Columbus Electric Cooperative, Inc. P.O. BOX 631 ¯ 900 NORTH GOLD ° DEMING, NEW MEXICO 88031 ° 575-546-8838 May 2, 2017 New Mexico Public Regulation Commission Records Management Bureau PO Box 1269 Santa Fe, NM 87504-1269 To Whom It May Concern: Enclosed please find a copy of our RUS Forna 7 and an Audit Report for the fiscal year ending July 31, 2016. In reviewing my records I realized that I failed to include them with the filing of our Annual Report as required. I apologize for the oversight. Should you have any questions or require anything further please don’t hesitate to contact our office. Sincerely, Rachel A. Marrufo Office Manager FAX (575) 546-3128 ¯ 800-950-2667 ¯ OUTAGE RESPONSE 800-228-0579 ColumbVs Electric Coopera-tive, Inc. P.O. BOX 631 ¯ 900 NORTH GOLD ¯ DEMING, NEW MEXICO 88031¯ 575-546-8838 April 28, 2017 New Mexico Public Regulation Commission Records Management Bureau PO Box 1269 Santa Fe, NM 87504-1269 To Whom It May Concern: Enclosed please find our Annual Report for the calendar year ending December 31, 2016. Also enclosed is a copy of our RUS Form 7, and an Audit Report for the fiscal year ending July 31, 2016. In accordance with Rules 17.1.2.51(A), 17.3.510.12(13) and 17.1.2.51(E), all required filings have been sent under separate cover. We have not engaged in any activities in reference to Rules 17.6.450.13(B) and SEC Form 10K. Sincerely, ~._. Rachel A. Marrufo Office Manager ~ FAX (575) 546-3128 ¯ 800-950-2667 ¯ OUTAGE RESPONSE 800-228-0579 RURAL ELECTRIC COOPERATIVES ANNUAL REPORT OF COLUMBUS ELECTRIC COOPERATIVE, INC. TO THE NEW MEXICO PUBLIC REGULATION COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2016 DATE DATEOF 1 BEGINNING ENDING- TQTAL .. 0 0 0 INTEREST -4- . RATE 4 10443014240 4MATURITY3 AMOUNI ZBALANCE BALANCE44 4 PRINCIPAL 44 4 5924,0004111444 45444301504330; 042,113.59 4_ 330.3344. 419,390,274 451,500.00; 4 299,413.51} 10,054.90 4 -. 04/23212992441234293744 4 . 44415129407 341,479-82 443423396440; 148283-42- 1 . 4_4 4 BET 812:4; 4R4US. 02.599494 41.4947/03/2003 7/3/2038 .. 357433; RUS 0.250% 101/03/2004 1/3/2039 0.250% 4 4 RET 0.250%4 14244/142/200044412-12-35 BET 7'2 ABET 47-3 RUS 1 4.750% 4 44 44 k4 . 44444 4 4.44 4 500,000.00 336,543.61 324,539,091 4 44 44 4 _4444 7 .. i 44440250%4 07/03/2003 @033 4 430,500.00 292,3492.794 273,74245034145? 1,154.49 13,007.43 4 4443243300 ?,4909.4041444444123423441 1,513.00 4 384090009144 426439281420. 250397-961 4908.194 12/384324. . 30941240440 800000-09. 44.585.30.952; 4.250% :11/415/2005 1414/15/20401 345004.351 22,120.72 4.374454% ;00/12/200050/12/2041 449414041750 ?3942,050101444443900031 24,307.40 4 493,402.22 4 4724,450474430g 41,505.44 4 44444420439430 51380407 . 561939-4344 620391490. 4 590,099.34 44457030290444 25,290.33 RET 9?314 RUS 0.250% 12/31/2003 12/31/2043 33,794.13 2473.30 443,539.11 RET 9441*1 R03 4 RET 94-2 RUS 1 _1 444 4 RET 9-411 . 03/25/2007 11125124042 . 4 . 655.5Q0.-004 BET 4RUS4 0.250% 07/10/2007 7/10/420442 1,300,000.00 44?444? 1 RET 9-40: R0344 0.250% 02/07/2003 32/7/2043 RUS 2.500% 3* __10/23/2003 10/23/2043) 771,000.00 1 44.4444 444 4. 4 H0010 14753 4.220% :045/03/2009 12/31/204341 1,100,000.00 #1,010,40474.407_ FFB 4.220% 1/4/2010 12/31/2043?4 300,000.00. 391,400.73 43109441474 ?"1900029 44 474404,4349.22,4 413,922.00 040100204?, FFEJ 4.015% 5/14/2010 12/31/2043, 400,000.00? 4 4 14710402341444 FFB 0.129% 10/22/2010 12/31/20434j 351,094,531 29,304.59 4305253301 353144091 (4415,13143 074,100.95 4FFB. 4.083% i55/2/2011 12/31/2943 1.500.009__._004 3.90..599T401 1.363484544245855974 H00355, FFB 2.934% 3/20/2012 12/31/2043 14,337,414?214 1,354,357.09 442,397.73 32,143.02 H0040 FFB 24__.4507% 1/3/2013 412/31/2043441 2,500,000.00; 3,347,090,204 2,290,073.13 44440341219944 444547023413 4 3.424% 11/12/2013 __12/31/240431 440100501 FFB 3.109% 0/20/24014 12/31/2043 417 4444 4444? . 444444 ., 4 .4 .4 . 4. 4 gw__2/26/2015412/31/2043} 1.566.000.0941 1,537,001.58 39.3248554145 441,500,00000 1,440,553.41 1,409,034.30 541,121.03 3* 30,374.05 4 909,095.14 $147,250,501 54431325131 214,344.04 F0000, FFB 441 2.057% 7/1/2010 12/31/2049 I 4 4 4 4 4444 . 1 1 1 1 41.2500900-00 410,374-17 - 4430024444? 4 440,797.12 4 4524344702944444444245093 :4 "17,320.33" 9003 I 7.400% ,124/30/19374 12/30/202 153,001.00; 4444002144301 44,133.44 7,153.59 70,003.02, 741,415.29 45,440.17 4,053,334 7.250% 05/27/1933 5/27/2013 4 4244,40153400444 . 44 4 24? 4 4 9004 f. CFC 14.50% 2124/25/199242/25/2027?4 139/816-9941 14541918394314- 945551-501 4284-17 9000 CFC 7.500% 44 7 4137047494003 4441432070454 13,000.73; 5,009.00 9009 91490040944 .1535254-154 5.9482494: 4 1.735564 9010 474-43450?794 91/07/2007 107120424444 699,812.32. 451.13.915.34 12685-86 4 51434112914244. 7120129244- 44210694163545.3144 1.9947299-76. 41.647.47.594-40 43454573-1.344443191045-36 1 TOTAL 23,597,933531 24,240,424.44 23,301,703.90 054,017.19i 944,055.90054 47/26/2029 04194111999 41/2934.? 232,000.00 ELECTRIC OPERATION AND MAINTENANCE EXPENSES 1. Enter in the the space provided the operation and maintenance expenses for the year. Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Account (a) POWER PRODUCTION EXPENSES STEAM POWER GENERATION Operations 500 Operation supervision and engineering 501 Fuel 502 Steam expense 503 Steam from other sources 504 Steam transferred - Cr 505 Electric expenses 506 Miscellaneous steam power expenses 507 Rents Total operations Maintenance 510 Maintenance supervisions and engineering 511 Maintenance of structures 512 Maintenance of boiler plant 513 Maintenance of electric plant 514 Maintenance of miscellaneous steam plant Total maintenance Total power production expenses - steam power NUCLEAR POWER GENERATION Operations 517 Operation supervision and engineering 518 Fuel 519 Coolants and Water 520 Steam expenses 521 Steam from other sources 522 Steam transferred - CR 523 Electric expenses 524 Miscellaneous nuclear power expenses 525 Rents Total Operations Maintenance 528 Maintenance supervision and engineering 529 Maintenance of structures 530 Maintenance of reactor plant equipment 531 Maintenance of elecWic plant 532 Maintenance of miscellaneous nuclear plant Total maintenance Total power production expenses - nuclear power HYDRAULIC POWER GENERATION Operations 535 Operation supervision and engineering 536 Water for power 537 Hydraulic expenses 538 Electric expenses 539 Miscellaneous hydraulic power generation expenses 540 Rents Total operation Maintenance 541 Maintenance supervision and engineering 542 Maintenance of structures 2. if the increases and decreases are not derived from previously reported fi~ures explain in footnotes. Increase or decrease from Amount for year preceding year (b) (c) ( ) ( ) ELECTRIC OPERATION AND MAINTENANCE EXPENSES (Continued) Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 Account (a) HYDRAULIC POWER GENERATION (Continued) 543 Maintenance of reservoirs, dams and waterways 544 Maintenance of electric plant 545 Maintenance of miscellaneous hydraulic plant Total maintenance Total power production expenses - hydraulic power OTHER POWER GENERATION Operations 546 Operation supervision and engineering 547 Fuel 548 Generation expenses 549 Miscellaneous other power generation expenses 550 Rents Total Operation Maintenance 551 Maintenance supervision and engineering 552 Maintenance of structures 553 Maintenance of generating and electric plant 554 Maintenance of miscellaneous other power generation plant Total maintenance Total power production expenses - other power OTHER POWER SUPPLY EXPENSES 555 Purchased power 556 System control and load dispatching 557 Other expenses Total other power supply expenses Total power production expenses TRANSMISSION EXPENSES Operations 560 Operations supervision and engineering 561 Load dispatching 562 Station expenses 563 Overhead line expenses 564 Underground line expenses 565 Transmission of electric by others 566 Miscellaneous transmission expenses 567 Rents Total Operation Maintenance 568 Maintenance supervision and engineering 569 Maintenance of structures 570 Maintenance of station equipment 571 Maintenance of overhead lines 572 Maintenance of underground lines 573 Maintenance of miscellaneous transmission plant Total maintenance Total transmission expenses DISTRIBUTION EXPENSES Operations 580 Operation supervision and engineering 581 Load dispatching 582 Station expenses 583 Overhead line expenses 584 Underground line expenses 585 Street lighting and signal system expenses Increase or decrease from preceding year Amount for year (b) (c) $ 8,068,121 (49,727) 8,068,121 8,068,121 (49,727) (49,727) 159 29,851 (3) 4,123 30,011 4,120 6,861 4,208 6,861 36,872 4,208 8,328 36,789 (3,597) 37,793 320,520 40,251 (6,529) 5,680 (4,810) ELECTRIC OPERATION AND MAINTENANCE EXPENSES (Continued) Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Account (a) DISTRIBUTION EXPENSES (Continued) 586 Meter expenses 587 Customer installations expenses 588 Miscellaneous distribution expenses 589 Rents Total Operation Maintenance 590 Maintenance supervision and engineering 591 Maintenance of structures 592 Maintenance of station equipment 593 Maintenance of overhead lines 594 Maintenance of underground lines 595 Maintenance of line transformers 596 Maintenance of street lighting and signal systems 597 Maintenance of meters 598 Maintenance of miscellaneous distribution plant Total maintenance Total distribution expenses CUSTOMER ACCOUNTS EXPENSE Operations 901 Supervision 902 Meter reading expenses 903 Customer records and collection expenses 904 Uncollectible accounts 908 Customer Service and Informational Expense Total customer accounts expenses SALES EXPENSES Operations 911 Supervision 912 Demonstrating and selling expenses 913 Advertising expenses 914 Revenues from merchandising, jobbing and contract work 915 Cost and expenses of merchandising, jobbing and contract work 916 Miscellaneous sales expenses Total sales expenses ADMINISTRATIVE AND GENERAL EXPENSES Operations 920 Administrative and general salaries 921 Office supplies and expenses 922 Administrative expenses transferred - Cr 923 Outside services employed 924 Property insurance 925 Injuries and damages 926 Employee pensions and benefits 927 Franchise requirements 928 Regulatory commission expenses 929 Duplicate Charges - Cr 930 Miscellaneous general expenses 931 Rents Total operation Maintenance 932 Maintenance of general plant Total administrative and general expenses Total Electric Operation and Maintenance Expenses Increase or decrease from preceding year Amount for year (c) (b) $ 44,962 