Salary cap, Shmalary Cap

[Skam85]

Originally Posted by Adam43

Dealing in absolutes? That won’t go down well.

Only a Sith deals in absolutes.


I have learned from this thread that the severity of the (thus far) imagined indiscretion and level of cheating depends entirely on which team or driver you do or don't support.

[Tourer]

Originally Posted by Skam85

Only a Sith deals in absolutes.


I have learned from this thread that the severity of the (thus far) imagined indiscretion and level of cheating depends entirely on which team or driver you do or don't support.

......or whether location checks out

[seanyb505]

As an accountant, good accounts can reconcile to the penny. Great accountants can reconcile to the nearest 100 thousand.

[Adam43]

Originally Posted by Skam85

Only a Sith deals in absolutes.

The Jedi are extinct, their fire has gone out of the Twitterverse.

Originally Posted by Tourer

......or whether location checks out

Depends on who’s opinion you want to dismiss because of your own location.

[Adam43]

Originally Posted by seanyb505

As an accountant, good accounts can reconcile to the penny. Great accountants can reconcile to the nearest 100 thousand.

[bathurst77]

AS I say, two different accountants get two different numbers...

Depreciation of assets amount

Was this bit of equipment that cost 10 milion bought by ferrari F1 or Ferrari road car factory and used at xx xper hour by the f1 team.
I buy a new factory mill or hi tech hardware costing millions, but its a one off purchase that will be used for next 5 - 10 years. How much do I deduct today and how much in following years.

Was this bit of equipment hired per hour at how much or was it underwritten by sticker on car. If a 3rd party external wind tunnel say we normally charge 10000 per hour, but put a sticker on your car and you can have it for 9... how does that work.

If Cisco and webex say " you can use our gear for free if you have stickers on the car, normally we sell the equipment for xxx per user per year. (and different amounts in different countries) How does that go against the cap. or similar with parts of the cars or the raw material used to make them

If they bought raw material to make carbon fiber or metal parts last year but are using it now, when do you account it?

We spent 1 million on clothing for piuit crew and drivers and factory staff and hospitality workers serving drinks. was some or all of that paid for by mercedes road car as PR and advertising etc or was it all on the f1 budget.

Should the budget cap cover the food and drink and wages of the corporate hospitality unit thats at every track. the team members eat and drink there and the sponsors and owners entertain and use it as PR and to show love to our partners. How do we work out how much that cost and how much was red bull f1 team and how much was red bull drinks company

If they build 30 widgets for $1000 each but sell ten for $2000 how much did they spend?

And if their accountant structured the accounts one way and claims they spent 139.9 million and all the team believed that was correct and worked within that framework ,but different accountant goes "no cant deduct that, claim this or offset this" then you are at 145 million.

What do you do? Only spend 135 million so you have a buffer?
But what iif that 4.9 million could have bought an upgrade that would result in more points and more money at the end of year, but you didnt spend it, so came a place or two lower in the WCC/WDC. Isnt htat the same as the driver driving all year at 9 tenths... and this forum calls for 10 10ths by all the team!

The team accountant and external accountant could easily disagree as the term "creative accounting" is very real, ask any millionaire or business.

[Adam43]

Which is why you have auditors.

Is depreciation of assets included in the budget? Is income on sales included? Are there rules about parts and material costs? As sponsorship with suppliers is available all for teams is it a problem? All understandable.
The first three aren’t that different to structuring of NFL player contracts. Maybe you can play with the timing. hrug: others sounds like what Sarries tried to do with players and additional income that wasn’t straight salary. And they were caught.

But put a cap in place even with these difficulties and it still has the effect you want.

Here either it will be announced there isn’t a problem (which would be great), or there is because a team tried something dodgy and it’s been figured out. Which will be annoying, but not a criticism of the cap.

[Tourer]

Originally Posted by Adam43

Depends on who’s opinion you want to dismiss because of your own location.

Of course, you & I are immune, given that you're in the US & I'm in the land of Oz.

[Adam43]

[bathurst77]

The same kind of accounting that can see Mr Trump live in gold plated mansions and penthouses and own planes casinos NYC sky scrapers, yet so poor he pays almost no tax

[chillibowl]

Originally Posted by peebee2

The cap was brought in to drive down budgets. It has done this. Everybody involved knew all along there were going to be massive arguments. It's no surprise.

