Audit Case Study Synopsis™ (4993)
Savings (square foot)
Exclusive Service Provider
RRG’s audit covered seven (7) years and two (2) ownership entities.
Upon commencing the audit, RRG was informed that the audit would not be allowed as the client had already performed an audit internally and no adjustments were made. RRG was aware the client had an internal desktop review program in place for most of the decade long period it had been representing them and upon review of the file history and consultation with the client, RRG did not see any reason as to why a formal audit would not be permitted. RRG was able to work with the landlord and outline why it should be provided access to perform the review and the audit should be allowed to advance. Ultimately, the landlord, citing its professional, global history with RRG, concurred with the performance of the formal audit.
Following RRG’s review of the lease and other supporting documents associated with the operating expenses for the building, it was noted that several expenses, including insurance and certain capital expenditures which appeared excludable were actually included. In addition, RRG confirmed that a cap limitation on all operating expenses had not been applied. RRG requested an adjustment of the relevant items, including an application of the cap. Each of the adjustments was applied and the new cap method was agreed to by the landlord. Further, an amendment was drafted to ensure the correct application of the cap during each subsequent accounting period throughout the remainder of the lease term.
Upon submission of the audit report, the landlord initially disagreed with the interpretation of the cap and the basis for the cap. In addition, the landlord also challenged the right to audit all of the years included in the report and attempted to limit the scope citing case law related to statute of limitations. RRG’s audit team provided counter positions and was able to develop a case for the inclusion of all the operating years to which the landlord ultimately agreed. Following audit discussions with the landlord, and in consultation with client, RRG secured a settlement of the full amount requested in the initial audit report.
Operating Expense Cap