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FIA challenged over payments

NEWS STORY
20/10/2013

Formula One's governing body the FIA has been in the news a lot recently. First it came to light that FIA presidential candidate David Ward had made a complaint to the federation's ethics committee about allegedly unfair practices in the campaign of his rival, the current incumbent Jean Todt. Then, over the past few days, concerns began to emerge about the FIA's new policy-making F1 Strategy Group which is said to be biased towards the sport's top teams. Now we have news in today's Sunday Telegraph, courtesy of Pitpass' business editor Christian Sylt, that one of the FIA's own members has launched a stinging attack on it. Is this connected to the upcoming election? Not necessarily.

Sylt's story reveals that Britain's oldest motoring organisation, the Royal Automobile Club (RAC), has written to the FIA about an alleged lack of disclosure in its accounts. The FIA has issued a strong denial and questioned the motivation behind the allegation which it claims was completely unexpected.

The RAC is a members group for motorists and is separate to the breakdown service with the same name which is owned by the private equity firm the Carlyle Group. The club was set up in 1897 and was a founding member of the FIA which was established seven years later.

The FIA's annual revenue is understood to be around 50m and generally comprises fees from motorsport series and their participants whilst its biggest expenses are salaries and travel costs. It has an office in Geneva but its headquarters are in Paris where it does not need to file publicly-available accounts as it is a not-for-profit organisation. The accounts are approved by the federation's 236 members at its annual General Assembly and following the previous meeting Tom Purves, the RAC chairman and former chief executive of Rolls-Royce, wrote to FIA president Jean Todt to demand further details about payments totalling 12.2m.

Explaining the background to his enquiry, Purves mentions the FIA's Sport Conference Week which took place in June at Goodwood. In addition to being a motor racing venue, Goodwood also has a 91-room on-site hotel and spa which is amongst a small group of deluxe sports resorts in the south of England. Another is Woodcote Park, a 350-acre estate which is just south of London. Its facilities include two 18-hole golf courses, a swimming pool, gym, tennis courts and a 22-room hotel which is owned by the RAC and used as a clubhouse for its members.

In a letter dated 25 July 2013 Purves states that "I remain saddened to think the FIA chose Goodwood as a meeting location for its sporting conference held in Britain. Those sentiments apart, I asked three of our more financially astute senior members to take a look at the FIA accounts simply to ensure that our fees contributed to a financially strong entity. My concerns have been raised by their comments."

He says that "as a Chairman responsible for the deployment of members' funds in an appropriate manner, I question the value we receive from our membership fee." The FIA accounts are at the heart of his concern.

"There is a lack of the narrative or detail in the FIA accounts that one would not expect of an international entity, or UK entity," says Purves. "This may be because they are prepared in a way that meets merely the minimum standards required of a French, not for profit, organisation."

He adds that "as shareholders, I would expect to be given more information than was required by French statute. I would expect to see some form of narrative from the directors (or Chairman/CEO) explaining the business, the key matters arising in the year, any major issues or related party transactions and the outlook for the future."

He lists several queries about the accounts culminating in his concern over two costs which stand out: "personnel expenses of Euro 6.1m and Euro 8.3m for travel, missions and conferences. There is nothing to indicate how many people the personnel costs relate to, or the average remuneration, or highest paid director etc. These costs may not even be the total of people costs as there is another line item under ‘Other outside expenses' which refers to interim staff, agency expenses and specialists fees. Please could you provide a narrative on both items. There is no explanation or narrative for travel costs. Please could you provide a narrative on this."

The FIA's response came in two letters with the first sent on 31 July and the second on 12 September. They were written by Nick Craw, president of the FIA's decision-making body the Senate. He says that Purves' "assertion of a lack of narrative in the accounts is unfounded. At the time of the approval of these accounts at the General Assemblies, detailed reports were presented by the FIA President on the general situation of the FIA and the major actions deployed as well as by the President of the Senate on the financial documents, including the budget, balance sheet and audit."

Addressing Purves' concern over the 12.2m payments, Craw says that "the staff of FIA France and FIA Switzerland currently numbers 121 people with a permanent contract. The costs indicated in the FIA accounts reflect the salaries and social security contributions for those staff. The transport and travel costs mainly reflect costs relating to FIA staff, to certain elected people in certain circumstances (for taking part in General Assemblies, for example), to the FIA officials on duty at FIA events, and to the transporting of equipment (such as to the venues of FIA events)."

He adds that "our accounts for FIA France and FIA Switzerland are audited by PWC, one of the largest audit firms in the world and their certification of our accounts is without reservation, which confirms to our members the strictness and quality of our bookkeeping."

Craw says that "PWC is satisfied with the accounting principles and rules applied by the FIA and have made no request that they be modified."

He told Sylt that "the FIA accounts are fully reviewed by an independent Audit Committee and then by the FIA Senate; the members of both of these bodies having been elected by the General Assembly. Detailed reports are presented by the FIA President and me, as Senate President, to the FIA General Assembly each year when members have (and often take) the opportunity to raise any questions they may have." Craw adds that "the FIA has always answered, with complete transparency, any questions that its members have raised regarding the accounts."

Crucially, Craw points out that the RAC "was duly represented at the General Assemblies relating to the accounts for 2010 and 2011 and raised no questions. Moreover, the accounts were approved by a show of hands and were thus also approved by your Club. I am therefore curious as to the reasons and timing of your questions."

The RAC declined to comment further and time will tell whether it is satisfied with the FIA's response.

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1. Posted by Algie Lacey, 21/10/2013 14:31

"Oh well, if PWC are keeping tabs on them then everything must be hunky-dory!
See http://en.wikipedia.org/wiki/PricewaterhouseCoopers#Controversies"

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