Cost Recovery Audits

This is VERY old news to most seasoned auditors, but there is a new generation coming through the ranks who may not be up to speed. Auditing your telephone service is an almost guaranteed way to generate future cost reductions and sometimes, even refunds of past inaccuracies. This can be surprisingly complicated, and there are seminars available that can teach you some of the basics and technical details that are necessary to be successful. The quality of the different seminars can vary greatly, I suspect, so choose wisely. But depending on the size of your organization, and the quality and sophistication of the controls you have over your telephone systems, the cost of a good seminar can easily be recouped 10 times over and often much more than that.


How many old, unused fax lines are you paying for every month? These might terminate at a wall jack, closed over wall jack or even at the switch panel and are live but completely unused. Someone, years ago, had a need and had the line installed. As time rolled by, the fax machine was moved, or replaced, or removed, and nobody thought to notify accounting to have the service disconnected.


How about alarm panels? Did you used to have fire and intrusion alarm lines that were replace by internet systems? At one company where I worked, we discovered 8 old alarm lines that were live but unused. At $50 a month, that’s $4,800 a year down the drain. The savings add up quickly. I think that the thousands of “professional” utility auditing firms generally take not only half of all refunds but also half of one year’s future savings from adopting their recommendations. That can become a point of contention if the firm disagrees with the recommendation or fails to implement it. These firms may also negotiate a low minimum fee, also.


I live in a small town and in the early 1990’s, after taking a 3 day course on auditing telephone charges, I approached the town manager and offered to audit the town phone costs. The deal was that there was zero cost to the town, but if I generated any cash refunds, I would get half, and any future savings would just accrue to the town. The town had the following locations: a town hall, 1 grammar, 1 middle and 1 high school, 1 public safety building, 1 fire and 1 public works building. Pretty limited. There was absolutely no risk to the town in commissioning the work, so he agreed.


You would think there would be very little to be gained by me in doing this work. However, after examining the detailed customer service record for every phone line, I found numerous instances of a $1.95 charge that was in error, and should have disappeared 7 year earlier. That was the only exception or error I could find. But it added up. The total that the town received in refund checks covering the 7 years was $13,000. I got a nice check for $6,500. The “audit” probably took me a total of 4 hours over a few weeks, mostly in correspondence with the phone company.


You may be paying for directory listing you don’t need or want, calling services like call waiting or call forwarding that you don’t need or want, or even phone line insurance.


Similar results might be found in auditing other utilities. Can anyone comment and add their wisdom and experience?

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This entry was posted on June 28, 2011 and is filed under Cost Reduction/Recovery. Written by: . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.