Originally Posted by Adam43

But put a cap in place even with these difficulties and it still has the effect you want.

really this! by any objective standard the cap has driven budgets down. the top teams have gone from being able to spending a half billion a year to quibbling over not having enough room to spend an extra 1 million on a late season upgrade package.

of course several expenses are outside the cap, they will of course debate about whether this or that item covered in the budget cap or part of the PU/Drivetrain components outside of the cap but this is part of the process....and one they have to go through if they hope to expand the cap to include more items.

the leak was unfortunate (as were Toto's comments) but otherwise, for me, its hard to see year 1 of the budget cap as anything other than a success.

[Akrapovic]

So Aston Martins overspend was deemed a procedural breach, whilst Red Bulls was an actual overspend. Red Bull are the only team to have purposefully broken the cost cap according to the FIA.

[peebee2]

Originally Posted by Akrapovic

So Aston Martins overspend was deemed a procedural breach, whilst Red Bulls was an actual overspend. Red Bull are the only team to have purposefully broken the cost cap according to the FIA.

According to the FIA, both are procedural, although they haven't yet said to what level AM broke it.

[Akrapovic]

Originally Posted by peebee2

According to the FIA, both are procedural, although they haven't yet said to what level AM broke it.

Aston Martin was deemed to be in procedural breach of the rules, while Red Bull was said to have both a procedural and minor overspend breach.

Red Bull is the only team that has overspent beyond a procedural issue.

Williams were also fined due to last years late submission breach, but we knew that one already.

[peebee2]

Originally Posted by Akrapovic

Red Bull is the only team that has overspent beyond a procedural issue.

Williams were also fined due to last years late submission breach, but we knew that one already.

OK thanks.

[crmalcolm]

Originally Posted by peebee2

According to the FIA, both are procedural, although they haven't yet said to what level AM broke it.

According to the FIA, both have committed a procedural breach and RB have also exceeded the limit.

AM are not being reported as breaking the limit.

[peebee2]

Word is it's under £1m over, and it's all on how healthcare and catering were counted.

[Mike Harte]

Why hasn't the figure been published at the same time? It just leads to yet more speculation, and, IMHO, it damages the brand of F1 and the FIA; it needs to be totally transparent, especially as, in this incident, it concerns both this and last year's champion.

[PhilipR]

2021 the season that keeps on giving .....ahh let me grab a pizza and a cold one haha

I mean a breach is a breach...all the other teams were able to stay within budget cap so if RB spent 500k-1mil (could well be wrong numbers) on catering and absenteism that means they had 500k-1 mil to spend on other things that other teams did not have in theory

Also of course they will claim something inofensive as catering or sick pay - no one will actually say it was on car performance

Also FIA are in big issue after the AD controversy and now with RB overspending casts more shadow over the 2021 season and over how FIA go about their rules. So I imagine they would like to find RB as innocent as possible as not to cause more cotnroversy

Also it seems interesting that it was delayed from wednesday until today and after they seem to have tried everything to make Max get the championship on Sunday - no penalty for dangerous driving in qualifying, full points when everybody thoguht it was half, quick penalty for Leclerc. Almost as if they wanted the championship over before they released the data - I know this is quite the conspiracy

Oh well if RB acted in good faith what is the chance they do the same this year? Also are we about to see all teams splash money on caviar and champagne?

[BTCC frog]

I have seen mentions of Lewis Hamilton's rear wing breaking the rules by a 0.2mm in Brazil qualifying and Sebastian Vettel's fuel being a tiny amount too low in Hungary, both resulting in straight disqualifications from the session. It doesn't matter if this budget cap is a minor breach from Red Bull, this has to be punished very harshly otherwise teams in the future will just take the mickey and will all exceed the budget cap by 7 million every year (as that counts as minor). Disqualification from the championship in 2021 would be extremely harsh, but if they don't do that then they should definitely make it extremely difficult, almost impossible, for them to win again in 2023. Even if it is just catering, that means that Mercedes and Ferrari and everyone else spent that money as part of the budget cap, so Red Bull have still gained an advantage by cheating, intentional or not (Mercedes in Brazil and Aston Martin in Hungary did not cheat intentionally).

[crmalcolm]

Originally Posted by peebee2

Word is it's under £1m over, and it's all on how healthcare and catering were counted.

The cap is across many aspects. It can't be narrowed down to one area in isolation.