20,516 286,979 23,008 810,817 (23,457’ (3,584’ 27,559 7,053 (1,686 13,645 147,710 3,339 17,798 786 10,608 1,265 195,150 1,005,967 (8,135 (9,827’ 61 (14,811 (1,951 (1,557 (1,112 (37,333 (39,019 195,663 449,766 5,158 10,850 32,638 678,068 (12,437; 3,571 492,036 73,264 (1,963 7,749 33,790 1,535 68,629 (1,377) 418,999 (13,236) 1,086,718 (7,292) 93,583 1,180,300 10,969,328 (34,443 (41,735) (118,582 ELECTRIC OPERATION AND MAINTENANCE EXPENSES (Continued) SUMMARY OF ELECTRIC OPERATION AND MAINTENANCE EXPENSES Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Functional Classification (a) Operation (b) Maintenance (c) Total (d) $ Power Production Expenses Electric Generation: Steam power Nuclear power Hydraulic power Other power Other power supply expenses Total power production expenses Transmission Expenses Distribution Expenses Customer Accounts Expenses Sales Expense Adm. and General Expenses Total Electric Operation and Maintenance Expenses 8,068,121 8,068,121 30,011 810,817 678,068 8,068,121 6,861 195,150 8,068,121 36,872 1,005,967 678,068 1,086,718 93,583 1,180,300 10,673,734 295,594 10,969,328 NUMBER OF ELECTRIC DEPARTMENT EMPLOYEES Number of electric department employees, payroll period ending 1. Total regular full-time employees 2. Total part-time and temporary employees 3. Total employees The data on number of employees should be reported for the payroll period ending nearest to October 31, or any payroll period ending 60 days before or after October 31. If the respondent’s payrolls for the reported period include any special construction forces include such employees as parttime and temporary employees and show the number of such 31-Dec-16 26 0 26 special construction employees so included. The number of employees assignable to the electric department from joint functions of combination utilities may be determined by estimate, on the basis of employee equivalents. Show the estimated number of equivalent employees attributed to the electric department from joint functions. DISTRIBUTION OF SYSTEM LOAD IN SERVICE AREA 1. Information is desired regarding the distribution of the system load within the territory served by the system. This information should be furnished on the basis used by respondent in maintaining load distribution data, such as by primary substations, operating divisions, communities, metropolitan areas, or other areas. 2. A sketch map showing the location and the approximate boundary of each of these areas, together with identi?cation symbols, should be furnished. Annual Energy Provided for the Area Estimated Distribution - Percent Designation of Area Public Actual or Estimated (Primary substation, Streets and Other Sales Residential Commercial Industrial Highway to Public community) Symbol (kilowatt-hours Sales Peak Demand of Annual Irrigation Company Unaccounted Area During the Date of Load Lighting Authority Sales Use operating division, or Map Total for Year (Kilowatts) Peak Factor CONSTRUCTION OVERHEAD - ELECTRIC no overhead apportionments are made, but rather should explain on the lower section of this schedule that only such engineering, supervisior, and administrative costs, etc., which are directly chargeable construction are charged to construction if this is the case. Engineering, supervision, administrative, and interest costs, etc., which are first assigned to a blanket work order and then prorated to construction jobs shall be considered overheads for the purposes of formulating a response to this schedule. 1. Report below the information called for concerning construction overheads for the year. 2. List in column ( a ) the kinds of overheads according to the titles used by the respondent. Charges for outside professional services for engineering fees and management of supervision fees capitalized should be shown as separate items. 3. On the lower section of this schedule furnish the requested explanatory information concerning construction overheads. 4. A respondent should not report "none" to this schedule if Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 Name of Overhead Total overheads cleared to construction Cost of construction to which overheads were charged (ex- Percent overheads to construction cost (a) (b) clusive of overhead charges) (c) (d) Indirect Labor Transporation Stores Expense Taxes Miscellaneous Computer Expenses Communication Expense Employee Benefits Workplan & Engineering Studies Property Tax & Insurance $ $ $ $ $ $ $ $ $ $ 55,370 178,460 178,230 4,922 36,519 13,356 3,048 255,718 21,551 1,582 TOTAL $ 748,757 $ 273,935 GENERAL DESCRIPTION OF CONSTRUCTION OVERHEAD PROCEDURE 1. For each construction overhead for electric plant explain ( a ) nature of the engineering, supervisory, or administrative work, etc., the overhead charges are intended to cover. ( b ) the general procedure for determining the amount capitalized. ( c ) the method of distribution to construction jobs. ( d ) percentages applied to different types of construction. ( e ) basis if differentiation in percentages for different types of construction, and (f) amounts capitalized for each overhead for the year for which this report is submitted. 273.33% 2. In addition to other information concerning engineering and superintendence or other such overheads, explain whether the amounts treated as overheads include all engineering and superintendence costs or only such portions as are not directly chargeable to specific jobs. 3. For interest during construction state the interest rate used, the basic charges to which applied, in addition to the amounts capitalized for the year for which this report is submitted. ELECTRIC DISTRIBUTION METERS AND LINE TRANSFORMERS 1. Report below the information called for concerning distribution watt-hour meters and transformers. 2, Watt-hour demand distribution meters should be included below but external demand meters should not be included. 3, Show in a footnote the number of distribution watt-hour meters or line transformers held by the respondent under lease fi’om others, jointly owned with others, or held otherwise than by reason of sole ownership by the respondent. If500 or more meters or line transformers are held under a lease, give name of lessor, date and period of lease and annual rent. If 500 or more meters or line transformers are held other than by reason of sole ownership or lease, give name of co-owner or other party, explain basis of accounting for expenses between the parties, and state amounts and accounts affected in respondent’s books of account. Specify in each case whether lessor, co-owner or other party is an associate company. LINE TRANSFORMERS Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Item Number of watt-hour meters (a) (b) Number at beginning of year Additions during year: Purchases Associated with utility plant acquired Total additions Reductions during year: Retirements Associated with utility plant sold Total reductions Number at end of year In stock Locked meters on customers’ premises Inactive transformers on system in customers’ use In company’s use Total end of year (as above) Total capacity (kva) (d) (c) 5,369 6,513 138,623 46 87 1,474 46 87 1,474 2 126 2,014 2 126 2,014 5,413 341 6,474 254 138,083 8,344 5,064 8 5,413 289 5,919 12 6,474 6,921 124,606 400 140,271 VERIFICATION The foregoing report must be verified by the oath of the President or chief officer of the company. The oath required may be taken before any person authorized to administer an oath by the laws of the State in which the same is taken. OATH State of New Mexico ) County of Luna ) ) Christopher Martinez makes oath and says that he is the Executive Vice President and General Manager of Columbus Electric Cooperative, Inc that it is his duty to have supervision over the books of account of the respondent and that to the best of his knowledge and belief such books have, during the period covered by the foregoing report, been kept in good faith in accordance with the accounting and other orders of the New Mexico Public Regulation Commission, effective during said period, that has examined the said report, and to the best of his knowledge and belief the information contained in the said report is, insofar as it relates to matters of account, in accordance with the said books of account; that he believes that all other statements of fact contained in the said report are true, and that the said report is correct statement of the business and affairs of the above-named respondent in respect to each and every matter set forth therein during the period from and including January 1,2016, to and including December 31, 2016. Subscribed and sworn to before me, a Notary Public in and for the State and county above named, this 1st day of May, 2017. ~-.~’,¢.4 ’" .res November 17, 2019. (Signature of officer authorized~o administer oaths) New Mexico Jurisdictional Information Year Ending December 31, 2016 Electric Company Name Columbus Electric Cooperative, Inc. Address: PO Box 631 Deming, NM 88031 Phone Number: (505) 546-8838 Person Completing Form: Rachel A. Marrufo Customer Class Number of Customers KWH Sales (Thousands) Gross Revenues Residential 3,906 25,336 3,659,844 Other Total 1,101 72,338 9,745,317 5,007 97,674 13,405,161 Avg. Annual KWH pr Customer (1) ** 6,486 65,702 72,188 Avg. Annual Bill per Customer (2) ** 937 8,851 9,788 Avg. Monthly Bill per Customer (3) ** 78 738 816 0.1445 0.1347 0.13724 Avg. Gross Revenue per KWH sold (4) ** Directions for the completion of (1), (2), (3), (4): (1) Divide KWH sales by number of customers. (2) Divide gross revenues by number of customers. (3) Divide (2) by 12 months. (4) Divide gross revenues by KWH sales. Accnrding to the Paperwork Reduction Act of 1995, an agency nmy not conduct or spo~tsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. The valid OMB control number for this iafonnation collection is 0572-0032. The time required to complete this intbnnation collection is estimated to average 15 hours per response, including tile time for reviewing irtstructions, searching existing data sources, gathering and nmintaining the data needed, and completing and reviewing the collection of information. UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTIHTIES SERVICE BORROWER DESIGNATION NM0 0 2 5 PERIOD ENDED December, 2016 FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION BORROWER NAME Columbus Electric Cooperative, Inc. INSTRUCTIONS - See help in the online application. This information is analyzed and used to determine the submitter’s financial situation and feasibility for loans and guarantees. You are required by contract and applicable regulations to provide the infom~ation. The inlbrmation provided is subject to the Freedom of Information Act (5 U.S.C. 552) CERTIFICATION We recognize that statements contained herein concern a matter within the jurisdiction of an agency of the United Stales and the making of a false, fictitious or fraudulent statement may render the maker subject to prosecution under Title 18, United States Code Section 1001. We hereby certify that the entries in this report are in accordance with the accounts and other records of the system and reflect the status of the system to the best of our knowledge and beliel: ALL INSURANCE REQUIRED BY PART 1788 OF 7 CFR CHAPTER XVII, RUS, WAS IN FORCE DURING THE REPORTING PERIOD AND RENEWALS HAVE BEEN OBTAINED FOR ALL POLICIES DURING THE PERIOD COVERED BY THIS REPORT PURSUANT TO PART 1718 OF 7 CFR CtlAPTER XVII (check one of the following) [] [] "lhere has been a default in the fidlilhnent of the obligations under the RUS loan docmnents. Said delhult(sl is/are specifically described in Part D of this report. All of the obligations under the RUS loan documents have been fulfilled in all material respects. DATE PART A. STATEMENT OF OPERATIONS YEAR-TO-DATE ITEM 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. ! 