2021 Cost Cap Rumours and Speculation

[Wazari]

What a mess! After speaking to my accountant and an accountant involved in this situation (both are senior partners for one of the big four firms) this seems to be a very complicated situation. From my understanding:

1. The guidelines are very poorly written and leave too much to interpretation.
2. Accountants on both sides can not agree on the accounting procedures with regards to the guidelines.
3. The categories involved have nothing to do with the car's performance.

If it were to involve Newey's compensation I can understand the potential difficulty. In my case I received compensation from HRD in my name where benefits and certain taxes were paid by the latter. I also submitted invoices to HRD from my one person corporation and received compensation where payments were made in the name of both myself and my company. In HRD's eyes, I was considered a 100% employee.

Another scenario I have seen on several occasions over the years was the following:

Team A's principal earns XX million US dollars a year and team B's principal earns YY million dollars a year. YY is 12 to 15 million greater than XX. Team B's chief engineer in a given department is paid substantially less than team A's per year on paper. Team B's principal says to his engineer, I realize the difference in pay from your counterparts so here is a "Christmas gift" from me as a thank you which makes up the difference. There is no official record of this. So IMO, this budget cap policy is a farce and has too many paths around it.

[Zynerji]

What a mess! After speaking to my accountant and an accountant involved in this situation (both are senior partners for one of the big four firms) this seems to be a very complicated situation. From my understanding:

1. The guidelines are very poorly written and leave too much to interpretation.
2. Accountants on both sides can not agree on the accounting procedures with regards to the guidelines.
3. The categories involved have nothing to do with the car's performance.

If it were to involve Newey's compensation I can understand the potential difficulty. In my case I received compensation from HRD in my name where benefits and certain taxes were paid by the latter. I also submitted invoices to HRD from my one person corporation and received compensation where payments were made in the name of both myself and my company. In HRD's eyes, I was considered a 100% employee.

Another scenario I have seen on several occasions over the years was the following:

Team A's principal earns XX million US dollars a year and team B's principal earns YY million dollars a year. YY is 12 to 15 million greater than XX. Team B's chief engineer in a given department is paid substantially less than team A's per year on paper. Team B's principal says to his engineer, I realize the difference in pay from your counterparts so here is a "Christmas gift" from me as a thank you which makes up the difference. There is no official record of this. So IMO, this budget cap policy is a farce and has too many paths around it.

Some of us instantly expected this debacle when the cap was put in place precisely because of the hilighted text.

Thank you Wazari for sharing your personal, inside view.

[littlebigcat]

Hmm. The accountants agreed in 2020. There would have appeared to be no issue with the interim report, so RBR must have changed it’s reporting after 31/3/21. The teams wrote the rules with the FIA. Nine other teams managed just fine.

[ispano6]

Hmm. The accountants agreed in 2020. There would have appeared to be no issue with the interim report, so RBR must have changed it’s reporting after 31/3/21. The teams wrote the rules with the FIA. Nine other teams managed just fine.

Or someone in the FIA decided to interpret the writing in their own way, based on pressure from Team Principal W. I do wonder why Sheila-Ann Rao's role changed mid-year at Mercedes from General Counsel to Special Advisor, all the while employed under Mercedes Petronas Formula One team. Perhaps a change in title to avoid cost caps? Who knows, maybe she was earning bonus off the books from Principal W as an x-mas gift or going away present.

[johnny vee]

Reading through the posts in this speculation thread, I see little speculation. Most seem 100% certain that RBR cheated and should be punished very severely.
Nobody knows what the disagreement between the accountants of the FIA and RBR are about.

Great post. Thank you Wouter.
Suppose it is about the payments to Newey. The FIA accountants claim that Newey is not on their staff, but RBR's accountants have looked at the UK law books and read that he is on their staff, despite the fact that he sends RBR bills through his own company.
How can you call that cheating? The FIA has better accountants? They can't have done anything wrong/missed anything?
The blame is always on the team?

It's remarkably quiet at the FIA. I'll wait to see which accountants know best what is meant by employee in the UK law
before accusing them of cheating. After all, I think that is a heavy accusation when nothing is known yet.
That they have been above the BC according to the FIA accountants is one thing, but whether that is true and whether it is cheating
remains to be seen. Until the final result and reason is announced, I will wait quietly.

[InsaneX_Badger]

Hmm. The accountants agreed in 2020. There would have appeared to be no issue with the interim report, so RBR must have changed it’s reporting after 31/3/21. The teams wrote the rules with the FIA. Nine other teams managed just fine.

Or someone in the FIA decided to interpret the writing in their own way, based on pressure from Team Principal W. I do wonder why Sheila-Ann Rao's role changed mid-year at Mercedes from General Counsel to Special Advisor, all the while employed under Mercedes Petronas Formula One team. Perhaps a change in title to avoid cost caps? Who knows, maybe she was earning bonus off the books from Principal W as an x-mas gift or going away present.

Oh look! Another distraction post to send everyone in circles again, can't wait and see what comes from this

[ispano6]

Hmm. The accountants agreed in 2020. There would have appeared to be no issue with the interim report, so RBR must have changed it’s reporting after 31/3/21. The teams wrote the rules with the FIA. Nine other teams managed just fine.

Or someone in the FIA decided to interpret the writing in their own way, based on pressure from Team Principal W. I do wonder why Sheila-Ann Rao's role changed mid-year at Mercedes from General Counsel to Special Advisor, all the while employed under Mercedes Petronas Formula One team. Perhaps a change in title to avoid cost caps? Who knows, maybe she was earning bonus off the books from Principal W as an x-mas gift or going away present.

