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BP Business Economic Loss Claim Appeal 2016-252: Grants used for capital improvements 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.

This Claimant is a non-profit religious organization, a church, located in Lafayette, Louisiana (Zone C). Its Business Economic Loss claim was denied by the Claims Administrator for failure to satisfy the Settlement Agreement Exhibit 4B causation tests. Claimant appeals, urging that it would have passed those tests had not the Claims Administrator excluded from its revenue grants and donations it received at various times from its members.

The analyst’s Calculation Notes record the following with respect to this issue:

Accounting Review conducted outreach to ascertain the objective/purpose for which the Church Building Fund/Church Building—Other Funds were created, and how the objective/purpose applies to each year in 2007-2011. The Claimant purchased their current property on May 31, 2007. The property at that time was a vacant grocery store and needed renovations to transform the building into a church. In 2007, a Capital Campaign for building fund was established to allow people to give towards overall expenses of the building and property. On the onset, it was established the designated building funds could be used for mortgage payments, renovations, maintenance, repairs, utilities, property insurance or any expense related to the building itself. These expenses are listed on the P&L as Occupancy Expenses under the Building Class. Any funds/donations designated for the building (or Capital Campaign) beginning in the year 2007 to 2011 (and each year afterwards) were deposited in our Building Class account and used for said purposes. Refer to p. 1. Accounting Review excluded the Building Fund/Capital Campaign Fund accounts since they were initially created for capital improvement purposes. The exclusion is in accordance with policy 328, v. 2.

CAO Approved Policy 328 v. 2 is a final policy which deals with non-revenue items of entities. It states that “capital assessments” “shall not typically be treated as ‘revenue for purposes of the various calculations to be performed under the terms of the Settlement Agreement with regard to entities asserting BEL claims.’” Claimant argues that the donations it received from its members were not the result of any sort of “assessment” or obligation but were freely given. It cites, instead, CAO Approved Policy 307 v. 2 which provides, in part, as follows:

(a) income received by non—profit entities in the form 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.

BP argues that since the donations at issue here were intended to be used in connection with capital purchases, that income should not be treated as revenue because it was not earned in the normal course of Claimant’s operations. In other words, these were extraordinary, one-time start-up donations used to purchase capital assets.

Policy 307 v. 2 provided a needed clarification of the Settlement Agreement with regard to nonprofit entities whose income is often derived from non-traditional sources such as grants and donations. It makes no distinction regarding the purpose for which such funds are utilized. It is now a court decision which is binding upon the parties, Settlement Program, Claims Administrator and Appeal Panelists. Consequently, there is no authority which supports BP’s argument that such funds utilized for capital purposes must be excluded from revenue.

For the foregoing reasons, the Claims Administrator committed error in excluding the referenced grants and donations from Claimant’s revenue. This Claimant appeal is hereby sustained and the claim is remanded to the Claims Administrator for further processing in keeping with this opinion.

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