2o 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. Operating Revenue and Patronage Capital Power Production Expense Cost of Purchased Power Transmission Expense Regional Market Expense Distribution Expense - Operation Distribution Expense - Maintenance Customer Accounts Expense Customer Service and Informational Expense Sales Expense Administrative and General Expense Total Operation & Maintenance Expense (2 thru 11) Depreciation and Amortization Expense Tax Expense - Property & Gross Receipts ’Fax Expense - Other Interest on Long-Term Debt Interest Charged to Construction - Credit Interest Expense - Other Other Deductions Total Cost of Electric Service (12 thru 19) Patronage Capital & Operating Margins (1 minus 20) Non Operating Margins - Interest Allowance for Funds Used During Constrnction income (Loss) from Equity Investments Non Operating Margins - Other Generation and Transmission Capital Credits Other Capital Credits and Patronage Dividends Extraordinary Items Patronage Capital or Margins (21 thrtt 28) RUS Financial and Operating Report Electric Distribution LAST YEAR TillS YEAR ~) 14,183,417 13,980,556 8,117,848 8,068,121 36,872 28,544 BUDGET 14,092,948 8,116,792 45,678 THIS MONTH (~ 919,478 411,391 3,661 812,503 232,483 629,421 45,075 810,817 195,150 645,430 32,638 879,099 294,390 657,176 87,422 78,960 17,193 56,932 2,223 1,222,035 11,087,909 1,285,942 1,180,300 10,969,328 1,328,498 1,312,804 11,393,361 1,342,319 90,411 660,771 111,949 703,004 60,836 4,854 3,815 405 12,957,297 1,023,259 31,314 13,442,499 650,449 21,351 833,961 649,566 3,401 14,598 13,041,416 1,142,001 44,521 654,617 85,517 5,710 875 388,181 84,209 230,852 69,717 1,659,787 1,355,142 230,852 671,800 322,079 Revision Date 2014 UN I]FED STATES DEPARTMENT OF AGRICULTURE RL’RAL UTILITIES SERVICE BORROWER DESIGNATION NM0025 FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION PERIOD ENDED December, 2016 INSTRLICTIONS - See help in the online application. PART B. DATA ON TRANSMISSION AND DISTRIBUTION PLANT ITEM 1. New Services Connected YEAR-TO-DATE LAST YEAR TillS YEAR (a) (b) 41 ITEM (a) 48 17 228 3. Total Services in Place 7,499 7,379 4. Idle Services (Exclude Seasonals) 2,513 2. Services Retired 15. ASSETS AND OTHER DEBITS Total Utility Plant in Service Construction Work in Progress Total Utilitrv Plant (1 + 2) Acctml. Provision lbr Depreciation and Amort. Net Utility Plant (3 - 4) Non-Utili~ Property (Net) Investments in Subsidia~ Companies Invest. in Assoc. Or~. - Patronaee Capital Invest. in Assoc. Or~. - Other - General Funds Invest. in Assoc. Org. - Other - Nongeneral Funds Investments in Economic Development Projects Other Investments Special Funds Total Other Property & Investments (6 thru 13) Cash - General Funds 16. Cash - Construction Funds - Tntstee 17. 18. 19. 20. 2 I. 22. Special Deposits Tempom~ Investments Notes Receivable (Net) Accomtts Receivable - Sales of Energy (Net) Accounts Receivable - Other (Net) Renewable Energy Credits 23. Materials and Snpplies - Electric & Other 1. 2. 3. 4. 5. 6. 7. 8. 9. I0. I 1. 12. 13. 14. 24. 25. Prepa~nents Other Current and Accrued Assets Total Current and Accrued Assets 26. (15 thru 25) 27. Regulatory Assets 28. Other Deferred Debits Total Assets and Other Debits 29. (5+14+26 thru 28) RUS Financial and Operating Report Electric Distribution YEAR-TO-DATE "FillS YEAR LAST YEAR 5. Miles Transmission 6. Miles Distribution Overhead 7. Miles Distribution Underground 130.00 1,896.23 1,897.57 8 5.3 9 86.08 Total Miles Energized 2, ill. 62 (5+6+7) PART C. BALANCE SIIEET LIABILITIES AND OTHER CREDITS 44,708,033 30. Memberships 655,415 31. Patronage Capital 45,363,448 32. ()]~emtin~ Mar~ins - Prior Years 17,994,773 33. Operating Margins - Cun-ent Year 27,368,675 34. Non-Operating Margins 0 35. Other Mar~ins and Equities 0 36. Total Mar~gins & Equities (30 thru 35) 2,326 8. 130.00 4,581,816 37. 0 517,296 0 0 38. 39. 40. 41. 0 42. 5,099, 112 43. 3,731,643 44. 500 o o o 1,171,565 o o Lone-Term Debt - RUS (Net) Lon~-Tem~ Debt - FFB - RUS Guaranteed Long-Term Debt - Other - RUS Guaranteed Long-Term Debt Other (Net) Lon~-Tenn Debt - RUS - Econ. Devel. (Net) Pa)anents- Unapplied Total Long-Term Debt (37 thru 41-42) 46. 47. 48. Obligations Under Capital Leases - Noncurrent Accumulated Operating Provisions and Asset Retirement Obligations Total Other Noncurrent Liabilities (44 + 45) Notes Payable Accounts Payable 49. Consumers Deposits 45. 2,113.65 14,069,79~ (252,419) 1,254,11= 101,03 C 15,172,523 6,860,832 12,983,752 ¢ 2,511,184 ¢ 1,004,09H 21,351,671 138,281 138,281 C 730,162 317,36] 946, OOO 50. Current Maturities Lone-Term Debt 487,241 51. Current Maturities Long-Term Debt - Economic Development 177,863 52. Current Maturities Capital Leases 6,953 53. Other Current and Accrued Liabilities Total Current & Accrued Liabilities 5,575,765 54. (47 thru 53) 287,881 55. Regulatory Liabilities 1,079,778 56. Other Deferred Credits Total Liabilities and Other Credits 39,411,211 57. (36 + 43 + 46 + 54 thru 56) 0 303,924 2,297,447 0 451,289 39,411,211 Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE BORROWER DESIGNATION RURAL UTILITIES SERVICE FINANCIAL AND OPERATING REPORT NM0025 ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application. PERIOD ENDED December, 2016 PART D. NOTES TO FINANCIAL STATEMENTS PART C LINE 25, OTHER CURRENT AND ACCRUED ASSETS Interest Receivable $6,953 PART C LINE 28, OTHER DEFERRED DEBITS GIS Field Inventory $377,033 Rate Study $16,578 Fuel & Debt Service Adjustment $80,057 4 Year Work Plan $62,694 Lon,q Range Plan $35,379 R&S Prepayment $494,421 Computer Conversion $13,616 PART C LINE 53, OTHER CURRENT AND ACCRUED LIABILITIES Accrued Property Tax $89,362 Accrued Other Taxes $65,180 Accrued Audit Fees $10,149 Accrued Paid Time Off $139,232 RUS Financial and Operating Report Electric Distribution Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE BORROWER DESIGNATION RURAL UTILITIES SERVICE FINANCIAL AND OPERATING REPORT NM0025 ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application. PERIOD ENDED December, 2016 PART D. NOTES TO FINANCIAL STATEMENTS PART C LINE 56, OTHER DEFERRED CREDITS Consumer Advance Payments $229,016 Ener.qy Rebates $4,195 Abandoned Capital $213,805 Joint Pole Use $4,273 RUS Financial and Operating Report Electric Distribution Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application. BORROWER DESIGNATION NM0025 PERIOD ENDED December, 2016 PART D. CERTIFICATION LOAN DEFAULT NOTES RUS Financial and Operating Report Electric Distribution Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION PERIOD ENDED NM0025 December, 2016 tNSTRUCTIONS- See help in the online application. PART E. CItANGES IN UTILITY PLANT BALANCE ADJUSTMENTS AND RETIREMENTS TRANSFERS BEGINNING OF YEAR ADDITIONS (a) o 436, 992 36,756,437 1,484,624 3,085,236 383,486 o o 1,218,271 o o 13, 940 411 0 o o PLANT ITEM Distribution Plant General Plant Headquarters Plant Intangibles Transmission Plant 2,155,198 Regional Transmission and Market Operation Plant All Other Utility Plant Total Utility Plant in Service (l thrtt 7) Construction Work in Progress Total Utility Plant (8 + 9) o 445,078 [ 0 USED (NET) (d) 381,079 2,202,620 o 44,7o8,o33 655,415 45,363,448 BALANCE END OF YEAR SOLD ADJUSTMENT~)(81) I 487,241 433’96:1 ITEM Present Year Five-Year Average I. 2. 3. (b) 423,769 SALVAGED (c) 10,672 445,078 1,937,558 309,678 43,561,290 2,247,236 PART F. MATERIALS AND SUPPLIES (a) Electric Other o 8,086 o 43,215,553 345,737 BAI,ANCE I BEGINNING OF YEAR I PURCHASED ITEM 55,508 BALANCE END OFYEAR (e) 37,804,069 3,468,722 1,232,211 411 POWER SUPPLIER (a) 144.100 31.350 Nmnber of Full Time Employees Employee - Hours Worked - Regular Time Employee - Hours Worked - Overtime PART G. SERVICE INTERRUPTIONS AVERAGE MINUTES PER CONSUMER BY CAUSE MAJOR EVENT PLANNED (b) (c) 213. 800 0. 000 206.324 8.150 PART tt. EMPLOYEE-HOUR AND PAYROLL STATISTICS 26 4E Payroll - Expensed 55,3051561 Payroll- Capitalized Payroll - Other 3,2 87 PART 1. PATRONAGE CAPITAL DESCRIPTION ITEM 1. Capital Credits - Distributions 2. Capital Credits - Received 1. Amount Due Over 60 Days I Anticipated Loan Delinquency % 2. Actu’a! Loan Delinquency % 3 Total Loan Delinquency Dollars YTD ALL OTtlER a. General Retirements b. Special Retirements ¢. Total Retirements (a + b) a. Cash Received From Retirement of Patronage Capital by Suppliers of Electric Power b. Cash Received From Retirement of Pa~onage Capital by Lenders for Credit Extended to the Electric System e. Total Cash Received (a + b) PART J. DUE FROM CONSUMERS FOR ELECTRIC SERVICE 5 51,095 ]2. Amount WrittenOffDttring Year ENERGY EFFICIENCY AND CONSERVATION LOAN PROGRAM $ RUS Financial and Operating Report Electric Distribution 88.270 TOTAL (e) 446. 