2017-11-13T15:35:59-06:00 2016-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2016-01-01 750233075 DENTON COUNTY ELECTRIC COOPERATIVE INC DBA COSERV ELECTRIC DENT 9403217800 7701 SOUTH STEMMONS FREEWAY CORINTH TX 76210 BRENT BISHOP SENIOR VP & CFO 9403217800 2017-11-13 1 WILLIAM M MILLER P00439459 8067473806 2017-11-13 X 65.182.80.152 2017-11-13 09:47:26 CS P BB0A6EFF21CE0653C6B3B49029A3E11A3F81D504 587910E538FB33049B4D87AFCCD061243FC33F22 2016 2017-02-10 21:41:12Z DONALD CLARY 7701 SOUTH STEMMONS FREEWAY CORINTH TX 76210 454168226 0 X WWW.COSERV.COM X 1938 TX TO PROVIDE ELECTRIC POWER TO MEMBERS AT COST ON A COOPERATIVE BASIS. 7 7 402 0 138823 137823 0 0 470984141 450459962 740700 1761195 847363 1054961 472572204 453276118 46017 52692 47261706 40071506 32125581 35180484 0 0 0 392324445 375996969 471757749 451301651 814455 1974467 1123708908 1169665469 658107078 670422476 465601830 499242993 TO DELIVER EXCELLENT SERVICE TO OUR MEMBERS AND CUSTOMERS BY PROVIDING SAFE AND RELIABLE ENERGY SOLUTIONS. 0 0 THE COOPERATIVE PROVIDED ELECTRICITY TO 209,341 ACTIVE MEMBER SERVICES AT YEAR END. THE ELECTRICITY AND RELATED SERVICES WERE PROVIDED AT COST ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. 0 0 0 0 0 0 0 1 0 1 1 1 0 1 1 0 1 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 1 1 1 1 0 1 96 0 402 1 1 1 0 0 0 0 441362829 26989960 0 X 7 7 0 0 0 0 1 1 1 1 1 0 0 1 1 1 1 1 0 1 1 0 X BRENT BISHOP SENIOR VP & CFO 9403217800 7701 SOUTH STEMMONS FREEWAY CORINTH TX 76210 X ANNE VADEN CHAIRMAN 13.30 X X 46111 0 0 RICHARD MUIR VICE CHAIRMAN 10.80 X X 42185 0 0 BILL RAGSDALE SECRETARY/TREASURER 11.10 X X 42185 0 0 CURTIS TALLY DIRECTOR 10.50 X 42460 0 0 LEON PELZEL DIRECTOR 11.00 X 43066 0 0 CLINTON BEDSOLE DIRECTOR 13.40 X 47573 0 0 CHRISTOPHER MCCRAW DIRECTOR 12.70 X 41389 0 0 DONALD CLARY PRESIDENT AND CEO 45.00 1.00 X 392993 0 148463 CURTIS TRIVITT SENIOR VP - ENERGY SERVICE 40.00 X 318868 0 146368 JOE FORMAN SENIOR VP - CORP. RELATIONS 50.00 X 295150 0 143360 STACIA SIMS SENIOR VP - INFORMATION SERVICES 45.00 5.00 X 270055 0 81928 DENISE SMITHERS SENIOR VP - EMPLOYEE RELATIONS 45.00 1.00 X 250091 0 86285 BRENT BISHOP SENIOR VP & CFO 45.00 1.00 X 242213 0 87101 GREG WARD SENIOR VP - FIELD OPERATIONS 45.00 1.00 X 216619 0 64869 ROBBY HAMLIN SENIOR VP - ENGINEERING SERVICES 45.00 X 198545 0 73970 JEFFREY MCNEAL SR DIRECTOR OF INFORMATION SECURITY 45.00 X 198466 0 31782 BRUCE BOUTILIER SR DIRECTOR OF CUSTOMER OPERATIONS 50.00 X 179320 0 59035 CHARLES TURNER DIRECTOR OF FINANCE 40.00 X 174235 0 62173 WAYNE FRANCIS DIRECTOR OF INFORMATION TECHNOLOGY 40.00 X 161158 0 53111 RUTH ANN SICKING DIRECTOR OF INFORMATION SYSTEMS 40.00 X 156348 0 34296 3359030 0 1072741 63 0 1 0 WILLBROS T&D SERVICES LLC 1432 CHURCH STREET MCKINNEY TX 75069 UTILITY LINE CONTRACTOR 16410913 TEXAS STATE UTILITIES INC 3112 WICHITA COURT FORT WORTH TX 76140 UTILITY LINE CONTRACTOR 8061859 MASTEC NORTH AMERICA INC PO BOX 277181 ATLANTA GA 30384 UTILITY LINE CONTRACTOR 5525179 SIRIUS COMPUTER SOLUTIONS INC PO BOX 202289 DALLAS TX 75320 IT/IS CONSULTING 2614802 DATAPROSE 1122 WEST BETHEL ROAD STE 100 COPPELL TX 75019 PRINTING 1732658 35 X SALES OF ELECTRICITY 