| Return Reference | Explanation |
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| 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 INCOME OF $124,702, WHICH IS THE INCOME STATEMENT EFFECT OF ACCRUED UNBILLED REVENUE AND THE PORTION OF NON-OPERATING MARGINS RETAINED. THE GAAP BASIS FINANCIAL STATEMENTS INCLUDE AN ACCRUAL FOR UNBILLED REVENUE AND POWER COST BECAUSE THE COOPERATIVE'S BILLING CYCLE DOES NOT END ON THE LAST DAY OF THE MONTH. THE COOPERATIVE ESTIMATES THIS ADDITIONAL REVENUE AND POWER COST WITH THE YEAR EARNED. HOWEVER, THE COOPERATIVE ALLOCATES PATRONAGE CAPITAL TO MEMBERS IN THE YEAR THESE TWO ITEMS ARE 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 AND POWER COST, PAGE 1, PART I, LINE 19 ANNUALLY REPORTS NET INCOME EQUAL TO THE NET INCREASE IN ACCRUED UNBILLED REVENUE & UNBILLED POWER COST OR A NET LOSS EQUAL TO THE NET DECREASE IN UNBILLED REVENUE AND POWER COST. THE FOLLOWING SCHEDULE IS PROVIDED TO FURTHER EXPLAIN THE IMPACT OF THIS TRANSACTION: ADD: UNBILLED REVENUE 12/31/24 $ 2,828,221 LESS: UNBILLED REVENUE 12/31/23 (2,646,867) ADD: NON-OPERATING MARGINS RETAINED (56,652) (A) - NET INCOME ON PAGE 1, PART I, LINE 19 $ 124,702 (B) - BENEFITS PAID TO MEMBERS (I.E. PATRONAGE DIVIDENDS), PART I, LINE 14 $ 2,693,317 TOTAL 2024 NET MARGIN PER FINANCIAL STATEMENTS (A + B) $ 2,818,019 |
| 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. 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 PRESENTED A COPY OF THE FORM 990 TO THE BOARD FOR DISCUSSION AND REVIEW PRIOR TO FILING. |
| FORM 990, PART VI, SECTION B, LINE 12C | ALL OFFICERS, DIRECTORS, AND EMPLOYEES ARE REQUIRED TO REVIEW AND BE FAMILIAR WITH THE POLICIES OUTLINED IN THE COOPERATIVE'S EMPLOYEE-ETHICS POLICY AND ARE REQUIRED TO DISCLOSE ANY ACTION OR SITUATION THAT MIGHT VIOLATE THE POLICY TO THE GENERAL MANAGER AS SOON AS POSSIBLE. THE GENERAL MANAGER REGULARLY MONITORS AND ENFORCES THIS POLICY. |
| FORM 990, PART VI, SECTION B, LINE 15 | ANNUALLY, THE BOARD OF DIRECTORS EVALUATE AND SET THE COMPENSATION OF THE GENERAL MANAGER. THE BOARD USES RESULTS OF A COMPENSATION STUDY AND THE FORM 990 OF SIMILARLY SITUATED ELECTRIC COOPERATIVES AS A GUIDE IN THE DECISION MAKING PROCESS. THE BOARD OF DIRECTORS AND GENERAL MANAGER USE A COMPENSATION SURVEY WHEN DETERMINING THE COMPENSATION OF THE ORGANIZATION'S EMPLOYEES MEETING THE DEFINITION OF OFFICER AND KEY EMPLOYEE, 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 EACH NEW MEMBER WITH A COPY OF ITS BYLAWS, WHICH ARE ALSO LOCATED ON ITS WEBSITE AT WWW.PENTEX.COM. UPON REVISION, BYLAWS ARE MAILED TO ALL MEMBERS. THE COOPERATIVE WILL ALSO PROVIDE A COMPLETE COPY OF ITS CONFLICT OF INTEREST POLICY AND AUDITED FINANCIAL STATEMENTS TO ANY MEMBER WHO REQUESTS A COPY OF ANY SUCH DOCUMENT. ADDITIONALLY, THE COOPERATIVE ANNUALLY PUBLISHES ITS AUDITED BALANCE SHEET AND INCOME STATEMENT IN THE CO-OP POWER MAGAZINE PRIOR TO EACH ANNUAL MEETING. |