170 116.026 361.850 802,053 647,675 115,801 Tills YEAR CUMULATI VE (a) 486, 047 1,186,822 486,047 1,186,822 o 20,076 20,076 18,149 Actual Loan Default % Total Loan Dollars 4l Anticipated LoanDefault Default % YTD Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION NM0025 FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application PERIOD ENDED December, 2016 PART K. kWh PURCHASED AND TOTAL COST No ITEM 1 Tri-State G & T Assnr lnc CCO0047) 2 *Residential Renewable Supplier 3 *Commercial Renewable Supplier Total SUPPLIER CODE RENEWABLE RENEWABLE kWh FUEL PURCHASED ENERGY PROGRAM TYPE NAME TOTAL COST AVERAGE COST (Cents/kWh) 30151 107,266,954 8,050,559 7.51 700200 141,449 13,171 9.31 700100 42,448 4,391 10.34 107~450,851 8,068~121 7.51 RUS Financial and Operating Report Electric Distribution INCLUDED IN INCLUDED IN TOTAL COST - TOTAL COST FUEL COST WHEELING ADJUSTMENT AND OTHER CHARGES Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application NM0025 PERIOD ENDED December, 2016 PART K. kWh PURCHASED AND TOTAL COST Comments No 1 RUS Financial and Operating Report Electric Distribution Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application. No NAME OF LESSOR BORROWER DESIGNATION NM0025 PERIOD ENDED December, 2016 PART L. LONG-TERM LEASES TYPE OF PROPERTY Ib) RENTAL TH1SYEAR TOTAL RUS Financial and Operating Report Electric Distribution Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION 1~,I0025 PERIOD ENDED December, 2016 INSTRUCTIONS - See help in the online application. 1. Date of Last Annual Meeting PART M; ANNUAL MEETING AND BOARD DATA 2. Total Nmnber of Members 3. Number of Members Present at Meeting 4/16/2016 3, 172 5. Number of Members Voting by Proxy or Mail 6. Total Number of Board Members 3 RUS Financial and Operating Report Electric Distribution 181 7. Total Amount of Fees and Expenses for Board Members 9 4. Was Quorum Present? $ Y 8. Does Manager Have Written Contract? 227,254 Revision Date 2014 N UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INSTRUCTIONS - See help in the online application. No ITEM BORROWER DESIGNATION NM0025 PERIOD ENDED December, 2016 PART N. LONG-TERM DEBT AND DEBT SERVICE REQUIREMENTS BALANCE END OF INTEREST PRINCIPAL YEAR (Billed This Year) (Billed This Year) ~a) 1 Rural Utilities Service (Excludes RUS Economic Development Loans! 2 National Rural Utilities Cooperative Finance Corporation 3 CoBankr ACB 4 Federal Financing Bank 5 RUS - Economic Development Loans 6 Payments Unapplied 7 Principal Payments Received from Ultimate Recipients of lRP Loans 8 Principal Payments Received from Ultimate Recipients of REDL Loans 9 Principal Payments Received from Ultimate Recipients of EE Loans TOTAL RUS Financial and Operating Report Electric Distribution TOTAL (Billed This Year) 6,860,833 120,709 294,206 4t4,915 1,149,590 89,752 52,843 142,595 1~361~594 12r983~752 551743 388r682 319~705 277~902 375~448 666~584 654,886 944,656 1,599v542 lr004r098 21,351,671 Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION BORROWER DES IGNATION NM0025 PERIOD ENDED December, 2016 INSTRUCTIONS - See help in the online application. PART O. POWER REQUIREMENTS DATABASE - ANNUAL SUMMARY AVERAGE NO. CONSUMER SALES & CLASSIFICATION DECEMBER CONSUMERS SERVED REVENUE DATA (a) 1. Residential Sales (excluding seasonal) 2. Residential Sales - Seasonal 3. lnSgation Sales 4. Comm. and Ind. 1000 KVA or Less a. No. Consumers Served b. kwh Sold c. Revenue a. No, Consumers Served b. kwh Sold c. Revenue a. No, Consumers Served b. kWh Sold c. Revenue a. No. Constuners Served b. k\\% Sold c. Revenue 5. Comm. and Ind, Over 1000 KVA a. No. Consumers Served kwh Sold Revenue 6. Public Street & Highway Lighting b. c. a. b, c. kwh Sold Revenue 7. Other Sales to Public Authorities 8. Sales for Resale - RUS Borrowers Sales lbr Resale - Other No. Consumers Se~wed a. No. Consumers Served b. kWh Sold c. Revenue a. b. No. Consumers Served kWh Sold c. Revenue a. No. Consumers Served 3,913 TOTAL YEAR TO DATE (c) 3, 911 25,335,892. ~ ........ 4,068,529 301I 308 47,393,697 5,995,886 ..... 840 789 24,847,843 3,706,377 io IO 96,480 23,985 b. kWh Sold c. Revenue I 0. 11. 12. 13. 14. 15. 16, 17, 18, 19, 20, Total No. of Consumers (lines la thru 9a) Total kWh Sold (lines lb thru Total Revenue Received From Sales of Electric Energy (lines lc thru 9c) Transmission Revenue Other Electric Revenue kwh - Own Use Total kwh Purchased Total kWh Generated Cost of Purchases and Generation Interchange - kWh - Net Peak - Sum All kW Input (Metered) Non-coincident X Coincident RUS Financial and Operating Report Electric Distribution 97,673,911 13,794,777 185,779 107,450,851 8,104,993 25,218 Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION PERIOD ENDED NM0025 December, 2016 INSTRUCTIONS - See help in the online application. CLASSIFICATION 2. 3. 4. 5. 6. 7. 8. 9. 10. PART P. ENERGY EFFICIENCY PROGRAMS ADDED THIS YEAR Estimated No. of Amount MMBTU Savings Consumers Invested 75 Residential Sales (excluding seasonal) Residential Sales - Seasonal Irrigation Sales Comm. and Ind. 1000 KVA or Less Comm. and Ind. Over 1000 KVA Public Street and Highway Lighting Other Sales to Public Authorities Sales tbr Resale - RUS Borrowers Sales for Resale - Other Total 75 RUS Financial and Operating Report Electric Distribution 5,706 5,706 116 No. of Consumers TOTAL TO DATE Amount Estimated Invested MMBTU Savings 345 32,977 43.3 6 1 11,238 3,497 261 58 352 47,712 732 Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION NM0025 FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INVESTMENTS, LOAN GUARANTEES AND LOANS PERIOD ENDED December, 2016 INSTRUCTIONS - Reporting of investments is required by 7 CFR 1717, Subpart N. Investment categories reported on this Part correspond to Balance Sheet items in Part C. Identify all investments in Rural Development with an ’X’ in colmnn (e). Both ’Included’ and ’Excluded’ Investments must be reported. See help in the online application. PART Q. SECTION I. INVESTMENTS ~See Instructions for definitions of Income or Loss) RURAL No DESCRIPTION INCLUDED EXCLUDED INCOME OR LOSS ($) 2 Investments in Associated Organizations TRI-STATE PATRONAGE CAPITAL NRUCFC PATRONAGE CAPITAL NRUCFC CTCS FEDERATED INSURANCE PATRONAGE CAPITAL VALLEY TELEPHONE PATRONAGE CAPITAL WUESC PATRONAGE CAPITAL NISC PATRONAGE CAPITAL COBANK PATRONAGE CAPITAL NRTC PATRONAGE CAPITAL CFC MEMBERSHIP TRI-STATE MEMBERSIHP NMRECA EQUITY CONTRIBUTION BASIN ELECTRIC MEMBERSHIP TOUCHSTONE ENERGY INVESTMENT NISC MEMBERSHIP NMRECA MEMBERSHIP Totals 6 Cash - General WELLS FARGO BANK Totals 11 TOTAL INVESTMENTS (1 thru 10) RUS Financial and Operating Report Electric Distribution - Investments 1,000 5 4r652 100 3,013 100 15 8,885 3~731,643 3,731v643 3~740~528 DEVELOPMENT 4~496vl26 85,690 314~310 111~031 6,933 34~137 17~304 23~830 867 4,111 219 7r246 787 1~971 1 r669 16~170 0 5,090,228 32~173 5~090,228 32,173 Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION NM0025 FINANCIAL AND OPERATING REPORT ELECTRIC DISTRIBUTION INVESTMENTS, LOAN GUARANTEES AND LOANS PERIOD ENDED December, 2016 INSTRUCTIONS - Reporting of investments is required by 7 CFR 1717, Subpart N. Investment categories reported on this Part correspond to Balance Sheet items in Part C. Identify all investments in Rural Development with an ’X’ in column (e). Both ’Included’ and ’Excluded’ Investments must be reported. See help in the online application. No ORGANIZATION PART Q. SECTION II. LOAN GUARANTEES MATURITY DATE ORIGINAL AMOUNT ($) LOAN BALANCE ($) RURAL DEVELOPMENT TOTAL TOTAL (Included Loan Guarantees Only) RUS Financial and Operating Report Electric Distribution - Loan Guarantees Revision Date 2014 UNITED STATES DEPARTMENT OF AGRICULTURE RURAL UTILITIES SERVICE BORROWER DESIGNATION NM0025 FINANCIAL AND OPERATING REPORT PERIOD ENDED ELECTRIC DISTRIBUTION December, 2016 INVESTMENTS, LOAN GUARANTEES AND LOANS INSTRUCTIONS - Reporting of investments is required by 7 CFR 1717, Subpart N. Investment categories reported on this Part correspond to Balance Sheet items in Part Co Identify all investments m Rural Development with an ’X’ in column (e). Both ’Included’ and ’Excluded’ Investments must be reported. See help in the online application. SECTION III. RATIO RATIO OF INVESTMENTS AND LOAN GUARANTEES TO UTILITY PLANT 8.25 % [Total of Included Investments (Section I, 1 lb) and Loan Guarantees - Loan Balance (Section II, 5d) to Total Utility Plant (Line 3, Part C) of this report] SECTION IV. LOANS RURAL No ORGANIZATION MATURITY DATE ORIGINAL AMOUNT LOAN BALANCE DEVELOPMENT ($) ($) TOTAL RUS Financial and Operating Report Electric Distribution - Loans Revision Date 2014 NEW MEXICO 25 LUNA COLUMBUS ELECTRIC COOPERATIVE, INC. DEMING, NEW MEXICO FINANCIAL STATEMENTS WITH ACCOMPANYING INFORMATION FOR THE YEARS ENDED JULY 31, 2016 AND 2015 AND REPORT OF CERTIFIED PUBLIC ACCOUNTANTS BOLINGER, SEGARS, GIIJ~ERT,~ ~IO~.k~q, L.L.P. CERTIFIED PUBLIC ACCDUNTANTS L~BI~OCI~, TEXAS NEW MEXICO 25 LUNA COLUMBUS ELECTRIC COOPERATIVE, INC. DEMING, NEW MEXICO FINANCIAL STATEMENTS WITH ACCOMPANYING INFORMATION FOR THE YEARS ENDED JULY 31, 2016 AND 2015 AND REPORT OF CERTIFIED PUBLIC ACCOUNTANTS NEW MEXICO 25 LUNA COLUMBUS ELECTRIC COOPERATIVE, INC. DEMING, NEW MEXICO FINANCIAL STATEMENTS WITH ACCOMPANYING INFORMATION FOR THE YEARS ENDED JULY 31, 2016 AND 2015 TABLE OF CONTENTS Page No. Independent Auditor’s Report Financial Statements Balance Sheets Exhibit A 3 Statements of Income and Patronage Capital Exhibit B 4 Statements of Cash Flows Exhibit C 5 6 Notes to Financial Statements Accompanying Information Electric Plant Schedule 1 18 Accumulated Provision for Depreciation Schedule 2 19 Investments in Associated Organizations Schedule 3 20 Patronage Capital Schedule 4 21 Mortgage Notes Schedule 5 22 Administrative and General Expenses Schedule 6 23 Five Year Comparative Data Schedule 7 24 Compliance and Internal Control Section Report on Compliance with Aspects of Contractual Agreements and Regulatory Requirements for Electric Borrowers 25 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards 27 Independent Auditor’s Report Board of Trustees Columbus Electric Cooperative, Inc. Deming, New Mexico Report on the Financial Statements We have audited the accompanying financial statements of Columbus Electric Cooperative, Inc. (the Cooperative), which comprise the balance sheets as of July 31,2016 and 2015, and the related statements of income and patronage capital and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. -1- -2Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Columbus Electric Cooperative, Inc. as of July 31, 2016 and 2015, and the results of their operations and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Accompanying Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of electric plant, accumulated provision for depreciation, investments in associated organizations, patronage capital, mortgage notes, administrative and general expenses, and five year