Audit for a hotel in Chattanooga with EPB. I identified that they were paying for outdoor lighting on a separate meter when those fixtures had been removed two years ago. EPB agreed to terminate the lighting account and issue a refund of about $9,600 for the 24 months of charges. I also recommended they switch their main meter from Rate GSA to Rate GSB which will save about $400/month going forward. Client says my fee should only apply to the $9,600 refund — he says the rate switch is just a 'recommendation' not a 'recovery.' My agreement says 40% of savings. Who's right?
What counts as a 'recovery' — client and I disagree
This is exactly why the definition of recovery matters in your engagement agreement. If your agreement says 'savings' without defining it, the client has an argument. My agreement explicitly defines recovery as: any refunds, credits, or bill reductions resulting from errors, overpayments, rate optimizations, or billing corrections identified by the auditor. The rate switch from GSA to GSB is a billing correction — the client was on the wrong rate. That's a recovery. But if your agreement doesn't say that clearly you're in a gray area.
I had the same fight with a client in Birmingham over an Alabama Power rate reclassification. My agreement specifically says 'savings resulting from rate changes recommended by the auditor' are included in the fee calculation. The client still grumbled but the language was clear and he paid. Lorraine, for this engagement you may need to negotiate with the client if your agreement is ambiguous. For future engagements, tighten the language.
This is one of the most common fee disputes in our profession. The lesson is that your engagement agreement must define 'recovery' or 'savings' with enough specificity that there's no room for interpretation. Include refunds, credits, rate reclassifications, tariff corrections, removed charges, reduced demand, tax exemptions — list every category explicitly. Derek and Brenda are both right that clear language prevents these disputes. Lorraine, for this specific engagement I'd suggest splitting the difference with the client to preserve the relationship, then updating your template.
Ended up negotiating — client agreed to pay 40% on the refund and 25% on the ongoing savings from the rate switch for 12 months. Not ideal but fair enough and we parted on good terms. He's already referred me to another hotel owner. Updated my engagement template with the detailed recovery definition Randy described.