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BP Business Economic Loss Claim Appeal 2016-347: Grants to non-profits are 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.

At issue is the Settlement Program’s (“the SP”) treatment of a $5,000 grant received by claimant a non-profit residential rehabilitation center for persons afflicted with substance abuse. The SP removed the grant from revenue, which, in turn (Claimant asserts), caused it to fail the causation tests.

As explained in its communications with the SP, and in its submissions on appeal, it is greatly dependent on grants, contributions and gifts for its income. Claimant offers as examples of the grants it received during the time frame in question, a monthly grant from the [XXXXX]; grants for purchasing computers, printers and software; grants used for buying reading material for 12-step recovery materials; grants used for buying identification cards; grants used for transportation; and a grant used for providing the residents with proper credentials to work in Oil Spill jobs, such as Hazmat Training. Among the grants were some, like the $5,000 grant in question, used for “brick and motor” purposes. This grant was used to expand an area of building so that a larger freezer could be installed to store more frozen foods. The SP’s reasoning for excluding this grant from revenue was stated Note 12 of the Calculation Notes as “The Claimant received a grant in June 2009 to upgrade the property…Accounting Review created an adjustment to remove this grant received for capital improvements.”

BP says this was proper, relying on Policy 328 v. 2, which lists various items that “shall not typically be treated as ‘revenue’…,” because they “are not typically earned as revenue under the normal course of operations in an arm’s length transaction.” Included in that list is “(h) grants for ‘for-profit’ entities.” Thus, grants to “non-profit’ entities implicitly would not be excluded from revenue. That distinction is made explicit by Policy 307 v. 2, which states that “[i]ncome received by non-profit entities in the from of grant monies or contributions shall typically be treated as revenue for that entity for purposes of the various required calculations under the terms of the Settlement Agreement.” All grants are in response to a grant request and are frequently one-time, non-recurring events; thus this policy’s express inclusion of “grant monies” as revenue is instructive. The fact that this grant was used for a particular purpose does not disqualify it as a grant.

This particular claimant’s recurring revenue streams include grants of this sort, and, indeed, it appears that its income is largely dependent on grants, contributions and gifts, such that they are an integral part of its normal business operations.

The appeal is upheld and the exclusion of the $5,000 grant from Claimant’s revenue is overturned. The claim is remanded with instructions that the SP further review it with those funds included in revenue. (Claimant offers a detailed explanation in its Reply Brief of why its earlier placement of the receipt of this grant as being in June of 2009 is now determined to have been in error, and that the only months in which it could have been received were January 2007, December 2007 and January 2010. To the extent necessary, the SP will consider that explanation of the timing of the grant in reassessing this claim.)

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