13,821) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 27,450 EXPENSE TO THE COOPERATIVE $ 33,425 RANDY ORTIZ: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 8,056 EMPLOYER CONTRIBUTION TO 401(K) PLAN 3,186 TOTAL REPORTED IN COLUMN C $ 11,242 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (3,186) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 15,321 EXPENSE TO THE COOPERATIVE $ 18,507 RUSSELL KORZEKWA: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 13,985 EMPLOYER CONTRIBUTION TO 401(K) PLAN 4,456 TOTAL REPORTED IN COLUMN C $ 18,441 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (13,985) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 21,617 EXPENSE TO THE COOPERATIVE $ 26,073 PAUL RODRIGUEZ: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 6,147 EMPLOYER CONTRIBUTION TO 401(K) PLAN 3,157 TOTAL REPORTED IN COLUMN C $ 9,304 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (6,147) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 15,321 EXPENSE TO THE COOPERATIVE $ 18,507 JASON VYVLECKA: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 7,765 EMPLOYER CONTRIBUTION TO 401(K) PLAN 3,335 TOTAL REPORTED IN COLUMN C $ 11,100 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (7,765) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 16,177 EXPENSE TO THE COOPERATIVE $ 19,512 JESSE BENAVIDES: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 7,031 EMPLOYER CONTRIBUTION TO 401(K) PLAN 4,386 TOTAL REPORTED IN COLUMN C $ 11,417 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (7,031) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 21,374 EXPENSE TO THE COOPERATIVE $ 25,760 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 GAIN OF $1,553,000, WHICH IS THE INCOME STATEMENT EFFECT OF ACCRUED UNBILLED REVENUE. THE GAAP BASIS FINANCIAL STATEMENTS INCLUDE AN ACCRUAL FOR UNBILLED REVENUE 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, PAGE 1, PART I, LINE 19 ANNUALLY REPORTS NET INCOME EQUAL TO THE NET INCREASE IN ACCRUED UNBILLED REVENUE OR A NET LOSS EQUAL TO THE NET DECREASE IN UNBILLED REVENUE. THE FOLLOWING SCHEDULE IS PROVIDED TO FURTHER EXPLAIN THE IMPACT OF THIS TRANSACTION: ADD: UNBILLED REVENUE 12/31/25 $11,237,000 LESS: UNBILLED REVENUE 12/31/24 (9,684,000) (A) NET INCREASE EQUALS NET INCOME ON PAGE I, LINE 19 $ 1,553,000 (B) - BENEFITS PAID TO MEMBERS (I.E. PATRONAGE DIVIDENDS), PART I, LINE 14 $ 7,419,638 TOTAL 2025 NET MARGIN (A + B) $ 8,972,638 FORM 990, PART VI, SECTION A, LINE 4 DURING THE YEAR, THE COOPERATIVE'S BYLAWS WERE AMENDED. THE FOLLOWING IS A SUMMARY OF THE CHANGES: ARTICLE III. MEETING OF MEMBERS SECTION 3. QUORUM: ADDED SENTENCE OR (B) BY OTHER METHODS APPROVED BY THE BOARD OF DIRECTORS AS PROVIDED IN THIS SECTION 3" TO ADD WAYS BY WHICH MEETINGS MAY HAVE QUORUM OTHER THAN BY MEETING IN PERSON. ALSO STRUCK FORCE MAJEURE EVENT FOR REASON OF NOT HAVING A MEETING IN PERSON. STRUCK WORDING DETERMINED AND ADDITIONAL TO CHANGE TO APPROVED IN PARAGRAPH (I). SECTION 4. VOTING: ADDED "ANY MEMBER CASTING A VOTE THROUGH SUCH MANNERS OF VOTING APPROVED BY THE BOARD IN ACCORDANCE WITH SECTION 3 SHALL BE DEEMED TO HAVE CAST THE EQUIVALENT OF A MAIL BALLOT PURSUANT TO THE ELECTRIC COOPERATIVE CORPORATION ACT (THE "ACT"). STRUCK "IN PERSON" IN FOLLOWING SENTENCE. 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 AT THE ANNUAL MEETING. 