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Horner refutes talk of budget cap overspend

NEWS STORY
30/09/2022

Christian Horner has reacted following claims in the German media that Red Bull over spent the budget limit in 2021.

Before a wheel had turned in Singapore today, the paddock was buzzing amidst speculation that Red Bull's 2022 title - possibly even its 2021 title - could be under threat.

According to Germany's Auto Motor und Sport, the Austrian team may have overspent the 2021 budget limit of $145m, the publication claiming that Aston Martin also exceeded the limit.

Christian Horner was quick to dismiss the claim, telling Sky Sports: "The accounts were submitted way back in March, so it's been a long process with the FIA, going through and we're in that process as we speak.

"So they're rightly following that process," he continued. "I think mid-next week is when they declare their certificates.

"I think that our submission was below the cap and it's down to the FIA, obviously, to follow their process, which they're currently doing," he added.

"Every team, theoretically, is subjected to it so they will have looked at every team's submitted account. They're following a process and that conclusion date has been moved from July to September now to October. It's a big job, it's a lot for them to get through.

"There's always going to be rumours," he insisted. "I've heard of major breaches or whatever, I'm certainly not aware of that.

"Inevitably it's a brand new set of regulations and a set of very complicated regulations," said the Briton. "So how rules are interpreted and applied, inevitably you're going to be subjected between the teams. I'm sure as the years go by things will get tidied up but we're confident in our submission and as I said the FIA are in a process.

"You have to remember this is the first time this has ever happened. But we do our due diligence, we get audited anyway, it's a similar process, to that of working with an auditor. It's slightly bespoke to Formula 1.

"Clarifications have been coming even after the submissions were made so you can see how immature the process is. But the FIA obviously has been working hard on it and doing the best they can."

Reacting to the media reports, a spokesman for the FIA said: "The FIA is currently finalising the assessment of the 2021 financial data submitted by all Formula 1 teams.

"Alleged breaches of the Financial Regulations, if any, will be dealt with according to the formal process set out in the regulations."

The sport's governing body is expected to announce its findings after analysing the teams' 2021 budgets, next week, but in the meantime it is the punishment that could be meted out that is causing a buzz throughout the paddock.

Essentially, in exceeding the budget limit, the FIA sees anything less than a 5% overspend as a 'minor' breach, while anything beyond that is considered 'major'.

Though the penalties are not set in stone, it is believed that a minor breach could result in championship points being deducted, limitations on aero testing and a reduction of the cap in subsequent years.

However, a major breach could mean exclusion from the championship, a move which could place the 2022, and even the 2021 world championship result, in doubt.

Understandably, Mercedes boss, Toto Wolff was quick to react.

"The cost cap is probably the most important evolution of regulations in order to keep a level playing field," said the Austrian. "and to allow teams that haven't got the full budget to catch up and to put the ceiling onto the spending of the top teams. So it is of huge importance for a demonstration that these regulations are policed.

"I have no reason to believe otherwise," he added. "The FIA, particularly Mohammed, have shown a pretty robust stance on enforcing all kinds of regulations. So I think if we're talking now about something big, he will show the same integrity and leadership that he's done before."

Asked specifically about the claims surrounding Red Bull, he said: "I have no information at this stage if they are in breach, or by how much they are in breach.

"Obviously being in breach in one year, means you're probably in breach of a second year, and potentially a third year," he added.

"And once that is clarified, I'm sure lots of discussions are going to take off about what effect it would have.

"But it's too early at this stage to comment," he added, without a hint of irony.

And to think Domenicali and the boys are still looking for 'added spice'.

Check out our Friday gallery from Singapore here.

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READERS COMMENTS

 

1. Posted by Spindoctor, 04/10/2022 11:06

"The notion that a Buget Cap would be some kind of Silver Bullet, "Levelling Up" the Racing was at best naive & worst a deliberate obfuscation.
It ain't about any kind of fairness, honour, truth or Justice, simply about "Rules". There of course is the rub. "Rules is Rules": it's hard (but not impossible!) to get away with cheating on physically measurable bits 'n bobs, but on almost anything else, especially involving Finance, it's all about interpretation. One man's Tax avoidance is another's Tax Evasion; fraud is only Fraud when you get caught....."

Rating: Neutral (0)     Rate comment: Positive | NegativeReport this comment

2. Posted by ancient70!, 04/10/2022 6:36

"So we have already had conviction by t-shirt, so why not conviction by rumour in the F1 world? I suppose the “honourable” mr Wolf is not afraid of lightning?"

Rating: Neutral (0)     Rate comment: Positive | NegativeReport this comment

3. Posted by Chester, 03/10/2022 11:57

"No win situation FIA rule, once again. Another case of regulations not working and causing political intrigue. "

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4. Posted by alvarezh3, 02/10/2022 9:01

" @ Max Noble

Ok, I see your point: "It is how the rules are defined, agreed, and implemented" Yes, there could be a lot of leeway in the way the FIA can act/behave to manipulate the final outcome of an investigation. Too much power by the FIA could cause unfair results for a team while being very easy going for another one."

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5. Posted by Max Noble, 02/10/2022 5:31

"@alvarezh3 - While that style of clear cheating is possible, that’s not, at least for me, what I’m talking about. It is like the difference between “Tax Minimisation” which is legal, and “Tax Evasion” which is illegal.

The hyper-wealthy use shell-cpomanies, holding companies, off-shore accounts, all sorts. Look at the outcry the other year when Lewis *legally* minimised the import tax on his private jet.

The FIA budget cap is the same issue. “What is the definition of what’s inside the cap, and what is outside?”