comparative data are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2016 on our consideration of Columbus Electric Cooperative Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Columbus Electric Cooperative Inc.’s internal control over financial reporting and compliance. Certified Public Accountants Lubbock, Texas September 30, 2016 -3COLUMBUS ELECTRIC COOPERATIVE, INC. Exhibit A BALANCE SHEETS JULY 31, 2016 AND 2015 ASSETS July 31, 2016 UTILITY PLANT AT COST Electric Plant in Service Construction Work in Progress $ $ $ 43,932,285 229,751 44,162,036 17,724,798 26,437,238 $ 42,487,000 664,064 43,151,064 16,925,422 26,225,642 $ 4,864,842 $ 4,444,140 2,372,614 1,000,000 $ 548,858 3,500,000 $ Less: Accumulated Provision for Depreciation OTHER PROPERTY AND INVESTMENTS - AT COST OR STATED VALUE Investments in Associated Organizations CURRENT ASSETS Cash - General Temporary Cash Investments Accounts Receivable (Less allowance for uncollectibles of $104,506 in 2016 and $63,574 in 2015 ) Materials and Supplies at Average Cost Power Cost and Debt Cost Adjustments Under Billed Other Current and Accrued Assets DEFERRED CHARGES Regulatory Assets Other 1,834,359 440,043 42,222 141,602 5,830,840 $ TOTALASSETS 2015 $ $ 1,662,545 375,265 157,633 148,550 6,392,851 $ $ 318,768 1,059,084 1,377,852 $ 390,423 1,169,647 1,560,070 $ 38,510,772 $ 38,622,703 $ 14,156,996 $ (283,273) $ 13,873,723 $ 13,496,142 (328,763) 13,167,379 7,005,743 11,612,251 1,172,493 1,486,873 21,277,360 $ $ 7,296,265 11,897,615 1,227,443 1,811,671 22,232,994 128,736 $ 137,892 $ $ 945,000 15,480 1,019,043 54,943 365,004 217,477 37,674 142,905 58,845 2,856,371 946,000 20,000 905,434 186,405 284,926 216,446 38,763 146,680 63,624 2,808,278 $ 374,582 $ $ 38,510,772 EQUITIES AND LIABILITIES EQUITIES Patronage Capital Other Equities - Deficit LONG-TERM DEBT RUS Mortgage Notes Less Current Maturities FFB Mortgage Notes Less Current Maturities CFC Mortgage Notes Less Current Maturities CoBank Mortgage Notes Less Current Maturities ACCUMULATED PROVISION FOR PENSIONS AND BENEFITS Post-retirement Benefits CURRENT LIABILITIES Current Maturities of Long-Term Debt Current Portion of APBO Accounts Payable - Purchased Power Accounts Payable - Other Consumers’ Deposits and Prepayments Accrued Taxes Accrued Interest Accrued Employee Compensated Absences Other Current and Accrued Liabilities DEFERRED CREDITS TOTAL EQUITIES AND LIABILITIES See accompanying notes to financial statements. $ $ 276,160 38,622,703 -4COLUMBUS ELECTRIC COOPERATIVE, INC. Exhibit B STATEMENTS OF INCOME AND PATRONAGE CAPITAL FOR THE YEARS ENDED JULY 31, 2016 AND 2015 Years Ended July/31, 2016 % OPERATING REVENUES Residential Irrigation Commercial and Industrial Public Buildings and Other Authorities Under (Over) Billed Power Cost Other Operating Revenues Total Operating Revenues 4,112,396 6,087,404 3,760,521 23,813 (115,411) 150,797 14,019,520 29.3 43.4 26.8 0.2 (0.8) 1.1 100.0 $ OPERATING EXPENSES Purchased Power Transmission Expense Distribution - Operation Distribution - Maintenance Customer Accounts Customer Service and Information Administrative and General Depreciation and Amortization Other Interest Other Deductions Total Operating Expenses 8,290,725 36,230 840,468 281,666 633,796 39,962 1,219,357 1,313,834 4,223 6,030 12,666,291 59.1 0.3 6.0 2.0 4.5 0.3 8.7 9.4 $ OPERATING MARGINS - BEFORE FIXED CHARGES 28.1 43.6 25.7 0.2 1.5 0.9 100.0 $ 56.2 0.3 6.1 1.5 4.4 0.3 8.5 9.0 $ 90.3 7,826,382 39,290 847,852 210,116 612,041 48,456 1,187,587 1,259,130 4,272 8,568 $ 12,043,694 0.1 86.4 464,343 (3,060) (7,384) 71,550 21,755 (8,494) 31,770 54,704 (49) (2,538) $ 622,597 1,353,229 9.7 $ 1,879,766 13.6 S (526,537) 646,806 4.6 644,568 4.6 2,238 $ 706,423 5.1 $ 1,235,198 9.0 $ (528,775) 2.8 0.5 3.3 $ 466,467 79,015 545,482 3.4 0.6 4.0 (78,286) $ 388,181 66,683 454,864 $ (90,618) $ 1,161,287 8.4 $ 1,780,680 13.0 $ (619,393) 30,993 0.2 41,680 0.3 (10,687) 1,192,280 8.6 1,822,360 13.3 $ (630,080) $ FIXED CHARGES Interest on Long-Term Debt OPERATING MARGINS - AFTER FIXED CHARGES CAPITAL CREDITS G&T Capital Credits Other Capital Credits NET OPERATING MARGINS NON-OPERATING MARGINS Interest and Other Income NET MARGINS $ PATRONAGE CAPITAL - BEGINNING OF YEAR Transfer Calendar Year Non-Operating Margins to Other Equities Patronage Capital Retired PATRONAGE CAPITAL - END OF YEAR Increase (Decrease) 2015 Amount Amount 13,496,142 3,909,074 6,090,551 3,573,206 23,834 203,935 122,860 $ 13,923,460 $ 11,952,677 (45,395) (486,031) $ 14,156,996 (26,799) (252,096) $ 13,496,142 See accompanying notes to financial statements. $ 203,322 (3,147) 187,315 (21 ) (319,346) 27,937 96,060 (12,332) COLUMBUS ELECTRIC COOPERATIVE, INC. Exhibit C STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 2016 AND 2015 July 31, 2016 2015 $ 1,192,280 $ 1,822,360 $ 1,373,719 71,655 (454,864) 5,916 (56,403) (57,830) 110,563 53,613 98,422 2,337,071 $ 1,310,176 68,161 (545,482) 6,828 68,227 (190,544) 29,815 (52,103) 42,507 2,559,945 CASH FLOWS FROM INVESTING ACTIVITIES Additions to Utility Plant $ Removal Costs in excess of Salvage Value and Other Credits Other Property and Investments Net Cash Used in Investing Activities $ (1,383,885) $ (201,430) 34,162 (1,551,153) $ (2,325,792) (191,352) 39,260 (2,477,884) CASH FLOWS FROM FINANCING ACTIVITIES Advances on Long-Term Debt from FFB Payments on Long-Term Debt to RUS Payments on Long-Term Debt to FFB Payments on Long-Term Debt to CFC Payments on Long-Term Debt to CoBank Payments of Post-retirement Benefits Retirement of Capital Credits Change in Other Equities Net Cash Provided by (Used in) Financing Activities $ $ (313,522) (276,364) (50,950) (315,798) (19,592) (486,031) 95 (1,462,162) $ 1,566,000 (330,354) (240,536) (47,366) (306,822) (20,232) (252,096) 128 368,722 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (676,244) $ CASH FLOWS FROM OPERATING ACTIVITIES Net Margin Adjustments to Reconcile Net Margin to Net Cash Provided by Operating Activities Depreciation Amortization - Regulatory Asset Capital Credits Accrued Post-Retirement Benefits Accounts Receivable Inventories and Other Current Assets Deferred Charges Payables and Accrued Expenses Deferred Credits Net Cash Provided by Operating Activities 45O,783 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 4,048,858 3,598,075 CASH AND CASH EQUIVALENTS - END OF YEAR 3,372,614 $ 4,048,858 647,896 $ 642,732 0 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash Paid During the Year for: Interest $ Income Taxes $ See accompanying notes to financial statements. 0$ -6COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Columbus Electric Cooperative, Inc. (the Cooperative) is a non-profit company organized to provide electric service at the retail level to primarily residential and commercial accounts in a designated service area. Power delivered at retail is purchased wholesale from Tri-State Generation and Transmission Association, Inc. (Tri-State) of which the Cooperative is a member. Any revenues earned in excess of costs incurred are allocated to members of the Cooperative and are reflected as patronage capital equity in the balance sheets. System of Accounts 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). Electric Plant, Maintenance, and Depreciation Electric plant is stated at the original cost of construction which includes the cost of contracted services, direct labor, materials, and overhead items. Contributions from others toward the construction of electric plant are credited to the applicable plant accounts. When property which represents a retirement unit is replaced or removed, the average cost of such property as determined from the continuing property records is credited to electric plant and such cost, together with cost of removal less salvage is charged to the accumulated provision for depreciation. Maintenance and repairs, including the renewal of minor items of plant not comprising a retirement unit, are charged to the appropriate maintenance accounts, except that repairs of transportation and service equipment are charged to clearing accounts and redistributed to operating expense and other accounts. Cash and Cash Equivalents For purposes of the statement of cash flows, the Cooperative considers Cash - General and Temporary Cash Investments to be cash equivalents. Temporary cash investments are short-term investments with maturity dates of one year or less. Inventories Materials and supplies inventories are valued at average unit cost. Electric Revenues The Cooperative’s operating revenues are under the jurisdiction of the New Mexico Public Regulation Commission and the Arizona Corporation Commission. The Cooperative’s tariffs for electric service include power cost and debt cost adjustment clauses under which electric rates charged to customers are adjusted to reflect changes in the cost of power and interest costs. The amounts under billed are reflected on the balance sheet as a current asset and amounts overbilled are shown as a current liability. The net effect on revenue for the audit period is reflected on the statement of income and patronage capital. The Cooperative records electric revenues as billed to customers on a monthly basis. Revenue is not accrued for power -7COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS delivered and not billed at the end of each month. As of July 31, 2016 and 2015, the Cooperative has delivered power for usage which has not yet been billed. It is estimated that unbilled revenue net of power cost amounted to $444,912 and $462,095, respectively. A new accounting pronouncement scheduled to become effective in 2019 will likely result in the Cooperative recognizing the power delivered but not billed at the end of each period on the financial statements. Management is currently assessing the potential dollar impact of this new pronouncement. Allowance for Uncollectible Accounts The Cooperative uses the aging method to allow for uncollectible accounts receivable. During the year, management makes an evaluation of past due accounts to determine collectability. The accounts deemed uncollectible are written off upon approval by the Board of Trustees. Federal Income Taxes The Cooperative has qualified as a tax exempt organization under Section 501(c)(12) of the Internal Revenue Code and files form 990 annually. 