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BP Business Economic Loss Claim Appeal 2016-1910: Bad Debt Entries Treated As Variable Expenses Per Policy 495 and SA Exhibit 4D

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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.

Claimant is a comprehensive multi-specialty health clinic in Meridian, Mississippi. The Settlement Program determined that Claimant did not satisfy the causation tests established by Exhibit 4B of the Settlement Agreement and denied the claim. Claimant appeals, asserting the Claims Administrator misapplied Policy 495 when it adjusted two line items, which re-characterized “contra revenue” line items as variable expenses, and which resulted in Claimant failing to meet any of the tests set forth in Exhibit 4B.
BP argues Claimant recorded bad debt expenses and write-offs as contra revenue line items —reductions to its revenues—rather than as separate expenses on its profit and loss statements. It maintains the Settlement Program confirmed which specific line items were “Bad Debt in nature” based on descriptions provided by Claimant, and that Exhibit 4D to the Settlement Agreement provides that “Bad Debt” entries are to be treated as variable expenses.
Claimant argues the adjustments to its revenues were made in error, as the accounting reviewers did not have sufficient information to support the action they took.
Policy 495 provides that “In order to achieve sufficient ‘matching’, adjustments to the claimant’s contemporaneous accounting records are best made by the CSSP
Accounting Vendors after appropriate inquiry and gathering of additional documents and/or information, if necessary, from the claimant.” (Pol-495 at 4). In this case there was such an inquiry, as documented in the Accountant Causation Calculation Schedule–P&L Detail for Causation Denial.
The reviewers detailed a thorough and conscientious investigation and analysis of the matter, including additional information provided by Claimant in response to
specific inquiry. This was an appropriate exercise of the pre-calculation discretion granted by Policy 495 to the Program Accountants, and fully supported by the record. They concluded, after reviewing the Reconsideration Request, “Given that fee income adjustments do not solely relate to revenue earned and reported in that specific month, the adjustment was deemed appropriate to better match revenues per Policy 495. Further, the adjustment to restate Bad Debt is deemed appropriate as this represents a variable expense per Exhibit 4D of the Settlement Agreement.”  These conclusions, as well as the Denial issued by the Claims Administrator, are upheld, and Claimant’s appeal hereby denied

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