221000 432725693 432725693 PATRONAGE DIVIDENDS 221000 10541776 10541776 SERVICE FEES 221000 7192493 7192493 450459962 623188 623188 1287076 110301 670015 39300 617061 71001 688062 306235 92425 289402 1320800 182793 1138007 1138007 46398 1091609 17968 0 17968 17968 POLE ATTACHMENT INCOME 221000 348931 348931 348931 453276118 450784165 138823 2353130 X 52692 40071506 3321847 19165368 3633073 7013940 2046256 26561780 29111956 COST OF PURCHASED POWER 299299018 ADMIN & GENERAL EXPENSE 9167479 TAXES-PROPERTY & OTHER 4954881 UBIT EXPENSE 36966 6864889 451301651 19217978 20185356 47000000 38000000 17466284 16039686 51208 725786 638036 124974783 119483971 957614416 247429223 664610433 710185193 81400005 85675668 152491269 162604471 15771162 16853088 1123708908 1169665469 44681261 49805955 70520 70979 725587 732691 568505000 573285000 44124710 46527851 658107078 670422476 X 2565485 2709560 110048368 117185335 352987977 379348098 465601830 499242993 1123708908 1169665469 X 1974467 31666696 X X 0 1 X 1 0 0 1 X 3102142 2868309 5970451 31983650 10679030 21304620 1005758 858445610 236750193 622701175 91095 60117852 60208947 710185193 INVESTMENT IN SUBSIDIARY CORPORATION - EQUITY METHOD 85675668 C 85675668 MEMBERSHIPS IN ASSOCIATED ORGANIZATIONS 2365 C PATRONAGE CAPITAL - BEPCI 160721295 C PATRONAGE CAPITAL - CFC 357632 C PATRONAGE CAPITAL - COBANK 431600 C PATRONAGE CAPITAL - NRTC 708 C PATRONAGE CAPITAL - TEC 1090871 C 162604471 POST RETIREMENT HEALTH INSURANCE BENEFITS 10707872 DEFERRED COMPENSATION 524699 CONSUMER DEPOSITS 10378686 ACCRUED OPERATING TAXES & MUNICIPAL FRANCHISE FEES 12528210 ACCRUED UNBILLED POWER COST 9539772 DEFERRED CREDITS 2019774 OTHER CURRENT & ACCRUED LIABILITIES 828838 46527851 X PART IV, LINE 2B: PURSUANT TO SECTION 74.3013 OF THE TEXAS PROPERTY CODE, THE COOPERATIVE HAS ESTABLISHED A SCHOLARSHIP FUND WITH AMOUNTS DESIGNATED UNCLAIMED UNDER STATE LAW. THE AMOUNTS DEPOSITED INTO THE SCHOLARSHIP FUND ARE APPROVED BY THE STATE OF TEXAS AND CAN ONLY BE USED FOR SCHOLARSHIPS TO ENABLE STUDENTS WITHIN AREAS SERVED BY THE COOPERATIVE TO ATTEND COLLEGE, TECHNICAL SCHOOL OR OTHER POST SECONDARY EDUCATION INSTITUTION. ANY AMOUNTS SO DEPOSITED INTO THE 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 AMOUNTS DESIGNATED UNCLAIMED UNDER STATE LAW. 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 WITHIN AREAS SERVED BY THE COOPERATIVE. 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 AMOUNTS DESIGNATED UNCLAIMED UNDER STATE LAW. 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. PART X, LINE 2: THE COOPERATIVE FOLLOWS 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 OR OTHER STATE TAXING AUTHORITY, 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. 1 COSERV CHARITABLE FOUNDATION 7701 SOUTH STEMMONS FREEWAY CORINTH TX 76210 134281766 501(C)(3) 52492 TO SUPPORT THE FOUNDATION'S OPERATIONS. 1 PART I, LINE 2: ALL DONATIONS WERE MADE TO NON-PROFIT ORGANIZATIONS; AS SUCH, ALL DONATIONS MADE TO THE ORGANIZATION SUPPORT THE FOUNDATION'S OPERATIONS. 