2021 Cost Cap Rumours and Speculation

[Shakeman]

Some people seem to be forgetting the all the teams’ books have been audited by forensic accountants, so it’s time for Mr Occam to get his razor out, there is clearly no issue with how Mercedes accounted for JA’s time on the project. It’s all above board.

This is incorrect. By default nobody hires Forensic Accountants. You only hire them to conduct an investigation of what has been submitted when the auditors smell if the books are cooked. They are like crime detectives, just that their expertise is finance. FIA in their statement has said, they did not conduct any investigation and has only audited the submissions, specifically addressing the rumours about Forensic Accountants.

My understanding the independent auditors hired by the FIA who've been through the cost cap submissions are forensic accountants. These auditors are providing the evidence to the judges on the Adjudication Panel for them to make their decision.

Interestingly the case is not closed for 5 years, presumably in the event of personnel moving teams who'll whistle blow on any shady business.

I recall two accountancy firms were mentioned by the FIA as independent auditors, Deloitte and another which slips my mind.

[mendis]

So why was Red Bull so much more efficient than any other team last year, producing updates ad nauseaum, and this year we find they breached the budget cap?
Are we to ignore last year, and put this down to a clerical error/interpretation when Horner himself was intimating towards the "battle of accountants"?
That reeks.

Red Bull is also efficient than any other team this year in their car and upgrades. Their car is way better than other cars on the grid and their work always made the car faster. Ferrari went backwards and Mercedes is stagnant. I wonder if Ferrari and Mercedes have been putting their money in Stock Market. If anyone thinks it's all money related, it's just the most convenient way of ignoring efficiencies, better ideas and different people doing things differently. It was the same thing that was said about Mercedes. They spent billions to build the engine, yet those who also spent billions couldn't get to that level for over 5 or 6 years.

[mendis]

Some people seem to be forgetting the all the teams’ books have been audited by forensic accountants, so it’s time for Mr Occam to get his razor out, there is clearly no issue with how Mercedes accounted for JA’s time on the project. It’s all above board.

This is incorrect. By default nobody hires Forensic Accountants. You only hire them to conduct an investigation of what has been submitted when the auditors smell if the books are cooked. They are like crime detectives, just that their expertise is finance. FIA in their statement has said, they did not conduct any investigation and has only audited the submissions, specifically addressing the rumours about Forensic Accountants.

My understanding the independent auditors hired by the FIA who've been through the cost cap submissions are forensic accountants. These auditors are providing the evidence to the judges on the Adjudication Panel for them to make their decision.

Interestingly the case is not closed for 5 years, presumably in the event of personnel moving teams who'll whistle blow on any shady business.

I recall two accountancy firms were mentioned by the FIA as independent auditors, Deloitte and another which slips my mind.

https://www.fia.com/news/fia-completes- ... egulations

The FIA would also note that with respect to this first year of the application of the Financial Regulations the intervention of the FIA Cost Cap Administration has been limited to reviewing the submissions made by the Competitors and that no full formal investigations were launched.

[Shakeman]

This is incorrect. By default nobody hires Forensic Accountants. You only hire them to conduct an investigation of what has been submitted when the auditors smell if the books are cooked. They are like crime detectives, just that their expertise is finance. FIA in their statement has said, they did not conduct any investigation and has only audited the submissions, specifically addressing the rumours about Forensic Accountants.

My understanding the independent auditors hired by the FIA who've been through the cost cap submissions are forensic accountants. These auditors are providing the evidence to the judges on the Adjudication Panel for them to make their decision.

Interestingly the case is not closed for 5 years, presumably in the event of personnel moving teams who'll whistle blow on any shady business.

I recall two accountancy firms were mentioned by the FIA as independent auditors, Deloitte and another which slips my mind.

https://www.fia.com/news/fia-completes- ... egulations

The FIA would also note that with respect to this first year of the application of the Financial Regulations the intervention of the FIA Cost Cap Administration has been limited to reviewing the submissions made by the Competitors and that no full formal investigations were launched.

That doesn't contradict what I wrote.

[RZS10]

Plus, FIA have already said all teams cooperated and acted in good faith. The mere suggestion of malice is out of place.

Question is whether this statement is true after the fact (since handing in the paperwork) or from the very beginning as any team could have tried to be clever in their accounting but then fully cooperated /acted in good faith once the FIA started querying.

The FIA's statement would be true in both cases but it does read like it is the former in context, with "the process" being the review and not whatever the teams did during 2021.

The review [...] has been an intensive and thorough process, and [...] all Competitors acted at all times in a spirit of good faith and cooperation throughout the process.

The statement IMHO does not exclude the possibility of anyone knowingly/deliberately breaking the cap, the thing is (and you brought it up previously) intent is nigh impossible to prove anyways and all a team would have to do to check the "good faith" box is to express a firm belief that their interpretation is right and show a willingness to discuss the matter.

edit: wanted to add that i'm not stating that RB did so ... just to be on the safe side

[Wil992]

Or they have found something that every other team has missed. It happens. Nothing to say that RB have done anything wrong at present.

I'd question the logic of this, to be honest.

The FIA have said they're in breach of the cost cap. I accept we don't know what or how much, but we can categorically say they have done something wrong (given that "wrong" is defined by the FIA and it's FIA that are saying it).

[chrisc90]

Or they have found something that every other team has missed. It happens. Nothing to say that RB have done anything wrong at present.

I'd question the logic of this, to be honest.

The FIA have said they're in breach of the cost cap. I accept we don't know what or how much, but we can categorically say they have done something wrong (given that "wrong" is defined by the FIA and it's FIA that are saying it).