It is how the rules are defined, agreed, and implemented, not about a “bent” figure in accounts paying sub-contractors with paper bags stuffed with used notes… and off the books… :-)
"

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6. Posted by alvarezh3, 02/10/2022 3:34

"As the opinions of most (if not all) posters regarding the ways that institutions can hide its true financial numbers are correct, no one has said anything regarding a very important issue:

All accounting activities are performed by human beings, for institutions with 500 plus employees and $145m budget, there must be more than one person with knowledge of an improper bookkeeping operation. Most of the time the accounting wrongdoings are discovered through someone coming out and speaking out the truth in order to be relieved of heavy penalties by the authorities (when the cheating is done to the government).

The hardest part in evading being caught cheating......is probably keeping your own employees's mouth shut.

For an audit, I asume the FIA starts by comparing the accounts given to them to those the teams give the government. They better be the same, if not, one of the two statements is false and it's probably more beneficial that the false one be the one given to the FIA, as no one would go to jail for it.

An audit is much more complex than comparing statements, but experts know what questions to ask in order to get to the truth and they are probably -in most instances- more likely to succeed than not. Best example is how, not long ago, Bernie got caught in a bribery case (which cost him $100m), even with his web of companies and an army of top bookkeepers and lawyers.

You can get away with an improper behavior a few times, but sooner or later you will get caught.....it's the law of probabilities!"

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7. Posted by Max Noble, 02/10/2022 0:59

"@Spindoctor - Indeed, We published two articles on this very topic a little time back. You are 100% correct. It is all a complex narrative for tax and stock exchange reporting. Just as courts of law are not seeking the truth, only the correct application of the law, people need to understand that corporate accounts have nothing to do with what anything actually cost…

Mercedes (as I explored in one of the articles) is a huge multi-national with ten million rabbit holes within which to hide cash, expense, write-offs, write-downs, etc.etc. Toto knows that Christian has a far smaller, and simpler corporate structure within which to work, and as such only has the fraction of rabbit holes available to Toto.

It is interesting the Helmut Marko recently pointed out that Red Bull consisted of many companies working in concert, within boundaries the FIA has yet to fully define…

Honestly…. Very excited to see what the FIA forensic accountants drag out of the multi-verse of the team accounts! I believe in the cold light of day it will look like one of the very nasty things from the “Upside Down” in Stranger Things… yet the FIA will pronounce it a harmless thing of great beauty… :-)
"

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8. Posted by Spindoctor, 01/10/2022 13:36

"Nobody saw this coming. Or did they....?
Mr Noble of this Parish suggested some time ago that some energetically "creative" accountancy would be deployed by all Teams.

Anyone with even a passing knowledge of Corporate Accountancy practices knows that a Company's Accounts are prepared on the basis of the client telling the accountants a story about what they want them to show. Profits become "Losses", Operating Expenses become "Capital Investment" and so-on. There are even murkier areas where different entities within MeggaCorp(inc) flog services, rent properties to one another etc. The accountants then arrange things to fit that story. Arguments with Governments & Shareholders often follow....

The "Investigations" (of all involved) in this instance presumably revolve around how various Budget lines have been constructed & these complex intra Corporate activities

Formula One 2022 - Never mind the Racing, feel the aggro!
"

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9. Posted by ancient70!, 01/10/2022 8:12

"Look I can quite understand that at this stage of cost cap implementation there will be a lot doubt about what is, and wat is not within the cost cap. It seems this is still a dynamic process, with lots of changes occurring. What is more intriguing about the whole affair, is where did these rumours originate? Is the FIA a leaky ship? If so that is really concerning, and can cause a lot of damage. Or is this some bored media person deciding to spice up the show? Accusing a team of cheating without solid evidence can also cause a lot of damage."

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10. Posted by Max Noble, 01/10/2022 7:07

"Good grief… “Multi-nationals”; however “Mouth-nationals” is actually an amusing auto-correct…"

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11. Posted by Max Noble, 01/10/2022 7:06

"Poor old FIA… Imagine some of the largest, most powerful mouth-nationals on the planet having better accountants than they… Look at that slipping deadline… They simply have no idea what they are looking, since the big corporates can make the magic numbers add up to whatever figure they desire…

“Just because you can measure something, it does not mean you should.”
Coupled with…
“Measurement impacts behaviour.”

I’m expecting something on the level of a cream pie in the face for Christian if he is found to have breached a rule… Assuming the FIA can actually get anyone to believe the outcome of their audit…"

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12. Posted by elsiebc, 01/10/2022 1:37

"Also, I wonder how much money is being spent for the teams and sport to save money. This ranks right there with those "cost saving" engine rules."

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13. Posted by elsiebc, 01/10/2022 1:35

"And to think just a couple weeks ago there were all the complaints about how long it takes after qualifying to set the grid. Now we find it could be two years to know the results of the championship. This sport just keeps getting better and better."

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14. Posted by Endre, 01/10/2022 0:07

"People who believe that this is only RB and Aston Martin, are incredibly naive. The same goes for Mercedes, Ferrari, Alpine and who knows who else. Corporations are used to cooking books for the longest time for tax purposes. Wolff has a big mouth as usual because the story is not about him, while he is probably the biggest crook of them all. His papa I am sure taught him how things were done in the old country (which unfortunately I share with him), his politics and F1 are sure evidence of that."

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15. Posted by Defiant, 30/09/2022 22:03

"Of course Christian isn't going to comment, why would he potentially incriminate the organisation he is representing.
This will be interesting to see if Benny boy will actually do anything if a breach is found.
The sceptic in me doubts it very much."

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