Did a full audit for a property management company in Tucson — TEP accounts across 5 commercial buildings. Spent about 30 hours on data collection, analysis, and report writing. Found that their billing was actually correct. No errors, no rate optimization opportunities, nothing. Now the client says since there's no recovery and the audit was contingency-based, they want me to reimburse the $200 they spent on certified mail sending me bills plus the time their office manager spent pulling records. Am I obligated to pay their costs?
Audit found nothing — client wants me to pay for the data collection costs
Absolutely not. Contingency means your fee is contingent on finding savings — it does not mean the client incurs zero costs. Their data collection costs are their costs. Your 30 hours of unpaid work is your cost. That's the deal with contingency. If they wanted a guarantee that the audit itself would be free regardless of outcome, they needed to hire someone on a flat fee. Your engagement agreement should state that the client is responsible for providing billing records at their own expense.
Patricia is correct. Contingency means no auditor fee if no savings are found. It does not mean the client has zero obligation. The client's cost of providing their own records is not your responsibility. That said, a 'clean bill of health' audit has value — the client now knows their billing is correct, which is information worth having. Frame it that way. And for future engagements, include a sentence in your agreement that says: the client is responsible for providing billing records and any costs associated with obtaining those records.
Client backed off after I explained the contingency arrangement more clearly and pointed out the value of knowing their bills are correct. No hard feelings. Added the language Randy suggested to my engagement template. Also adding a disclaimer that a finding of no errors is itself a valuable professional conclusion.