| 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, INCLUDING OFFICERS AND HIGHLY COMPENSATED EMPLOYEES, MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS. THE COOPERATIVE ALSO PROVIDES HEALTH, DENTAL, LONG TERM DISABILITY AND LIFE INSURANCE TO ALL ELIGIBLE EMPLOYEES THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE OFFICERS AND THE HIGHLY COMPENSATED EMPLOYEE IS COMPRISED OF ACTUARIAL INCREASE IN THE DEFINED BENEFIT PLAN, THE TOTAL AMOUNT CONTRIBUTED BY THE COOPERATIVE TO THE DEFINED CONTRIBUTION PLAN, AND THE INSURANCE PAID ON BEHALF OF AND FOR THEIR BENEFIT. 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 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: | ALTHOUGH THE COOPERATIVE IS NOT A RURAL UTILITIES SERVICE (RUS) BORROWER, ITS ACCOUNTING RECORDS ARE MAINTAINED IN ACCORDANCE WITH THE RUS UNIFORM SYSTEM OF ACCOUNTS (USOA) PRESCRIBED FOR RUS ELECTRIC BORROWERS. 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, 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 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 FOR THE 2024 CALENDAR YEAR. 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 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, 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 $ 4,381,428 LESS: DIRECTOR FEES REPORTED ON FORMS 1099-NEC (153,922) LESS: EMPLOYEE OFFICER BENEFITS REPORTED ON LINE 5 (273,951) PLUS: SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 1,648,164 PLUS: SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING & OTHER ACCOUNTS 275,586 TOTAL WAGES ACCRUED AND/OR PAID $ 5,877,305 |
| FORM 990, PART IX, LINE 24: | ADMINISTRATIVE & GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL SALARIES, BENEFITS & OTHER $ 1,939,099 OFFICE SUPPLIES 405,127 OUTSIDE SERVICES 334,262 REGULATORY COMMISSION 86,759 DIRECTORS 172,874 PUBLIC RELATIONS 296,332 DUES 16,650 ANNUAL MEETING 41,637 MISCELLANEOUS GENERAL 61,131 DONATIONS 54,328 MAINTENANCE OF GENERAL PLANT 363,584 SUBSIDIARY EXPENSES 87,312 TOTAL ADMIN & GENERAL EXP PER FINANCIAL STATEMENTS $ 3,859,095 LESS: RECLASS OF DONATIONS TO PART IX, LINE 1 (54,328) LESS: RECLASS OF LABOR TO PART IX, LINES 5 & 7 (1,468,086) LESS: RECLASS OF BENEFITS TO PART IX, LINES 8-10 (697,372) LESS: RECLASS OF DIRECTOR FEES TO PART IX, LINE 5 (153,922) TOTAL ADMIN & GENERAL EXPENSE PER FORM 990, PART IX $ 1,485,387 |
| FORM 990, PART XI, LINE 9: | PATRONAGE CAPITAL ALLOCATED OR TO BE ALLOCATED 2,693,317. PATRONAGE CAPITAL RETIRED - TOTAL -1,863,805. PATRONAGE CAPITAL RETIRED - RECLAIMED (PAID) 16,573. PATRONAGE CAPITAL RETIRED - DISCOUNT 627. OCI - PROVISION FOR PENSIONS AND BENEFITS -60,410. |
| FORM 990, PART XII, LINE 2C: | THE BOARD AS A WHOLE IS RESPONSIBLE FOR OVERSEEING THE FINANCIAL STATEMENT AUDIT AND SELECTING THE INDEPENDENT FINANCIAL STATEMENT AUDITOR. PROCEDURAL CHANGES DID NOT OCCUR DURING THE YEAR. |
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