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 positions will be sustained upon examination by the Internal Revenue Service (IRS), or other State taxing authority and that all tax benefits are likely to be realized upon settlement with taxing authorities. The Cooperative files income tax returns in the U.S. federal jurisdiction. The Cooperative is no longer subject to income tax examinations by federal taxing authorities for years before 2013. The Cooperative recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. There were no penalties or interest recognized during the years ended July 31, 2016 and 2015, the Cooperative’s taxable year end. Group Concentrations of Credit Risk The Cooperative’s headquarters facility is located in Deming, New Mexico. The service area includes members located in a four county area surrounding the City of Deming. The Cooperative requires a deposit from its members upon connection, which is applied to unpaid bills and fees in the event of default. The deposit accrues interest annually and is returned along with accrued interest after one year of prompt payments. As of July 31, 2016 and 2015, deposits and prepayments on hand totaled $365,004 and $284,926, respectively. Although the Cooperative maintains its bank deposits in institutions that are insured by an agency of the federal government, deposits at times exceed insured amounts. Patronage Capital Certificates Patronage capital from associated organizations is recorded at the stated amount of the certificate. For the fiscal years ended 2016 and 2015, the actual final allocations from the prior calendar year were recorded and no estimate was recorded for the current year due to the Cooperative having a different fiscal year end than the G&T Cooperative. -8COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS The G&T patronage income recognized for the fiscal years 2016 and 2015 is as follows: FY 2016 Final Allocation for 2014 Final Allocation for 2015 $ $ FY 2015 $ 466,467 388,181 388,181 $ 466,467 Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Assets Pledged Substantially all assets are pledged as security for the long-term debt to CoBank, RUS, National Rural Utilities Cooperative Finance Corporation (CFC), and the Federal Financing Bank (FFB). 3. Electric Plant The major classes of electric plant are as follows: July 31, 2016 Intangible Plant Transmission Plant Distribution Plant General Plant Total Electric Plant in Service Construction Work in Progress Total Electric Plant $ $ 2015 411 2,197,846 37,330,116 4,403,912 $ 411 2,146,944 36,348,088 3,991,557 43,932,285 229,751 44,162,036 $ 42,487,000 664,064 43,151,064 $ Provision has been made for depreciation of transmission and distribution plant at straight-line composite rates of 2.75% and 3.00% respectively. -9COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS General plant depreciation rates have been applied on a straight-line basis and are as follows: Structures and Improvements Office Furniture and Fixtures Transportation Equipment Power-Operated Equipment Communications Equipment Laboratory Equipment Store Equipment 2.94% - 6.67% 5.00% - 20.00% 5.00% - 20.00% 5.00% - 10.00% 8.33% 4.76%- 10.00% 4.76% - 6.67% Depreciation for the years ended July 31, 2016 and 2015, was $1,373,719 and $1,310,176, respectively, of which $1,242,179 and $1,190,969 were charged to depreciation expense and $131,540 and $119,207 allocated to other accounts. 4. Investments in Associated Organizations Investments in associated organizations consisted of the following: July 31, 2016 2015 CFC Capital Term Certificates Patronage Capital Membership Tri State Patronage Capital Other 314,310 81,579 1,000 314,529 77,368 1,000 4,265,274 202,679 3,877,093 174,150 4,864,842 o $ 4,444,140 Materials and Supplies Materials and supplies inventories consist of the following: July’ 31, 2016 Construction Materials and Supplies 44O,O43 $ 2015 375,265 -10COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS 6. Deferred Charges Deferred charges consist of the following: July31, 2016 Regulatory Assets System Mapping and Inventory Costs Four Year Work Plan Long Range Plan Cost of Service Study R&S Prepayment Smarthub Conversion Document Vault Implementation 2015 318,768 $ 387,726 69,802 38,655 19,496 527,828 3,911 11,666 390,423 418,053 96,805 1,377,852 $ 1,560,070 26,502 608,004 5,378 14,905 Regulatory assets represent the Cooperative’s required costs associated with the merger of Plains Electric Generation and Transmission Cooperative, Inc. into Tri-State Generation and Transmission Association, Inc. Under the terms of the merger, the Cooperative was required to pay a buy-down of the Plains rates totaling $2,730,637, in order to equalize its Tri-State rates with that of the other TriState members. Of this amount, $1,600,000 was allocated to be recovered from a major consumer of the Cooperative, and the remaining $1,130,637 to be recovered from all other members of the Cooperative. The initial cost to the Cooperative was financed with CFC on a five-year variable rate note. RUS approval has been obtained for the recording of the regulatory assets. Phelps Dodge agreed to forego the reduction in its rate resulting from the Plains and Tri-State merger, and to apply this amount to the $1,600,000 allocation described above, plus interest. The Cooperative has previously recovered this amount from the major consumer. The Cooperative is recovering the portion allocated to the remaining members, plus interest at five percent, through a monthly power cost adjustment, over a 20-year period. At July 31, 2016, the remaining portion to be recovered from this allocation amounted to $318,768. The system mapping and inventory costs are being amortized over 20 years. In a previous reporting period, the Cooperative approved and funded a prepayment of $801,764 in to the National Rural Electric Cooperative Association (NRECA) Retirement Security Plan (the RS Plan) in return for future anticipated discounted contributions. The prepayment is being amortized over a ten-year period. Amortization amounted to $80,176 and $80,177 for the periods ending July 31, 2016 and 2015, respectively. 7. Return of Capital Under the provisions of the mortgage agreements, until the equities and margins equal or exceed 30% of the total assets of the Cooperative, the return to patrons of capital contributed by them is limited generally to 25% of the patronage capital or margins received by the Cooperative in the prior calendar year. The equities and margins of the Cooperative represent 36.03% and 34.09% of the total assets at July 31, 2016 and 2015. Capital credits totaling $486,031 and $252,096 were retired for 2016 and 2015, respectively, and were within guidelines set by RUS for return of capital. -11COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS Patronage Capital Patronage capital consists of the following: July 31, 2016 Prior Years Margins: Assignable Assigned Margins - Seven Months Ended July 31 2015 1,614,392 12,486,262 56,342 14,156,996 $ $ 1,356,101 11,616,210 523,831 13,496,142 Other Equities - Deficit Other equities - deficit consist of the following: July/31, 2016 Prior Years Operating Deficit (283,273) $ 2015 (328,763) The balance of other equities represents operating deficits incurred in prior years. As provided by the Cooperative’s by-laws, non-operating margins are being applied to reduce this balance. 10. Mortgage Notes - RUS Long-term debt due RUS is represented by 35-year mortgage notes payable to the United States of America. Following is a summary of long-term debt due RUS with rollover maturity at various times between 2034 and 2038. July 31, 2016 Fixed Rate Notes 2.000% 4.250% to 4.750% Variable Rate Notes - 0.250% to 0.625% - 2016 and 0.125% and 0.250% - 2015 2015 $ $ Less: Current Maturities $ 2,336,151 18,160 2,403,915 4,947,592 5,175,190 7,283,743 278,000 7,005,743 $ $ 7,597,265 301,000 7,296,265 -12COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS At July 31,2016, the Cooperative had no approved unadvanced loan funds from RUS. Principal and interest installments on the above notes are due in quarterly and monthly amounts. As of July 31, 2016, annual maturities of long-term debt due RUS for the next five years are as follows: 2017 2018 2019 2020 2021 $ 278,000 282,000 287,000 291,000 296,000 11. Mortgage Notes - FFB Long-term debt due FFB is represented by 35-year mortgage notes payable to the United States of America. Following is a summary of long-term debt due FFB and rollover maturity at various times between 2016 and 2043: July 31, 2016 Fixed Rate Notes 4.015% to 4.220% 2.297% to 3.424% Variable Rate Note - 0.265% in 2016 and 0.270% in 2015 2015 3,472,588 7,589,629 $ 837,034 $ Less: Current Maturities $ 11,899,251 287,000 11,612,251 3,538,956 7,770,346 866,313 $ $ 12,175,615 278,000 11,897,615 At July 31, 2016, the Cooperative had $14,705,000 in approved unadvanced loan funds from FFB. Principal payments on FFB advances are deferred for two years. Subsequent to year end the Cooperative drew $1,500,000 on this loan. As of July 31, 2016, annual maturities of long-term debt due FFB for the next five years are as follows: 2017 2018 2019 2020 2021 $ 287,OO0 293,000 304,000 312,000 321,000 -13COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS 12. Mortgage Notes- CFC Following is a summary of long-term debt due CFC and maturing at various times between 2018 and 2038: July 31, 2016 Fixed Rate Notes 7.25% Note 7.35% Note 7.40% Note 7.45% Note 7.50% Note 7.55% Note 2015 $ 32,292 706,271 56,704 167,244 184,622 80,360 $ 49,002 718,503 63,600 175,858 189,448 82,032 $ 1,227,493 55,000 $ 1,278,443 51,000 $ 1,172,493 $ 1,227,443 Less: Current Maturities Principal and interest installments on the above notes are due quarterly in amounts of approximately $35,000. As of July 31,2016, annual maturities of long-term debt due CFC for the next five years are as follows: 2017 2018 2019 2020 2021 $ 55,000 54,000 42,000 46,000 49,000 13. Mortgage Notes- CoBank Long-term debt due CoBank is represented by a 12-year mortgage note. The proceeds of the note were used to retire the five percent loans outstanding with RUS. Following is a summary of long-term debt due CoBank with a maturity in 2024. July 31, 2016 Fixed Rate Note 2.920% Less: Current Maturities $ $ 1,811,873 325,000 1,486,873 2015 $ $ 2,127,671 316,000 1,811,671 -14COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS Principal and interest installments on the above note are due monthly. As of July 31, 2016, annual maturities of long-term debt due CoBank for the next five years are as follows: $ 2017 2018 2019 2020 2021 325,OOO 295,000 210,000 216,000 223,000 14. Short-Term Borrowing The Cooperative has a $2,500,000 line of credit for short-term financing with CFC, at an interest rate not to exceed the prevailing bank prime rate plus one percent. No amounts were outstanding under this line of credit agreement at July 31, 2016 and 2015, respectively. 