NNC Compliance Reports for 2013-2014
Under the Nutrition North Canada (NNC) program, Aboriginal Affairs and Northern Development Canada (AANDC) monitors retailers' and suppliers' compliance of the terms and conditions outlined in the funding agreement between the retailer and the department.
Using a risk-based analysis, AANDC selected four retailers and suppliers registered with the NNC program to undergo compliance reviews for the 2013-2014 fiscal year:
- Le Marché Daoust Inc.
- La Fédération des coopératives du Nouveau-Québec
- Kovalik Enterprises Ltd. (Public Meat)
- Arctic Co-operatives Ltd.
The compliance reviews were conducted by an independent third-party, Samson & Associates.
The objectives of the compliance reviews for 2013-2014 were to:
- Verify that the retailer/supplier is passing on the value of the subsidy to customers (i.e. that selling prices are reduced by the amount of the subsidy);
- Verify that program visibility requirements are met (e.g. subsidy rates are written on cash receipts and program material, such as posters, are clearly visible in the store);
- Verify that retailer/supplier respects all program rules, especially in regards to sales to ineligible customers such as mining camps or construction companies; and,
- Test the retailers/suppliers' reporting and claiming systems and procedures with regards to gap and control issues (i.e. verify that the process used by the retailer/supplier to prepare detailed reports and calculate the amount of subsidy to be claimed is sound and precise, and that mechanisms to detect and correct errors are in place).
More information on the purpose and objectives of these reviews can be found under Compliance reviews.
Findings
Le Marché Daoust Inc.
The compliance review for Le Marché Daoust Inc. determined that the retailer was in full compliance with the terms and conditions in regard to program visibility and respect of program rules.
The compliance review made two observations regarding passing on the subsidy and claims and reporting:
- Passing on the subsidy: In a small amount of the invoices reviewed, the subsidy claimed for packaging was not passed on to the customer.
- Claims and reporting: In a small amount of the invoices reviewed for commercial clients, the weight reported in the Itemized Shipment Report did not reconcile with the invoice. The errors are sporadic and attributable to human error (typos).
Recommendations
The Compliance Review Report has outlined specific recommendations for each of the observations made:
- Passing on the subsidy: The retailer should ensure that the full subsidy, including the additional 5 percent claimed for packaging, is passed along to the customer.
- Claims and reporting: The retailer should pay particular attention when entering weights in the claim report and investigate any significant difference between the weight on the invoice and the weight of goods transported. The retailer has confirmed that they will add an extra step to double-check the accuracy of invoices and reports, and reduce typos.
Status
NNC outlined the recommendations in a letter to the retailer. Both the Le Marché Daoust Inc. management letter and Le Marché Daoust Inc. action plan to address the recommendations are posted online.
La Fédération des coopératives du Nouveau-Québec (FCNQ)
The compliance review for FCNQ demonstrated the retailer was in full compliance with the terms and conditions in regard to program visibility and respect of program rules.
The compliance review made two observations regarding passing on the subsidy and claims and reporting:
- Passing on the subsidy: Due to a lack of documentation, the compliance review was unable to assess the accuracy of the supplier's process for passing the subsidy on to the consumer.
- Claims and reporting: During the review, differences were noted between prices of items for sale and the prices submitted in the NNC Food Prices Report.
Recommendation
The Compliance Review Report has outlined specific recommendations for each of the observations made:
- Passing on the subsidy: The retailer needs to provide a clear audit trail demonstrating how the full value of the subsidy is passed to the consumers.
- Claims and reporting: The prices reported on the price list should be reviewed to ensure accuracy of the reported information.
Status
NNC outlined the recommendations in a letter to the retailer. Both the FCNQ management letter and FCNQ action plan to address the recommendations are posted online.
Kovalik Enterprises Ltd. (Public Meat)
The compliance review for Kovalik Enterprises Ltd. (Public Meat) demonstrated the retailer was in full compliance with the terms and conditions in regard to program visibility, claims and reporting and respect of program rules.
The compliance review made one observation regarding passing on the subsidy:
- Due to a lack of documentation, the compliance review was unable to assess the accuracy of the supplier's process for passing the subsidy on to the consumer.
Recommendation
The Compliance Review Report has outlined one specific recommendation for the observation made:
- The retailer should provide an appropriate audit trail by ensuring the order form is attached to the corresponding invoice and is kept on file to support the calculation of the subsidy for future reference.
Status
NNC outlined the recommendations in a letter to the retailer. Both the Kovalik Enterprises Ltd. (Public Meat) management letter and Kovalik Enterprises Ltd. (Public Meat) action plan to address the recommendations are posted online.
Arctic Co-Operatives Ltd. (ACL)
The compliance review for ACL demonstrated the retailer was in full compliance with the terms and conditions in regard to program visibility, and respect of program rules.
The compliance review made four observations regarding passing on the subsidy and claims and reporting:
- Passing on the subsidy: The retailer is providing the subsidy through a reduction of the actual freight cost. Due to a computer programming error, the subsidy in excess of freight costs was not passed along to further reduce the price.
- Passing on the subsidy: The purchase order system was not up to date with the most current net freight cost. This resulted in suggested retail prices that were too low in many cases, but also too high in others.
- Claims and reporting: The auditor found that the weights of items on invoices did not always reconcile when compared to the weight in the purchase order system.
- Claims and reporting: The review revealed that suppliers often do not provide the waybill with their invoice.
Recommendations
- Passing on the subsidy: The retailer should correct the programming error.
- Passing on the subsidy: The retailer must take appropriate action to update the purchase order system with the most current net freight cost.
- Claims and reporting: The review recommended that the retailer review the weight included in the purchase order system to ensure they accurately reflect the Supplier's weight as per their invoice.
- Claims and reporting: The review recommended to the retailer that they ensure the supplier submits the waybill with their invoice.
Status
As per the first recommendation above, ACL took appropriate action to correct the programming error. ACL also reimbursed NNC for the excess subsidy not passed on.
NNC outlined the recommendations in a letter to the retailer. Both the ACL management letter and ACL action plan to address the recommendations are posted online.