The procedural breach might be against those accounting lines. The overspend is against the entire budget.

[peebee2]

Originally Posted by crmalcolm

The cap is across many aspects. It can't be narrowed down to one area in isolation.

Unfortunately it just isn't that simple. The budget cap isn't even the figure quoted. It's a notional figure with every team having adjustments to their allowed spend.

Also the catering is interesting as hospitality is excluded, so there's been debate as to how that's split between team and guests - not easy especially if they all eat together with one provider.

[crmalcolm]

Originally Posted by peebee2

Unfortunately it just isn't that simple.

Exactly. So impossible to highlight a <1mil spend within a multi-million budget.

[Richard C]

Well, we at least now know the (rough) magnitude and who. It is clear that RBR spent over, but not quite beyond the 5% threshold which would really give them problems.

My speculation is that this was reported today vs. last Wed as the FIA probably engaged AM and RBR (maybe just RBR) so they could quickly have a bit of back and forth around "why" RBR says it was not over and why the FIA team says they were. And at this point RBR is still over. Who knows maybe it was even adjusted a bit based upon RBR arguments?

Anyhow, I haven't read the particulars of the regulations (the FIA site is absolutely being hammered right now and I can't get in to download a copy of the financial regulations), but I don't even know if the details are released to the public or not as to exactly what put them over. As others have called out, there is no one place that puts them "over". They are either over or they are not. It is the total of the numbers. If the rumors are true, then it would be RBR saying it was items they thought fit into the "not capped" should have been in the "capped" section. Those details may never be revealed by the FIA and maybe they will be by RBR, but probably as part of the release of the details of the Accepted Breach Agreement (ABR). Which is probably being negotiated right now with RBR and FIA (not to mention one with AM)

If catering is part of the speculation it could be as simple as they have food provided on the marketing side of events, but the staff also eats it. So it would be a benefit to the staff (otherwise the staff would need to pay for it). Same might apply if free food was provided at the HQ. That might be (probably rightly) considered as "compensation".

I am not arguing that this should be allowed. I am just pointing out what might have happened.

The FIA provided a summary of the regulations in the press release from earlier today as a way to set expectations...

https://www.fia.com/news/fia-complet...al-regulations

Procedural Breaches can result in Financial Penalties and/or Minor Sporting Penalties (in case of aggravating factors) as detailed in the Financial Regulation. Minor Overspend breach (<5% Cost Cap) can result in Financial Penalties and/or Minor Sporting Penalties. Only a Material Overspend breach (>5% Cost Cap) if confirmed before the Cost Cap Adjudication Panel will result in a mandatory Constructors’ Championship points deductions and can result in additional Financial Penalties and/or Material Sporting Penalties.

In the end, it seems to be under 5%, so they are to probably be lightly penalized. My guess is that it will be both monetary and a sporting penalty. The monetary penalty will probably be some value that is X% above the overspend will be taken out of the 2022 budget. So if they spent $200K over, they may have to take out $300K (150% penalty) from next years budget. I don't know what the sporting penalty will be, but it will probably be something. The penalties above are "example" speculation only. The actual value will be negotiated with the FIA.

Regardless, I think there will be a large amount of gnashing of teeth and complaints when this is eventually announced. Probably people having expectations that penalties should have been beyond what the regulations spell out (such as championship exclusion, removal of constructor points, etc.)

As I pointed out earlier, I do think the 5% window is too large. They should progressively shrink that over the next few years as they clarify things like whatever RBR did so that teams will not "accidently" put things in the wrong columns out of "ignorance". If there is more common knowledge of what does and doesn't fly with the auditors, then they can make that window smaller.

Lastly, I want to say that we should all take the comments from other teams about how X money equates to Y speed on the track. I have seen quotes from Ferrari that say... "$5 million is just about half a second, even $1-2million is one or two tenths". I think that is pure speculation on their part. No doubt if Ferrari was in breach they would be saying the opposite and downplaying any performance benefits.

Richard

[peebee2]

Originally Posted by crmalcolm

Exactly. So impossible to highlight a <1mil spend within a multi-million budget.

LOL, it is if the rule isn't clear on what constitutes hospitality and what doesn't for example. It's a classic problem, the more you try to write very tight rules, the more questionable gaps appear between them.

As another example, what can you tell us about teams who receive engine discounts - how does that work then?