15. Deferred Credits Deferred credits consist of the following: July 31, 2016 Consumer Advances for Operations and Maintenance Refundable Aid to Construction Irrigation Rebates Other 2015 $ 183,692 185 4,932 185,773 $ 147,299 185 5,212 123,464 $ 374,582 $ 276,160 16. Pension Benefits Narrative Description The National Rural Electric Cooperative Association (NRECA) Retirement Security Plan (the RS Plan) is a defined benefit pension plan qualified under Section 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. It is a multiemployer plan under the accounting standards. The RS Plan sponsor’s Employer Identification Number is 53-0116145 and the RS Plan Number is 333. A unique characteristic of a multiemployer plan compared to a single employer plan is that all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participating employers. Plan Information The Cooperative’s contributions to the RS Plan in 2016 and 2015 represented less than five percent of the total contributions made to the RS Plan by all participating employers. The Cooperative made contributions to the plan of $197,621 in 2016 and $194,123 in 2015. There have been no significant changes that affect the comparability of 2016 and 2015 contributions. In addition to these regular -15COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS contributions, the Cooperative funded a prepayment of $801,764 in 2013 as discussed in Note 6. Amortization expense related to this pension prepayment was $80,176 and $80,177 in 2016 and 2015, respectively. In the RS Plan, a "zone status" determination is not required, and therefore not determined, under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the RS Plan was over 80% funded at January 1,2015 and January 1, 2014 based on the PPA funding target and PPA actuarial value of assets on those dates. Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the RS Plan and may change as a result of plan experience. The Cooperative’s employees are also eligible to participate in the NRECA Savings Plan 401(k). The Cooperative contributes six percent of the participants’ salaries subject to the employees’ level of participation. Cooperative contributions were $70,826 and $71,532 for the years ended July 31, 2016 and 2015, respectively. 17. Rate Matters The rates currently in effect for the Cooperative were approved in 2013, by the New Mexico Public Regulation Commission and approved in 2014 by the Arizona Corporation Commission. 18. Litigation, Commitments, and Subsequent Events No litigation is pending against the Cooperative that would have a material effect on these financial statements. Under its wholesale power agreement, the Cooperative is committed to purchase its electric power and energy requirements from Tri-State until December 31, 2040. The Cooperative is committed to a contractor for the Camp Cody West Substation. The total amount of the contract is $756,691 and the Cooperative has not incurred any progress billings to date. The Cooperative’s management has evaluated subsequent events through September 30, 2016, the date which the financial statements were available for issue. 19. Related Party Transactions As mentioned in Note 18, the Cooperative purchases all of its power from Tri-State and as a member of the Association; the Cooperative has representation on its Board of Directors. During the years ended July 31, 2016 and 2015, the Cooperative purchased power from Tri-State in the amount of $8,290,725 and $7,826,382, respectively. Amounts payable to Tri-State at July 31, 2016 and 2015, for purchased power amounted to $1,019,043 and $905,434, respectively. The Cooperative was allocated capital credits from Tri-State of $388,181 and $466,467 for the years ended July 31, 2016 and 2015, respectively. -16COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS 20. Post-retirement Benefits The Cooperative provides post-retirement medical benefits for eligible employees. For purposes of this statement, the written plan in effect is the substantive plan, and is considered a defined benefit plan. All employees who retired before January 1, 1995 are eligible for the medical insurance premium benefit provided through the plan. The Cooperative pays 100% of the medical insurance premiums (including dependent coverage) for all eligible participants. Currently there are only seven participants in the plan. During 2010, the Cooperative made changes to the insurance plan that significantly reduced the premiums for Medicare eligible participants. The weighted average discount rate used to develop the accumulated post-retirement benefit obligation was 5.25%. The weighted average discount rate used to determine the net post-retirement benefit cost for the years ended July 31, 2016 and 2015 was 4%. The assumed health care cost trend rate was 7% in 2013, declining to an ultimate level of 5.50% in 2016 and later years. Amounts recognized in the Cooperative’s July 31, 2016 and 2015, financial statements and funded status of the plan follows: July 31, 2016 I) Net Post-retirement Benefit Cost Interest Cost II) Accumulated Post-retirement Benefit Obligation (APBO) Reconciliation APBO Balance at Beginning of Year Interest Costs Benefits Paid APBO at End of Year Ill) Amounts Recognized in the Balance Sheet Current Liability Non Current Liability Provision for Post-retirement Benefits $ $ $ $ $ $ 5,916 5,916 (157,892) (5,916) 19,592 (144,216) 15,480 128,736 144,216 2015 $ $ $ $ $ $ 6,828 6,828 (171,296) (6,828) 20,232 (157,892) 20,000 137,892 157,892 The Cooperative has not funded plan assets as of July 31,2016. No unrecognized actuarial gains or losses, or unamortized transition obligation amounts are included in the calculation of the accumulated post-retirement benefit obligation at July 31,2016. -17COLUMBUS ELECTRIC COOPERATIVE, INC. NOTES TO FINANCIAL STATEMENTS Estimated future benefit payments for the next five years and the five years thereafter are as follows: 2017 2018 2019 2020 2021 2022-2026 $ 15,480 15,000 15,000 15,000 15,000 75,000 ACCOMPANYING INFORMATION -18COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 1 ELECTRIC PLANT FOR THE YEAR ENDED JULY 31, 2016 Balance 8/1/2015 Balance 7/31/2016 Retirements Additions CLASSIFIED ELECTRIC PLANT IN SERVICE Intangible Plant Organization Transmission Plant Land and Land Rights Roads and Trails Station Equipment Poles, Towers, and Fixtures Overhead Conductors and Devices Distribution Plant Land and Land Rights Station Equipment Poles, Towers, and Fixtures Overhead Conductors and Devices Underground Conductors and Devices Line Transformers Services Meters Installations on Consumers’ Premises $ 13,557 19,200 354,304 1,039,684 720,199 $ 2,146,944 Total Classified Electric Plant in Service $ $ 47,610 3,544,830 12,542,750 7,276,213 1,109,211 6,826,771 2,737,554 1,852,111 411,038 36,348,088 $ 21,947 1,216,505 511,151 1,720,835 14,831 104,718 205,469 40,167 155,934 3,991,557 $ 42,487,000 Construction Work in Progress Total Utility Plant 0$ 411 $ $ General Plant Land and Land Rights Structures and Improvements Office Furniture and Equipment Transportation Equipment Store Equipment Tools, Shop, and Garage Equipment Laboratory Equipment Power-Operated Equipment Communications Equipment 411 $ 664,064 $ 43,151,064 $ $ 60,983 345 61,328 926,597 143,001 13,914 105,207 90,794 29,899 10,334 1,319,746 13,557 19,200 354,304 1,090,243 720,542 2,197,846 10,424 2 10,426 47,610 3,544,830 13,267,392 7,391,845 1,121,747 6,838,259 2,820,643 1,882,010 415,780 37,330,116 201,955 27,369 1,378 93,719 7,705 5,592 337,718 $ 24,769 $ 21,947 1,528,304 536,072 1,696,066 14,831 107,622 208,273 134,863 155,934 4,403,912 372,913 $ 43,932,285 311,799 24,921 24,769 2,904 2,804 94,696 $ 437,124 $ $ 1,818,198 $ (434,313) $ 1,383,885 $ 229,751 372,913 44,162,036 -19COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 2 ACCUMULATED PROVISION FOR DEPRECIATION FOR THE YEAR ENDED JULY 31, 2016 Balance 8/1/2015 Depreciation Accruals Balance 7/31/2016 Retirements Transmission Plant $ 1,192,734 $ 54,859 $ 20,334 $ 1,227,259 Distribution Plant $ 13,242,811 $ 1,095,350 $ 529,841 $ 13,808,320 $ $ $ 748,045 366,270 1,018,449 14,365 267,347 40,167 100,417 2,555,060 $ 39,675 40,933 124,920 201 11,362 1,555 4,864 223,510 $ 24,769 $ 787,720 407,203 1,118,600 14,566 278,709 41,722 105,281 2,753,801 $ 16,990,605 $ 1,373,719 $ 574,944 General Plant Structures and Improvements Office Furniture and Fixtures Transportation Equipment Store Equipment Laboratory Equipment Power-Operated Equipment Communications Equipment Total General Plant Total Classified Electric Plant in Service Retirement Work in Progress Total 24,769 (65,183) $ 16,925,422 (601) $ 1,373,719 574,343 (1) (1) Charged to Depreciation Expense Charged to Clearing and Other Accounts $ (2) 1,242,179 131,540 $ 1,373,719 (2) Cost of Units Retired Cost of Removal Less Salvage and Other Credits Loss Due to Retirement 372,913 201,430 $ 574,343 $ 17,789,380 (64,582) 17,724,798 -20COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 3 INVESTMENTS IN ASSOCIATED ORGANIZATIONS JULY 31, 2016 AND 2015 July 31, 2016 Memberships CFC CoBank Other Patronage Capital Valley Telephone Cooperative, Inc. NISC NRTC CoBank CFC Federated Rural Electric Insurance Exchange Touchstone Energy Cooperative, Inc. Western United Electric Supply Corporation Tri State Electric Cooperative, Inc. Equity Contribution NMRECA Capital Term Certificates CFC Total Investments in Associated Organizations 2015 1,000 1,000 220 1,000 1,000 220 7,584 17,304 867 22,830 81,579 115,066 3,013 30,143 4,265,274 8,190 13,409 867 17,439 77,368 99,844 3,013 25,516 3,877,093 4,652 4,652 314,310 314,529 4,864,842 $ 4,444,140 -21COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 4 PATRONAGE CAPITAL JULY 31, 2016 Assigned Columbus Assi~lnable Columbus Year 1971 1973 1974 1975 1976 1977 1978 1979 1980 1989 1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $ G&T 20,263 113 582 166 892 252 096 486 047 214 708 418 181 212 928 197 553 148 790 124 846 175 099 162 385 167 771 461 984 423 268 485 453 454 575 125 347 $ G&T Retired Balance 20,263 177,472 166,892 252,096 486,047 63,890 214 708 418 181 212 928 197 553 148 790 124 846 175 099 162 385 167 771 461 984 423,268 485,453 454,575 125,347 92,591 313,408 361,279 374,730 241,300 219,789 