1 X X X X 0 1 0 DONALD CLARY PRESIDENT AND CEO 345959 0 30000 0 17034 0 113022 0 35441 0 541456 0 0 0 CURTIS TRIVITT SENIOR VP - ENERGY SERVICE 287451 0 10510 0 20907 0 121614 0 24754 0 465236 0 0 0 JOE FORMAN SENIOR VP - CORP. RELATIONS 264823 0 9784 0 20543 0 116759 0 26601 0 438510 0 0 0 STACIA SIMS SENIOR VP - INFORMATION SERVICES 245908 0 9021 0 15126 0 65995 0 15933 0 351983 0 0 0 DENISE SMITHERS SENIOR VP - EMPLOYEE RELATIONS 227487 0 8476 0 14128 0 51867 0 34418 0 336376 0 0 0 BRENT BISHOP SENIOR VP & CFO 220834 0 8206 0 13173 0 53531 0 33570 0 329314 0 0 0 GREG WARD SENIOR VP - FIELD OPERATIONS 197544 0 6028 0 13047 0 32339 0 32530 0 281488 0 0 0 ROBBY HAMLIN SENIOR VP - ENGINEERING SERVICES 181071 0 6487 0 10987 0 42187 0 31783 0 272515 0 0 0 JEFFREY MCNEAL SR DIRECTOR OF INFORMATION SECURITY 181424 0 6738 0 10304 0 23048 0 8734 0 230248 0 0 0 BRUCE BOUTILIER SR DIRECTOR OF CUSTOMER OPERATIONS 158972 0 6015 0 14333 0 49243 0 9792 0 238355 0 0 0 CHARLES TURNER DIRECTOR OF FINANCE 163195 0 6116 0 4924 0 53153 0 9020 0 236408 0 0 0 WAYNE FRANCIS DIRECTOR OF INFORMATION TECHNOLOGY 152574 0 5696 0 2888 0 44155 0 8956 0 214269 0 0 0 RUTH ANN SICKING DIRECTOR OF INFORMATION SYSTEMS 150139 0 5540 0 669 0 27136 0 7160 0 190644 0 0 0 PART I, LINE 4B THE FOLLOWING INDIVIDUALS PARTICIPATE IN A SECTION 457(F) NON-QUALIFIED DEFERRED COMPENSATON (NQDC) PLAN. THE AMOUNTS LISTED REPRESENT THE ACTUARIAL INCREASE ASSOCIATED WITH PARTICIPATION IN THE PLAN. DONALD CLARY - $48,257 CURTIS TRIVITT - $31,307 SCHEDULE J, 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. DONALD CLARY: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 56,815 ACTUARIAL INCREASE IN NQDC PLAN 48,257 401(K) EMPLOYER CONTRIBUTION 7,950 TOTAL COLUMN C $ 113,022 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT & NQDC PLANS (105,072) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT & NQDC PLANS 45,033 EXPENSE TO THE COOPERATIVE $ 52,983 CURTIS TRIVITT: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 82,357 ACTUARIAL INCREASE IN NQDC PLAN 31,307 401(K) EMPLOYER CONTRIBUTION 7,950 TOTAL COLUMN C $ 121,614 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT & NQDC PLANS (113,664) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT & NQDC PLAN 37,090 EXPENSE TO THE COOPERATIVE $ 45,040 JOE FORMAN: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 108,809 401(K) EMPLOYER CONTRIBUTION 7,950 TOTAL COLUMN C $ 116,759 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (108,809) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 34,077 EXPENSE OF THE COOPERATIVE $ 42,027 STACIA SIMS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 58,685 401(K) EMPLOYER CONTRIBUTION 7,310 TOTAL COLUMN C $ 65,995 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (58,685) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 32,079 EXPENSE TO THE COOPERATIVE $ 39,389 DENISE SMITHERS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 45,099 401(K) EMPLOYER CONTRIBUTION 6,768 TOTAL COLUMN C $ 51,867 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (45,099) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 30,076 EXPENSE TO THE COOPERATIVE $ 36,844 BRENT BISHOP: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 46,709 401(K) EMPLOYER CONTRIBUTION 6,822 TOTAL COLUMN C $ 53,531 