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BP Business Economic Loss Claim Appeal 2016-1923: Private School’s Changes in “Pledges Receivable” Treated As “Operational Income”

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.

Claimant, a private school located in Tampa, Florida, appeals the denial of its BEL claim on the basis it failed to satisfy the causation requirements of Exhibit 4B of the Settlement Agreement.
Claimant asserts when applying policy 495 and the Education Methodology the Settlement Program(SP) improperly reallocated certain increments of  “Contributions/Donations” income by treating it as “tuition-related” and moving it from the period of July-December to September-July. Claimant contends this reallocation resulted in its failure to satisfy the causation requirements of the Settlement Agreement. Claimant argues as a threshold issue that revenues designated to “Changes in pledges receivables” are restricted and used for capital expenditures and endowment purposes and should not have been categorized as  “contribution/donations” and considered “tuition-related”. Claimant thus argues these amounts should have remained to the months pledged and recorded as such.
BP counters and observes two entries are disputed: one revenue contribution pledged in September 2009 and the other in May 2011. BP contends since the amounts pledged were not actually received until later months it was proper for the SP to allocate those sums to the months when actually received. A review of the record does not support claimant’s contentions.Claimant’s academic year runs from August to June so most expenses are incurred during that period.
In response to inquiry from the SP, claimant explained “restricted contributions” as “temporarily restricted gift cash received (i.e.,not endowment gifts). They include
unrestricted gifts used in operations *** and capital gifts to purchase buildings and equipment.” It is noted that ,one of claimant’s income statements identifies “Changes in Pledges Receivables” as part of a temporarily restricted fund explained previously.
Claimant further explained:”The restricted contribution accounts are actual cash gifts received. The change in pledges receivable is the net increase or decrease for the month in pledges. If the change in pledges receivable is a positive amount that means we added new pledges that month over and above the cash payments for previous pledges.***.” Finally, the program reviewer, in “Restricted Contribution” explained: “The Claimant’s P&Ls list two line items called ‘Restricted Contributions’ in the revenue section: The first line item contains temporarily restricted cash gifts received to be used in operations or for capital expenditures. The portion of the account pertaining to capital expenditures was reversed and restated as a separate line item, classified as Other Revenue, as capital expenditures are not considered to be part of the facility’s normal operations of the academic year, and remains in the period reported.***. The remaining balance
was classified as revenue***.”
Against this backdrop,this panelist concludes the SP was correct in its determination that the line item “Changes in pledges receivable” was operational income because it was only temporarily restricted; that it should be counted when received, not pledged; that it was attributable to the academic period of September-July; and that it should be allocated over those months because it was operational income. There is no error. Remand is not warranted. The decision of the Claims Administrator is affirmed and the appeal of claimant is denied.

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