Oh look! Another distraction post to send everyone in circles again, can't wait and see what comes from this

If I can fathom it, then surely it's not outside the realm of possibility! Wazari-san has alluded to the going-ons behind the scenes. There is plenty that goes on behind the scenes.

[chrisc90]

Great insight Wazari. Thanks. As expected it’s a very complicated structure

[Wouter]

What a mess! After speaking to my accountant and an accountant involved in this situation (both are senior partners for one of the big four firms) this seems to be a very complicated situation. From my understanding:
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Thank you @Wazari for this insight. Interesting to read!

[KeiKo403]

Or someone in the FIA decided to interpret the writing in their own way, based on pressure from Team Principal W. I do wonder why Sheila-Ann Rao's role changed mid-year at Mercedes from General Counsel to Special Advisor, all the while employed under Mercedes Petronas Formula One team. Perhaps a change in title to avoid cost caps? Who knows, maybe she was earning bonus off the books from Principal W as an x-mas gift or going away present.

Oh look! Another distraction post to send everyone in circles again, can't wait and see what comes from this

If I can fathom it, then surely it's not outside the realm of possibility! Wazari-san has alluded to the going-ons behind the scenes. There is plenty that goes on behind the scenes.

You mention Mercedes and Toto and Sheila-Ann Rao yet neglect to recognise stuff like this….

What a mess! After speaking to my accountant and an accountant involved in this situation (both are senior partners for one of the big four firms) this seems to be a very complicated situation. From my understanding:
=====================
=====================

[rijtuig]

What a mess! After speaking to my accountant and an accountant involved in this situation (both are senior partners for one of the big four firms) this seems to be a very complicated situation. From my understanding:

1. The guidelines are very poorly written and leave too much to interpretation.
2. Accountants on both sides can not agree on the accounting procedures with regards to the guidelines.
3. The categories involved have nothing to do with the car's performance.

Although this was mentioned from early on, even though the suspected overspending has nothing to do with the car's performance, is correct to say that indirectly it will have impact?

[Wil992]

Reading through the posts in this speculation thread, I see little speculation. Most seem 100% certain that RBR cheated and should be punished very severely.
Nobody knows what the disagreement between the accountants of the FIA and RBR are about.

Suppose it is about the payments to Newey. The FIA accountants claim that Newey is not on their staff, but RBR's accountants have looked at the UK law books and read that he is on their staff, despite the fact that he sends RBR bills through his own company.
How can you call that cheating? The FIA has better accountants? They can't have done anything wrong/missed anything?
The blame is always on the team?

It's remarkably quiet at the FIA. I'll wait to see which accountants know best what is meant by employee in the UK law
before accusing them of cheating. After all, I think that is a heavy accusation when nothing is known yet.
That they have been above the BC according to the FIA accountants is one thing, but whether that is true and whether it is cheating
remains to be seen. Until the final result and reason is announced, I will wait quietly.

Sorry, but almost none of this is correct.

First of all, it's not speculation to say that RBR are in breach of the cap. That's factual. The FIA have said they are in breach. RBR may appeal, they may win that appeal, but until such a time they are guilty. None of us even know the exact nature of the breach, so to imagine they may have a strong case to appeal is very big leap imo.

So, to criticise people for acting as if RBR are guilty is way off base. People are saying they are guilty because the FIA have said so and therefore they are.

The next bit about Newey's renumeration simply can't be true. Whether he is employed or uses a personal service company makes no difference to the expense, he can be excluded from the cap as one of the top 3 earners at RBR either way; it's clear from the rules that this is the case. I'm also 100% certain that Newey will not be the only one in the pit lane who is employed this way and is also a "top 3 earner" at their team. I'd imagine the rules were written to allow this specifically because so many of them are engaged in this way.

Also, what's UK law and what isn't has no bearing on the salary cap. It might well be possible to legally do something that falls outside the cap. For example, It's not illegal to spend 500 million on aero development, but it would breach the cap. So the law in that sense isn't relevant.

Since all your remaining arguments hang off the back of this incorrect speculation, i'd say it's invalidated.

None of this precludes newey being in some way involved of course, but in this specific way, no.

[littlebigcat]

Hmm. The accountants agreed in 2020. There would have appeared to be no issue with the interim report, so RBR must have changed it’s reporting after 31/3/21. The teams wrote the rules with the FIA. Nine other teams managed just fine.

Or someone in the FIA decided to interpret the writing in their own way, based on pressure from Team Principal W. I do wonder why Sheila-Ann Rao's role changed mid-year at Mercedes from General Counsel to Special Advisor, all the while employed under Mercedes Petronas Formula One team. Perhaps a change in title to avoid cost caps? Who knows, maybe she was earning bonus off the books from Principal W as an x-mas gift or going away present.

The auditors interpret the rules and apply them to the report a team submits. Not the FIA.

I’m not saying this imprecise use of who is responsible for what is on purpose, but all it does is discredit the process by introducing unfounded rumour and accusation.

Again the teams helped create, agreed to and had a dry run of the rules. One team has been judged by the auditors to have breached those rules. The FIA took that report from the auditors and began the formal process of punishing that breach. Red Bull have a right to appeal and we will wait to see if they do, what we hear next will depend on it.

No other team breached the cost cap, so there is nothing to speculate there.

[Big Tea]

I can sympathise with the 'not performance related' part, but money spent is money spent. If it was not used on catering or what ever it would have been spent on performance.

[SiLo]

Anyone trying to explain away "it wasn't spent on performance" is just being wilfully ignorant.

I expect that as this drags on, less and less noise will be made about it and then eventually RB receive a fine and nothing else happens.