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 PROVIDED A COPY OF THE FORM 990 TO THE BOARD OF DIRECTORS FOR DISCUSSION AND REVIEW PRIOR TO FILING. FORM 990, PART VI, SECTION B, LINE 12C EACH MEMBER OF THE BOARD MUST COMPLETE AND FILE WITH THE BOARD PRESIDENT A DISCLOSURE REPORT DETAILING ANY POSSIBLE CONFLICTS OF INTEREST. THE DISCLOSURE REPORT MUST BE COMPLETED WITHIN 30 DAYS OF BECOMING A BOARD MEMBER AND THEN ANNUALLY THEREAFTER. THE DISCLOSURE REPORT MUST BE KEPT CURRENT BY FILING A SUPPLEMENTAL REPORT SHOWING ANY CHANGE OF PERSONAL OR BUSINESS RELATIONSHIP WITHIN 30 DAYS AFTER SUCH RELATIONSHIP CHANGES. FORM 990, PART VI, SECTION B, LINE 15A THE BOARD USES THE EXPERTISE OF A COMPENSATION SURVEY WHEN DETERMINING THE COMPENSATION OF THE COOPERATIVE'S OFFICER. THE SURVEY INCLUDES SALARIES FROM SIMILARLY SITUATED COOPERATIVES THROUGHOUT TEXAS AND THE NATION. OTHER THAN THE GENERAL MANAGER, THE COOPERATIVE DID NOT HAVE ANY EMPLOYEES MEETING THE DEFINITION OF OFFICER OR KEY EMPLOYEE. THEREFORE, AND PURSUANT TO FORM 990 INSTRUCTIONS, LINE 15B HAS BEEN ANSWERED "NO". FORM 990, PART VI, SECTION C, LINE 19 THE COOPERATIVE WILL 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 IN THE TEXAS COOPERATIVE MAGAZINE THAT IS MAILED TO EACH MEMBER, ALONG WITH THE NOTICE OF THE ANNUAL MEETING. FINALLY, THE COOPERATIVE REVIEWS THE FINANCIAL STATEMENTS FOR THE MEMBERS OF THE COOPERATIVE AT THE ANNUAL MEETING DURING THE TREASURER'S REPORT. 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 MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS. THE COOPERATIVE ALSO PROVIDES HEALTH AND LIFE INSURANCE TO ALL ELIGIBLE EMPLOYEES THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE OFFICER AND HIGHLY COMPENSATED EMPLOYEES IS COMPRISED OF 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. FORM 990, PART VII, SECTION A: THE BOARD OF DIRECTORS CONSIDER THE GENERAL MANAGER TO BE BOTH THE TOP MANAGEMENT OFFICIAL AND THE TOP FINANCIAL OFFICIAL. THEREFORE, ONLY THE GENERAL MANAGER 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 ORGANIZATION TO ITS MEMBERS. FORM 990, PART IX: THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE RUS UNIFORM SYSTEM OF ACCOUNTS (USOA) 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 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 $ 5,970,378 LESS: DIRECTOR FEES REPORTED ON FORMS 1099-NEC (196,848) LESS: EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (52,821) PLUS: SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 2,976,230 PLUS: SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING AND OTHER ACCOUNTS 267,321 TOTAL WAGES ACCRUED AND/OR PAID $ 8,964,260 FORM 990, PART IX, LINE 24: ADMINISTRATIVE & GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL SALARIES, BENEFITS, & OTHER $ 1,684,776 OFFICE SUPPLIES 421,114 OUTSIDE SERVICES 585,174 WORKMEN'S COMPENSATION AND OTHER INSURANCES 489,523 EMPLOYEE BENEFITS 65,638 REGULATORY 15,000 DIRECTORS 240,129 INSTITUTIONAL AND GOODWILL ADVERTISING 67,113 DUES TO ASSOCIATED ORGANIZATIONS 98,169 ANNUAL MEETING 81,888 MANAGER 15,505 MISCELLANEOUS GENERAL 719,008 MAINTENANCE OF GENERAL PLANT 890,159 EMPLOYEE TRAINING 257,234 TOTAL ADMIN & GENERAL EXP PER FINANCIAL STATEMENTS $ 5,630,430 LESS: RECLASS OF DONATIONS TO PART IX, LINE 1 (47,961) LESS: RECLASS OF SCHOLARSHIPS TO PART IX, LINE 2 (-0-) LESS: RECLASS OF DIRECTOR FEES TO PART IX, LINE 5 (196,848) LESS: RECLASS OF LABOR TO PART IX, LINES 5 & 7 (1,644,753) LESS: RECLASS OF BENEFITS TO PART IX, LINES 8-10 (766,339) TOTAL ADMIN & GENERAL EXPENSE PER FORM 990, PART IX $ 2,974,529 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 CURRENT 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 IS COMPRISED OF THE FOLLOWING: ABANDONED WORK ORDER EXPENSE $ 131,219 TAXES 208,616 TOTAL OTHER EXPENSES PER FORM 990, LINE 24E $ 339,835 FORM 990, PART XI, LINE 9: PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 7,419,638. PATRONAGE CAPITAL RETIRED - TOTAL -1,169,302. PATRONAGE CAPITAL RETIRED - DISCOUNT 745. NET CHANGE IN MEMBERSHIPS 70.