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (46,709) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 29,407 EXPENSE TO THE COOPERATIVE $ 36,229 GREG WARD: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 26,847 401(K) EMPLOYER CONTRIBUTION 5,492 TOTAL COLUMN C $ 32,339 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (26,847) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 22,105 EXPENSE TO THE COOPERATIVE $ 27,597 ROBBY HAMLIN: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 36,585 401(K) EMPLOYER CONTRIBUTION 5,602 TOTAL COLUMN C $ 42,187 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (36,585) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 22,599 EXPENSE TO THE COOPERATIVE $ 28,201 JEFFREY MCNEAL: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 23,048 401(K) EMPLOYER CONTRIBUTION 0 TOTAL COLUMN C $ 23,048 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (23,048) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 23,827 EXPENSE TO THE COOPERATIVE $ 23,827 BRUCE BOUTILIER: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 45,918 401(K) EMPLOYER CONTRIBUTION 3,325 TOTAL COLUMN C $ 49,243 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (45,918) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 20,950 EXPENSE TO THE COOPERATIVE $ 24,275 CHARLES TURNER: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 48,062 401(K) EMPLOYER CONTRIBUTION 5,091 TOTAL COLUMN C $ 53,153 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (48,062) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 21,511 EXPENSE TO THE COOPERATIVE $ 26,602 WAYNE FRANCIS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 39,382 401(K) EMPLOYER CONTRIBUTION 4,773 TOTAL COLUMN C $ 44,155 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (39,382) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 19,927 EXPENSE TO THE COOPERATIVE $ 24,700 RUTH ANN SICKING: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 22,489 401(K) EMPLOYER CONTRIBUTION 4,647 TOTAL COLUMN C $ 27,136 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (22,489) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 19,282 EXPENSE TO THE COOPERATIVE $ 23,929 FORM 990, PART I, LINE 19 REVENUE LESS EXPENSES AS REPORTED ON PAGE 1, PART I, LINE 19 DIFFERS FROM THE TOTAL NET MARGINS REPORTED ON THE COOPERATIVE'S AUDITED FINANCIAL STATEMENTS DUE TO BOOK TO TAX ADJUSTMENTS REQUIRED TO CONFORM TO THE FORM 990 INSTRUCTIONS. THE FIRST ADJUSTMENT IS FOR THE EQUITY METHOD INCOME RECORDED ON THE COOPERATIVE'S BOOKS AND INCLUDED IN TOTAL NET MARGINS. U.S. GAAP REQUIRES THE COOPERATIVE TO RECORD ON ITS BOOKS THE EQUITY METHOD INCOME FROM ITS WHOLLY OWNED SUBSIDIARY. EQUITY METHOD INCOME IS NOT INCOME FOR IRS FORM 990 PURPOSES AND AS SUCH HAS BEEN REPORTED AS AN OTHER CHANGE IN NET ASSETS. THE SECOND ADJUSTMENT IS FOR THE PATRONAGE DIVIDENDS ALLOCATED OR TO BE ALLOCATED BY THE COOPERATIVE TO MEMBERS. WHEREAS THE FORM 990 REQUIRES SUCH AMOUNTS TO BE REPORTED AS AN EXPENSE, PATRONAGE DIVIDENDS ALLOCATED OR TO BE ALLOCATED ARE AN INCREASE IN CAPITAL AND EQUITY, SPECIFICALLY PATRONAGE CAPITAL, ON U.S. GAAP BASIS FINANCIAL STATEMENTS. 