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BP Business Economic Loss Claim Appeal 2015-1811: Accounting firm properly treated under AVM rather than Professional Services

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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.


In this appeal, BP challenges a Business Economic Loss award to a Panama City, Florida (Zone C) certified public accounting firm. It asserts that the Claims Administrator wrongly (1) utilized the Annual Variable Margin Methodology instead of the Professional Services Methodology in addressing matching issues; and (2) treated an August, 2011 revenue spike recorded on Claimant’s profit and loss statements.

Careful study of all of the relevant documents contained in this record convinces this panelist that those claims are insupportable.

While it is true that Claimant’s NAICS Code (541211, Offices of Certified Public Accountants) is assigned to the Professional Services Matching Framework, it has always been well understood that:

A claimant with a given NAICS code will not automatically be assigned to a given methodology by virtue of the NAICS code if, in the judgment of the Claims Administrator’s office, there are factors that indicate that revenues and expenses would be more sufficiently matched by applying an alternate methodology. As a result, some businesses within a certain three-digit NAICS Subsector may be treated under a different methodology from others within the same Subsector. CAO Policy 495, Attachment A, Footnote 9.

The claims analyst conducted the customary, thorough investigation into this Claimant’s revenue cycle. Calculation Note 7, Document I.D. states, in part, as follows:

The claimant provided insight into the business’s revenue cycle. Revenue is recorded when an invoice is provided to the client. Projects are billed when completed except those of longer than normal duration which are progress billed as work is completed. The typical project is tax return preparation or monthly bookkeeping both of which are normally completed in a 7 to 10 day window. The typical lapse in time between when the customer/client is invoiced and when payment is received is less than 7 days.

Calculation Note 11, found on the same document, contains this report:

This claim was classified under a Professional Services NAICS code. The DWH accountant has utilized the Annual Variable Margin (AVM) methodology based on the following factor: the business operates on a short earnings cycle. Accordingly, services are rendered on a more consistent monthly basis and therefore, the AVM methodology was applied.

This panelist has no quarrel with the judgment exercised by the claims analyst as evidenced by these notes.

The August, 2011 revenue spike was likewise investigated by the claims analyst. Calculation Note 7 also recites, in part, as follows:

DWH Accountant noted an increase in revenues in August 2011. In August of 2011 the claimant revived payments from 3 clients based on their recovery of damages through the GCCF. These amounts were 19,267.00, 15,350.00 and 38,582.40 for a total of 73,199.40. DWH Accountant deemed no further inquiry necessary.

Again, this panelist is satisfied with the judgment exercised by the claims analyst in investigating and deciding this issue.

In its briefs, BP makes much over the fact that Claimant, in its Initial Proposal memorandum, introduced numerous billing records and documents for the purpose of demonstrating that even if the Professional Services Methodology had been applied, the resulting difference in compensation amount would have been negligible. Consequently, it submitted that the claim should be remanded to the Claims Administrator with instructions to recalculate the award using the Professional Services Methodology “after evaluating the new evidence submitted by Claimant and determining whether this evidence provides the necessary inputs for the application of PSM.” Alternatively, BP submitted a zero dollar Final Proposal compensation amount.

As the above discussion makes clear, this panelist finds no merit to those assertions.

For the foregoing reasons, this BP appeal is denied. The determination of the Claims Administrator is hereby affirmed and Claimant’s Final Proposal is therefore selected.

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    Even though we won the appeal, BP filed a request for discretionary review. We filed an objection to the request. So we are once again in limbo, waiting to hear hopefully that the Court denies BP’s request for the review.

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