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BP Business Economic Loss Claim Appeal 2015-1339: Grants properly included as revenue


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

This is a BP appeal of a Business Economic Loss award to an Opelika, Alabama (Zone D) based organization that provides assistance to victims of domestic violence. Following analysis of Claimant’s financial data, certain matching identification issues were identified and the Annual Variable Margin Methodology was employed for the purpose of correcting them. A pre-RTP award of $61,049.95 ensued. BP does not challenge the analysis or the methodology; however, it does fault the Claims Administrator in his handling of certain of Claimant’s grant revenue.

More specifically, BP asserts that Claimant performs services and incurs expenses for which it, in turn, obtains reimbursement from various funding sources, primarily of a governmental nature. At issue here are grant revenues Claimant receives on a periodic basis from the Alabama Office of Prosecution Services as authorized by 1975 Code of Alabama Section 30-6-11. On the assumption that those revenues are received in reimbursement for certain Claimant expenses, BP contends that Claimant’s financial data indicates that they were not matched with their corresponding expenses. In other words, they were recorded upon receipt, rather than during the months when the corresponding expenses were actually incurred. Moreover, if those grants relate to program expenses incurred by Claimant as their classification as “reimbursable costs” indicates, then they should be attributed to the months when those expenses were actually incurred. BP also points to what it perceives to be irregularities in OPS revenues recorded in the months of July and August, 2009.

Finally, because Claimant’s OPS grant revenues represent expense reimbursements, BP contends that the claims analyst should have considered whether that grant revenue (and the corresponding reimbursed expenses) should have been excluded from the calculation under CAO Policy 328 v. 2. According to that policy, the Claims Administrator declares that “reimbursed expenses”, among other items, shall not typically be treated as “revenue” for the purposes of the various calculations to be performed under the terms of the Settlement Agreement with regard to BEL claims. BP submits that if those revenues are excluded, Claimant fails the Exhibit 4B causation tests. It requests that the claim be remanded with instructions to obtain the information necessary to properly allocate Claimant’s OPS grant revenue and to determine whether Claimant is able to pass the requisite causation tests; in the alternative, it submits Initial and Final Proposal Compensation Amounts of zero dollars.

Claimant, in response, asserts that unlike the fixed revenues it receives on an annual basis from [XXXXX] and the [XXXXX] (which it allocates evenly on a monthly basis), its OPS income represents funds collected by local Probate Judges on the issuance of marriage licenses and remitted to the local district attorney’s office to be used “exclusively for the purpose of establishing, maintaining or funding, or any combination thereof, of domestic violence shelters.” This is a general revenue funding source and not a funding source that reimburses particular expenses; i.e., there are no “reimbursable costs” as alleged by BP. To further quote Claimant:

BP is correct in that the Claimant records OPS revenues when they are received. The OPS funding is not predictable in amount nor in timing, thus there are no means to accurately estimate and accrue such funding. Also, the district attorney’s distributions are somewhat discretionary in that funding can be given to any domestic violence shelter, not only this particular shelter. The Claimant asserts these revenues should be recorded when received and an allocation by the Claims Administrator to other months would be inappropriate.

* * *

Lastly, BP suggests that pursuant to Final Policy 328 v.2: Business Economic Loss Claims: Non-Revenue Items of Entities, the Claimant’s OPS revenues are “not typically earned as revenue under the normal course of operations” and should be excluded. Once again, BP is incorrect. The OPS revenue began almost 16 years ago with the enactment of the statute. This funding source has been and continues to be a typical, regular and continuous source of revenue for the Claimant under its normal course of operations.

It is by now well understood that income received by non-profit entities in the form of grant monies or contributions shall typically be treated as revenue of that entity for the purposes of the various calculations required by the Settlement Agreement. See CAO Policy 307 v. 2 which became an order of the court on April 9, 2013. The record reflects that Claimant’s OPS revenues constitute grants or contributions by the District Attorney for the purpose of supporting and furthering Claimant’s activities. They are not intended to reimburse particular expenses and therefore cannot be considered “reimbursed expenses” as contemplated by Policy 328 v. 2.

BP’s contention that these revenues should be reallocated to match Claimant’s expenses fails for the same reason. Moreover, application of the AVM Methodology to correct matching issues does not require smoothing of revenues except in cases of obvious error, etc.

De novo review of this entire record reflects the customary, careful scrutiny by the claims analyst of this Claimant’s financial data. There is no error. Accordingly, this BP appeal is denied and Claimant’s Final Proposal is hereby selected.

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