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. AMENDMENTS TO THE ARTICLES OF INCORPORATION; 2. DISPOSAL OF A SUBSTANTIAL PORTION OF THE COOPERATIVE'S ASSETS; 3. DISSOLUTION/LIQUIDATION OF THE COOPERATIVE; AND 4. MERGER OR CONSOLIDATION OF THE COOPERATIVE WITH ANOTHER ORGANIZATION. 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 DIRECTORS, OFFICERS, AND EMPLOYEES OF THE COOPERATIVE ARE REQUIRED TO ANNUALLY CERTIFY THAT THEY HAVE COMPLIED WITH THE CODE OF CONDUCT AND ARE NOT AWARE OF ANY UNREPORTED VIOLATIONS OF THE CODE THAT MAY HAVE OCCURRED. FORM 990, PART VI, SECTION B, LINE 15 THE CEO IS SUBJECT TO AN ANNUAL EVALUATION BY A COMPENSATION COMMITTEE, WHICH IS COMPRISED OF THE BOARD OF DIRECTORS. A COMPENSATION SURVEY AND AN INDEPENDENT COMPENSATION CONSULTANT ARE USED WHEN DETERMINING THE COMPENSATION OF THE CEO. THE SURVEY SHOWS COMPARATIVE SALARIES FOR CEOS FROM SIMILARLY SITUATED COOPERATIVES, UTILITIES, AND OTHER BUSINESSES LOCATED IN THE DALLAS/FT. WORTH METROPLEX AREA, TEXAS AND THE NATION. THE CEO USES A WAGE AND SALARY PLAN APPROVED BY THE BOARD, WHICH IS BASED ON A COMPENSATION SURVEY, WHEN DETERMINING THE COMPENSATION OF THE COOPERATIVE'S OTHER EMPLOYEES MEETING THE DEFINITION OF OFFICER AND KEY EMPLOYEE, IF ANY, FROM SIMILARLY SITUATED COOPERATIVES, UTILITIES, AND OTHER BUSINESSES LOCATED IN THE DALLAS/FT. WORTH METROPLEX AREA, TEXAS AND THE NATION. FORM 990, PART VI, SECTION C, LINE 19 ANNUALLY, THE COOPERATIVE PROVIDES A CONDENSED SET OF AUDITED FINANCIAL STATEMENTS TO THE MEMBERS OF THE COOPERATIVE BY PUBLISHING THE COOPERATIVE'S ANNUAL REPORT IN THE CO-OP POWER MAGAZINE. THE BY-LAWS AND ANNUAL REPORT, WHICH INCLUDE THE CONDENSED FINANCIAL STATEMENTS, CAN ALSO BE FOUND ON THE COOPERATIVE'S WEBSITE. 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, VISION, LONGTERM DISABILITY, ACCIDENTAL DEATH & DISMEMBERMENT AND GROUP TERM LIFE INSURANCE TO ALL EMPLOYEES, INCLUDING OFFICERS, THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR THE OFFICERS AND HIGHLY COMPENSATED EMPLOYEES IS COMPRISED OF THE ACTUARIAL INCREASE IN THE DEFINED BENEFIT PLAN, THE TOTAL AMOUNT CONTRIBUTED TO THE 401(K) PENSION PLAN AND EMPLOYER PAID INSURANCE PREMIUMS. 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 PER INDIVIDUAL HAS NOT BEEN ESTIMATED. 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 TO 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 NO LONGER A BORROWER OF THE RURAL UTILITIES SERVICE (RUS), THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE UNIFORM SYSTEM OF ACCOUNTS AS PRESCRIBED FOR RUS BORROWERS. THE UNIFORM SYSTEM OF ACCOUNTING 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 ITS ACCOUNTING SYSTEM, BUT OTHER EXPENSES THAT ARE DESCRIBED IN LINES 1 - 23 ARE 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. THE FOLLOWING SCHEDULE RECONCILES AMOUNTS REPORTED ON LINES 5-7 TO THE TOTAL WAGES ACCRUED AND/OR PAID: TOTAL PER LINES 5-7 $ 22,487,215 LESS DIRECTORS FEES REPORTED ON 1099-MISC (304,969) LESS EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (832,344) PLUS SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 8,255,649 TOTAL WAGES ACCRUED AND/OR PAID $ 29,605,551 FORM 990, PART IX, LINE 24 ADMINISTRATIVE