At present the FiA have found a problem, but whether RB have found a area that isn’t covered then RB could actually be right

[ringo]

Yea, this is a thing I was thinking about too. I’m not sure where the line is on this. If he has a personal service company that bills RB for his time, that’s clearly allowed as one of the top 3 earners and can be excluded from the cap.
But what if that company hires another employee? Does that mean it immediately becomes just another supplier and therefore not able to be excluded? If not, where is the line? Could his ltd co hire the entire aero dept and call that one of the top 3 earners?
My feeling is that because the allowable exclusions refers specifically to individuals, the minute there’s more than 1 person, they can’t be on the list. I’m sure that’s the intention of the rules, at least.

Since his company more than likely would be limited liability.. the business would not be with the man Adrian Newey.. It would be with the company. A ltd company is a separate entity from its owners. So even if Newey was the sole person in that company.. the FIA will not see the company as Adrain Newey, it would be seen as the contractor racing services.

No, this is wrong.
Remember we're not talking about the law here, we're talking about the cost cap regulations as written by the FIA. So, despite the fact that a ltd co would be a separate legal entity (as you rightly point out), it is still allowed to be included in the top 3 earners.

From the regs:
"All costs of Consideration provided to the three individuals...in respect of whom the highest aggregate amount of
Consideration has been recognised...or to a Connected Party of any Excluded
Person."

So it can be a person, or a party connected to that person.

In the definitions from the same document:
"Connected Party" means, in relation to a Relevant Person...any company, trust, partnership, or other body, organisation or mechanism
established or operating directly or indirectly in whole or in part for the benefit of or
in respect of the Relevant Person or any or all of the other categories of person
referred to in this definition.

So, from the FIA's definition of a connected party, a company can still be included as a top 3 earner.

I assume it has been written this way specifically to enable people (and there'll be lots across all teams) who use ltd companies for payment to still count as top earners.

Ok thanks. But you posted something else... it must be in benefit to the connected party. A development company is in benefit to the car not to Newey. It's not like the company is feesing newey or massaging his bald spot during the race. The services are rendered to the team not him.

[Quantum]

The thing is, we do see patterns emerge and statements made which cannot be retracted.
For example, when journalists noted Red Bulls successive upgrade packages arriving at each race weekend.

As per Binotto/Wolff etc it was noted that RB had a stream of updates on their car and other teams were scratching their heads as to how this was achievable.

So why was Red Bull so much more efficient than any other team last year, producing updates ad nauseaum,
and this year we find they breached the budget cap?

That reeks.

.
So RBR has upgrade packages to the car every weekend?
And they were "producing updates ad nauseaum."?
Could you show me from each weekend the upgrades? I can't find them. Thankx.

I've provided you with the motorsport links.

If you wish to dispute my post, by all means find a link to dispute the motorsport story with links to all the upgrades RB brought last season.

[Quantum]

Red Bull is also efficient than any other team this year in their car and upgrades. Their car is way better than other cars on the grid and their work always made the car faster. Ferrari went backwards and Mercedes is stagnant.

Problem solved.

Or maybe it's because they're spending more than everyone else?

And have officially been found to have done so.

If anyone thinks it's all money related, it's just the most convenient way of ignoring efficiencies, better ideas and different people doing things differently.

There's a budget cap.

It literally is about coming in under that cap.

I don't see how you can say RB are more efficient, when they've broken the caps.

[Just_a_fan]

Plus, FIA have already said all teams cooperated and acted in good faith. The mere suggestion of malice is out of place.

And yet suggestions of malice are thrown against drivers for "taking Max out", when it's obviously not done on purpose.

Red Bull have deliberately structured their affairs to maximise budget available for the car. That's a given. All teams will have done it. Red Bull appear to have got it wrong.

Or they have found something that every other team has missed. It happens. Nothing to say that RB have done anything wrong at present.

Well, they have been found in breach of the budget cap so, yes, there is something to say that RB have done something wrong at present.

[mendis]

Red Bull is also efficient than any other team this year in their car and upgrades. Their car is way better than other cars on the grid and their work always made the car faster. Ferrari went backwards and Mercedes is stagnant.

Problem solved.

Or maybe it's because they're spending more than everyone else?

And have officially been found to have done so.

If anyone thinks it's all money related, it's just the most convenient way of ignoring efficiencies, better ideas and different people doing things differently.

There's a budget cap.

It literally is about coming in under that cap.

I don't see how you can say RB are more efficient, when they've broken the caps.

Broken the caps is not equal to efficient. There is no science for it.

[Quantum]

And yet suggestions of malice are thrown against drivers for "taking Max out", when it's obviously not done on purpose.

Red Bull have deliberately structured their affairs to maximise budget available for the car. That's a given. All teams will have done it. Red Bull appear to have got it wrong.

Or they have found something that every other team has missed. It happens. Nothing to say that RB have done anything wrong at present.

Well, they have been found in breach of the budget cap so, yes, there is something to say that RB have done something wrong at present.

Exactly. It's like the FIA findings are up for debate.

Mods need to intervene on this because it will just become a cesspit until folk can accept that the FIA findings are factual.

[Quantum]

Broken the caps is not equal to efficient.

Bingo.

[mendis]

Or they have found something that every other team has missed. It happens. Nothing to say that RB have done anything wrong at present.

Well, they have been found in breach of the budget cap so, yes, there is something to say that RB have done something wrong at present.

Exactly. It's like the FIA findings are up for debate.

Mods need to intervene on this because it will just become a cesspit until folk can accept that the FIA findings are factual.

They are up for debate, until the matter is fully closed!