December 10, 2018

NASCAR Needs Deloitte’s Help

Saw this come across my Twitter timeline the other day:

So, NASCAR is reportedly going to be a client of Deloitte’s: One organization that is synonymous with red flags (and not always in a good way), and the other checkered flags.

I wonder why the largest accounting firms aren’t involved in NASCAR on a sponsorship level? I mean, KPMG, RSM, and Grant Thornton sponsor either PGA and LPGA tour golfers or tournaments or both. Any of those firms could pony up enough money to sponsor a NASCAR driver’s car for a year.

Wouldn’t it be kinda funny to hear during driver introductions at next year’s Daytona 500, “The driver of the No. 2 PricewaterhouseCoopers Ford, Brad Keselowski!” (See what I did there? Because PwC is the second-largest accounting firm in the world. OK, then.)

Maybe it wouldn’t be a good image for clients or potential clients to see a KPMG-sponsored car on its roof in the infield grass at Talladega after a wreck, fire shooting out from under the hood (although it would be an appropriate image for the year KPMG has had), or an Ernst & Young-sponsored car limping around the apron of Richmond Raceway (RVA shout-out for Adrienne) on two flat tires.

Or, firms could sponsor one of these “redneck round-and-rounds.”

“Up next on FOX, the Ernst & Young Building a Better Working World 400 at Dover International Speedway,” or “Thanks for joining us for the Grant Thornton Dynamic 400 at Chicagoland Speedway.”

Anyway, back to the Deloitte/NASCAR story. If Deloitte has been hired by NASCAR to create a common accounting platform for teams to use, it could bring some sort of competitive balance back to NASCAR. I emailed Deloitte to confirm this but haven’t heard back from anyone yet.

Anyone who follows NASCAR knows there are mega-teams with tons of money, like Joe Gibbs Racing and Hendrick Motorsports, and teams with only one car that barely make races on Sundays, like StarCom Racing and Go Fas Racing.

The Sports Business Journal article says that the top NASCAR teams spend more than $20 million per car, and a team can have up to four cars in its stable. While the cars themselves are not cheap, a lot of that money goes toward research and development, logistics, and engineering. The low-tier teams can’t sink as much money into those things as the top-tier teams. That’s why you have Kyle Busch, Martin Truex Jr., Kevin Harvick, and reigning champion Joey Logano winning practically every race.

A cap on team spending still might not make the low-budget teams more competitive, but it could bring the top-tier teams closer to the pack:

The idea to have an accounting firm measure teams’ spending to help establish a baseline has been on the table for more than a year, but NASCAR and teams only recently signed off on it, sources said.

Establishing a baseline on what teams are spending will help NASCAR determine whether to introduce something as drastic as a cap on spending or less grandiose rules to prevent team owners from overspending. Teams account for their spending in different ways, so creating a common accounting platform is vital before the sport experiments with any new competitive balance framework, sources said. The audit will look at teams’ operational expenses, but not driver salaries.

The idea of a budget cap has been tossed around for years, but some NASCAR team owners have been against the idea. Sports Business Journal reported in May that the potential cap being discussed between teams and NASCAR was between $15 million and $20 million per car.

The audit could last well into 2019, sources told Sports Business Journal.

And once the audit ends, maybe one of these low-budget NASCAR teams could use some Deloitte pencil-pushers as pit crew members. I’d like to see them try to change four tires in under 16 seconds!

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Motely Foley is reporting that MGM Mirage got the Big D to drop the going concern language from its “financial assessment” which we confirmed with the author, Bob Steyer, that indeed meant the audit opinion.
Doing a little digging on this whole sitch, we found that MGM has done some duct tape repairs to its balance sheet in order to convince its banks and Big D that nothing is fucked.
Deloitte, wanting to be troopers and all, probably just had to step back from the whole thing to get perspective. “Yeah, when you look at it from back here, $14.4 Billion in debt doesn’t really look that bad.”

MGM Back From the Brink — for Now
[Motley Fool]

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For whatever reason, we find the story that Heelys, the skate shoe company, having fired Deloitte as their auditor, has to be an especially tough pill to swallow for the Big D.
Why, you may ask? How about the fact that Heelys MAKES SHOES THAT HAVE WHEELS ON THEM which might be something fun.
According to Reuters, Heelys gave Deloitte-period the heave-ho primarily because of cost considerations. That may be true but something tells us that the real reason might have been Deloitte putting the kibosh on Heelys request of the audit team to wear the skate shoes while working at the client’s HQ.
Deloitte, like all Big 4 firms, being the fun killer, likely argued that skate shoes did fall under acceptable attire in its dress code.
It was probably only a matter of time until the Heelys audit committee concluded that they had to find another audit firm with smaller sticks up their asses. Partners on the engagement are now quietly stewing with their decision that may have put their firm solidly in the #1 slot for hating all things fun.

Heelys dismisses accounting firm
[Reuters]