119,920 139,956 775,217 575,720 953,572 1,090,792 931,077 1,167,924 1,356,099 1,614,392 56,342 92,591 313,408 361,279 374,730 241,300 219,789 119,920 139,956 24,222 443,950 582,937 533,184 629,279 889,633 7 (months) $ 1,226,211 56,342 1,282,553 750,995 575,720 5O9,622 507,855 397,893 538,645 466,466 388,181 $ 388,181 $ 9,685,355 $ 3,903,677 $ 1,102,770 $ 14,156,996 -22COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 5 MORTGAGE NOTES JULY 31, 2016 RUS Mortgage Notes Note Number Date of Note 1B240 1 B241 1B245 1B246 1 B250 1B255 1B256 1 B260 1 B261 1 B262 1B263 1B264 1 B265 1B266 1B267 04-01-99 04-01-99 04-01-99 04-01-99 08-01-01 08-01-01 08-01-01 11-03-03 11-03-03 11-03-03 11-03-03 11-03-03 11-03-03 11-03-03 11-03-03 Interest Rate * * * * * * * * * * * Principal Amount 0.250% 4.750% 4.750% 0.250% 0.625% 0.625% 0.375% 0.375% 4.250% 4.375% 0.375% 0.625% 0.375% 0.250% 0.375% $ Total RUS Principal Repa~,ments Amount Unadvanced 592,000 451,500 500,000 543,500 436,500 48,500 388,000 800,000 1,000,000 1,100,000 655,500 1,800,000 877,000 771,000 107,500 $ $ 10,071,000 $ $ 0 241,798 158,249 170,404 212,699 152,205 16,912 131,959 228,238 188,991 197,705 174,282 475,064 223,262 189,713 25,776 Net Obligation $ 350,202 293,251 329,596 330,801 284,295 31,588 256,041 571,762 811,009 902,295 481,218 1,324,936 653,738 581,287 81,724 $ 2,787,257 $ 7,283,743 $ 99,279 66,748 38,362 162,966 123,023 129,226 181,335 75,078 41,945 48,787 $ $ 966,749 $ 11,899,251 $ 211,708 96,357 67,031 52,459 47,378 16,640 83,729 $ $ 575,302 $ 1,227,493 FFB Mortgage Notes H0010 H0015 H0020 H0025 H0030 H0035 H0040 H0045 F0050 F0055 Unadvanced 03-02-09 03-02-09 03-02-09 03-02-09 03-02-09 03-02-09 01-03-13 11-12-13 06-20-14 02-26-15 * 4.220% 4.220% 4.015% 0.265% 4.083% 2.934% 2.567% 3.424% 3.109% 2.297% $ Total FFB 1,100,000 800,000 400,000 1,000,000 1,500,000 1,500,000 2,500,000 1,500,000 1,000,000 1,566,000 14,705,000 $ 27,571,000 $ 1,000,721 733,252 361,638 837,034 1,376,977 1,370,774 2,318,665 1,424,922 958,055 1,517,213 14,705,000 $ 14,705,000 CFC Mortgage Notes 9002 9003 9004 9005 9006 9009 9010 12-23-82 09-30-88 05-10-93 09-30-97 04-01-99 08-01-01 06-07-07 7.250% 7.400% 7.450% 7.450% 7.500% 7.550% 7.350% $ Total CFC 244,000 153,061 140,816 145,918 232,000 97,000 790,000 $ $ 1,802,795 $ 0 32,292 56,704 73,785 93,459 184,622 80,360 706,271 CoBankMortgage Note 2611238 05-31-12 2.920% $ 3,069,144 $ 0 $ 1,257,271 $ 1,811,873 Net obligation includes $278,000 due RUS, $287,000 due FFB, $55,000 due CFC, and $325,000 due CoBank payable within one year, classified as current liabilities on the balance sheet. * Indicates variable rate notes with current interest rate. -23COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 6 ADMINISTRATIVE AND GENERAL EXPENSES FOR THE YEARS ENDED JULY 31, 2016 AND 2015 July 31, 2016 Administrative and General Salaries 496,521 Increase 2015 $ 488,737 (Decrease) $ 7,784 Office Supplies and Expense 67,389 59,262 8,127 Outside Services Employed 44,729 33,781 10,948 227,989 191,205 36,784 Annual Meeting Expense 28,288 27,927 361 Institutional and Goodwill Advertising 44,158 50,839 (6,681) Dues to Associated Organizations 68,655 61,647 7,008 Miscellaneous General Expense 4,359 5,679 (1,320) Utility Commission Related Expenses 69,150 68,116 1,034 Safety Expense 60,185 93,024 (32,839) 107,934 107,370 564 Directors’ Fees and Expense Maintenance of General Plant Total 1,219,357 $ 1,187,587 $ 31,770 -24COLUMBUS ELECTRIC COOPERATIVE, INC. Schedule 7 FIVE YEAR COMPARATIVE DATA 2016 OPERATING REVENUE Residential Irrigation Commercial and Industrial Public Buildings and Other Authorities (Over) Under Billed Power Cost Other Operating Revenues Total Operating Revenue OPERATING EXPENSES Purchased Power Transmission Expense Distribution - Operation Distribution - Maintenance Customer Accounts Customer Service and Information Administrative and General Expense Depreciation and Amortization Other Interest Other Deductions (Income) Total Operating Expenses OPERATING MARGINS - Before Fixed Charges Forthe Years Ended July 31, 2013 2014 4,112,396 6,087,404 3,760,521 23,813 (115,411) 150,797 $ 14,019,520 $ 3,909,074 6,090,551 3,573,206 23,834 203,935 122,860 $ 13,923,460 $ 3,913,551 6,300,091 3,552,464 23,850 (597,090) 96,605 $ 13,289,471 $ 3,901,217 6,288,297 3,500,507 22,082 107,133 27,705 $ 13,846,941 $ $ 8,290,725 36,230 840,468 281,666 633,796 39,962 1,219,357 1,313,834 4,223 6,030 $ 12,666,291 $ $ 8,074,377 25,129 888,859 246,223 668,158 50,199 1,143,864 1,213,135 4,057 $ $ 7,826,382 39,290 847,852 210,116 612,041 48,456 1,187,587 1,259,130 4,272 8,568 12,043,694 $ 12,314,001 $ 8,165,909 27,359 936,461 280,764 672,851 43,210 1,209,276 1,172,325 7,262 23,844 12,539,261 $ 7,760,428 17,752 931,410 323,267 616,794 109,672 1,202,497 1,156,321 7,516 (31,890) $ 12,093,767 $ $ 1,879,766 $ $ 1,307,680 1,353,229 646,806 644,568 609,806 $ 560,660 1,000,247 565,434 706,423 $ 1,235,198 $ 365,664 $ 747,020 $ 434,813 $ 388,181 66,683 454,864 $ 466,467 79,015 545,482 $ $ 397,893 47,686 445,579 $ $ 538,645 69,771 608,416 $ 507,855 29,123 536,978 $ 974,080 $ 1,192,599 $ 971,791 30,612 28,494 $ NET OPERATING MARGINS $ 1,161,287 $ 1,780,680 30,993 41,680 NON-OPERATING MARGINS Interest Income and Other Income Miscellaneous Statistics Meters at End of Year MWH Sales Times Interest Earned Ratio Debt Service Coverage Equity to Total Assets Cost of Power per MWH 975,470 4,043,030 5,453,135 3,497,073 21,032 54,293 25,451 $ 13,094,014 $ CAPITAL CREDITS G&T Capital Credits Other Capital Credits Total Capital Credits NET MARGINS 2012 $ FIXED CHARGES InterestonLong-Term Debt OPERATING MARGINS - After Fixed Charges 2015 $ 1,192,280 5,031 98,699 2.84 1.97 36.03 74.67 $ $ 1,822,360 5,069 98,165 3.83 2.38 34.09 73.31 $ 1,004,692 5,045 101,727 2.65 1.91 31.79 70.33 $ $ 1,221,093 5,151 105,743 3.18 2.08 31.68 70.61 22,237 $ 994,028 5,273 98,869 2.76 2.10 30.48 70.16 COMPLIANCE AND INTERNAL CONTROL SECTION REPORT ON COMPLIANCE WITH ASPECTS OF CONTRACTUAL AGREEMENTS AND REGULATORY REQUIREMENTS FOR ELECTRIC BORROWERS Independent Auditor’s Report Board of Trustees Columbus Electric Cooperative, Inc. Deming, New Mexico We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audit contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Columbus Electric Cooperative, Inc. (the Cooperative), which comprise the balance sheet as of July 31,2016, and the related statements of revenue and patronage capital, changes in cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated September 30, 2016. In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2016, on our consideration of the Cooperative’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. No reports other than the reports referred to above and our schedule of findings and recommendations related to our audit have been furnished to management. In connection with our audit, nothing came to our attention that caused us to believe that the Cooperative failed to comply with the terms, covenants, provisions, or conditions of their loan, grant, and security instruments as set forth in 7 CFR Part 1773, Policy on Audits of Rural Utilities Service Borrowers, §1773.33 and clarified in the RUS policy memorandum dated February 7, 2014, insofar as they relate to accounting matters as enumerated below. However, our audit was not directed primarily toward obtaining knowledge of noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Cooperative’s noncompliance with the above-referenced terms, covenants, provisions, or conditions of the contractual agreements and regulatory requirements, insofar as they relate to accounting matters. In connection with our audit, we noted no matters regarding the Cooperative’s accounting and records to indicate that the Cooperative did not: Maintain adequate and effective accounting procedures; Utilize adequate and fair methods for accumulating and recording labor, material, and overhead costs, and the distribution of these costs to construction, retirement, and maintenance or other expense accounts; Reconcile continuing property records to the controlling general ledger plant accounts; Clear construction accounts and accrue depreciation on completed construction; -25- -26Record and properly price the retirement of plant; Seek approval of the sale, lease or transfer capital assets and disposition of proceeds for the sale or lease of plant, material, or scrap; Maintain adequate control over materials and supplies; Prepare accurate and timely Financial and Operating Reports; Obtain written RUS approval to enter into any contract for the management, operation, or maintenance of the borrower’s system if the contract covers all or substantially all of the electric system; Disclose material related party transactions in the financial statements. In accordance with requirements for related parties in generally accepted accounting principles; Record depreciation in accordance with RUS requirements (See RUS Bulletin 183-1, Depreciation Rates and Procedures); Comply with the requirements for the detailed schedule of deferred debits and deferred credits; and Comply with the requirements for the detailed schedule of investments. This report is intended solely for the information and use of the Board of Trustees, management, Rural Utilities Service, and supplemental lenders and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. Certified Public Accountants Lubbock, Texas September 30, 2016 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Independent Auditor’s Report Board of Trustees Columbus Electric Cooperative, Inc. Deming, New Mexico We have audited the financial statements of Columbus Electric Cooperative, Inc. (the Cooperative) as of and for the year ended July 31, 2016, and have issued our report thereon dated September 30, 2016. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reportin.q Management of the Cooperative is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the Cooperative’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Cooperative’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Cooperative’s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Cooperative’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. -27- -28Purpose of this Report This report is intended solely for the information of the Board of Trustees, management, Rural Utilities Service, and supplemental lenders, and is not intended to be and should not be used by anyone other than these specified parties. Certified Public Accountants Lubbock, Texas September 30, 2016