AND GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: ADMINISTRATIVE & GENERAL EXPENSE $ 1,148,892 OUTSIDE SERVICES 1,864,207 PROPERTY INSURANCE 919,993 LOSS/DAMAGES 324,197 RENTS 40,772 MAINTENANCE OF GENERAL PLANT 14,509 MISCELLANEOUS GENERAL EXPENSE 4,854,909 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $ 9,167,479 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 2016 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: DISTRIBUTION EXPENSE $ 4,572,769 SALES 1,239,524 CUSTOMER ACCOUNTS & SERVICE 907,832 MISCELLANEOUS 134,256 MUNICIPAL FRANCHISE FEES 10,508 TOTAL OTHER EXPENSES PER FORM 990, LINE 24E $ 6,864,889 FORM 990, PART XI, LINE 9: EQUITY METHOD INCOME (LOSS) FROM SUBSIDIARY COMPANY 4,575,051. NET CHANGE IN MEMBERSHIPS 144,075. OCI - POST EMPLOYMENT BENEFITS & AFFILIATES -967,786. PATRONAGE CAPITAL ASSIGNED 40,071,506. PATRONAGE CAPITAL RETIRED - TOTAL -19,293,117. PATRONAGE CAPITAL RETIRED - DISCOUNT 7,136,967. SUBSIDIARY EQUITY TRANSFERS & ADJUSTMENTS FORM 990, PART XII, LINE 2C PURSUANT TO BOARD POLICY, THE BOARD OF DIRECTORS IS THE AUDIT COMMITTEE AND IS RESPONSIBLE FOR OVERSEEING THE FINANCIAL STATEMENT AUDIT AND SELECTING THE INDEPENDENT FINANCIAL STATEMENT AUDITOR. PROCEDURES REMAINED UNCHANGED DURING THE YEAR. FORM 990, SCHEDULE R, PARTS IV AND V THE DISCLOSURES PERTAINING TO COSERV INVESTMENTS LP INCLUDE THE FOLLOWING ENTITIES WHICH WERE DISREGARDED OF ITS SOLE OWNER FOR FEDERAL TAX REPORTING PURPOSES, AS OF DECEMBER 31, 2016: COSERV NATURAL LLC COSERV GAS LTD RENEWABLE ENERGY ALTERNATIVES LLC THIRTY SEVEN REALTY GP LLC THIRTY SEVEN REALTY HOLDINGS LP QUAIL RUN REALTY LLC 7701 SOUTH STEMMONS FWY CORINTH TX 76210 REAL ESTATE TX 746771 DENTON COUNTY ELECTRIC COOPERATIVE INC COSERV PROPERTY HOLDINGS LLC 7701 SOUTH STEMMONS FWY CORINTH TX 76210 REAL ESTATE TX 169306 3496881 DENTON COUNTY ELECTRIC COOPERATIVE INC COSERV ELECTRIC GROUP HEALTH BENEFIT PLAN TRUST 7701 SOUTH STEMMONS FWY CORINTH TX 76210 300403374 MEDICAL SELF INSURANCE FUND TX 501(C)(9) N/A DENTON COUNTY ELECTRIC COOPERATIVE INC 1 COSERV CHARITABLE FOUNDATION 7701 SOUTH STEMMONS FWY CORINTH TX 76210 134281766 COMMUNITY CHARITABLE CONTRIBUTIONS TX 501(C)(3) 7 DENTON COUNTY ELECTRIC COOPERATIVE INC 1 COSERV UTILITY SERVICES INC 7701 SOUTH STEMMONS FWY CORINTH TX 76210 752766000 GP FOR COSERV INVESTMENTS TX DENTON COUNTY ELECTRIC COOPERATIVE INC C 853261 1.00000 0 COSERV INVESTMENTS LP 7701 SOUTH STEMMONS FWY CORINTH TX 76210 752729645 INVESTMENTS TX DENTON COUNTY ELECTRIC COOPERATIVE INC C 47539036 182369619 1.00000 0 1 1 0 0 0 1 0 0 0 0 0 1 0 1 1 0 1 1 0 COSERV INVESTMENTS LP AND SUBSIDIARY A 403899 INVOICES AND OTHER RECORDS COSERV INVESTMENTS LP AND SUBSIDIARY F 250000 DIVIDEND DECLARED & RECEIVED COSERV INVESTMENTS LP AND SUBSIDIARY Q 6081509 INVOICES AND OTHER RECORDS COSERV ELECTRIC GROUP HEALTH BENEFIT PLAN R 5552935 INVOICES AND OTHER RECORDS COSERV ELECTRIC GROUP HEALTH BENEFIT PLAN O N/A - LESS THAN $50,000 COSERV CHARITABLE FOUNDATION B 52492 CASH CONTRIBUTION COSERV CHARITABLE FOUNDATION N N/A - LESS THAN $50,000 COSERV CHARITABLE FOUNDATION O N/A - LESS THAN $50,000 COSERV CHARITABLE FOUNDATION L N/A - LESS THAN $50,000