NNC Compliance Reports for 2012-2013
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 seven retailers and suppliers registered with the NNC program to undergo compliance reviews for the 2012-2013 fiscal year:
- Arctic Buying Company Inc. – Kivalliq – Winnipeg
- Ben Deshaies Inc. – Amos
- Hamilton Wholesalers Ltd. – Goose Bay
- Harris Meats & Groceries Inc. – Winnipeg
- Labrador Investments Ltd. – Goose Bay
- Newfoundland Multi-Foods Ltd. – Goose Bay
- North West Company LP – Winnipeg
The compliance reviews were conducted by an independent third-party, Samson & Associates.
The objectives of the compliance reviews in 2012-2013 were to:
- Verify that the recipient 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 recipients respect all program rules, especially in regards to sales to ineligible customers such as mining camps or construction companies; and,
- Test the recipients' reporting and claiming systems and procedures with regards to gap and control issues (i.e. verify that the process used by the recipient 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
Arctic Buying Company Inc. - Kivalliq
The compliance review for Arctic Buying Company Inc. - Kivalliq determined that the retailer was in full compliance with the terms and conditions described in their funding agreement with AANDC.
Ben Deshaies Inc.
The compliance review for Ben Deshaies Inc. determined that the retailer was in full compliance with the terms and conditions described in their funding agreement with AANDC.
Hamilton Wholesalers Ltd.
The compliance review for Hamilton Wholesalers Ltd. determined that the retailer was in full compliance with the terms and conditions described in their funding agreement with AANDC.
Harris Meats and Groceries Inc.
The compliance review for Harris Meats and Groceries Inc. determined that the retailer was in full compliance with the terms and conditions regarding passing on the subsidy, program visibility and respect of program rules.
The compliance review made two observations regarding claims and reporting:
- The review revealed a software malfunction which resulted in incorrect fields on the Itemized Shipment Report that is submitted to the NNC program claims processor.
- The review revealed instances where corrections or modifications made to invoices were not accurately reflected on the Itemized Shipment Report. Harris Meats indicated that this was due to human error when employees failed to recalculate invoice weight totals when corrections or modifications were made.
Recommendations
The Compliance Review Report outlined one specific recommendation:
- The recipient should ensure that any corrections or modifications are accurately processed and reflected on the Itemized Shipment Report. The recipient should also ensure that the report reconciles with the subsidy claim.
Status
The recommendation in the compliance report was immediately and effectively implemented by the retailer. The Harris Meats and Groceries Inc. action plan to address the recommendations is posted online. Harris Meats and Groceries Inc. is now in full compliance with the terms and conditions.
Labrador Investments Ltd.
The compliance review for Labrador Investments Ltd. determined that the retailer was in full compliance with the terms and conditions regarding respect of program rules.
The compliance review made six observations regarding passing on the subsidy, program visibility and claims and reporting:
- Passing on the subsidy: The review revealed that one out of three of the Labrador Investments stores could not provide documentation to clearly demonstrate that the full subsidy value was being passed on to the purchaser.
- Program Visibility: The review revealed that for one of the stores, the subsidy rates were not written on cash receipts.
- Claims and Reporting: The review revealed instances where the total weight on the air waybill was different from the total weight of subsidized item invoices.
- Claims and Reporting: The review revealed that the recipient was grouping the weights of different products such as bread and hot dog buns under the same NNC item code even though each product has its own distinct NNC code. The items were all part of the same subsidy level, but the distinct codes allow for information and data gathering.
- Claims and Reporting: The review revealed that some of the prices on the most recent price report did not reflect the actual prices of items displayed in the store. The differences might be due to recent price changes or errors made during the pricing reporting process.
- Claims and Reporting: The review revealed that the recipient does not have a formal communication process with store managers when changes occur in the program such as eligibility and product changes.
Recommendations
The Compliance Review Report has outlined one specific recommendation for each of the observations made:
- Passing on the subsidy: The review report recommends that the recipient be able to clearly demonstrate that the full subsidy value is being passed on to the purchaser. The NNC program determined that despite being unable to demonstrate that the full subsidy was being passed on, the prices for subsidized items were similar to the prices of its competitor in the same community.
- Program Visibility: The recipient should ensure that subsidy rates are written on cash receipts.
- Claims and Reporting: The recipient should reconcile the total weight indicated on the air waybill with individual invoices in order to ensure the weight on the invoice is accurate.
- Claims and Reporting: The recipient should use the appropriate distinct NNC item code for each product when preparing its Itemized Shipment Report.
- Claims and Reporting: The recipient should ensure that the prices indicated on the price report reflect the actual selling price on the day the report is produced.
- Claims and Reporting: The recipient should establish a formal communication process when changes occur in the program to adequately inform its store managers of program changes.
Status
NNC outlined the recommendations in a letter to the retailer. Both the Labrador Investments Ltd. management letter and Labrador Investments Ltd. action plan to address the recommendations are posted online.
The Program continues to work with the recipient to ensure compliance with the funding agreement. The current recommendations will be revisited in the next compliance review.
Newfoundland Multi Foods Ltd.
The compliance review for Newfoundland Multi-Foods Ltd. determined that the retailer was in full compliance with the terms and conditions regarding passing on the subsidy, program visibility and respect of program rules.
The compliance review made two observations regarding claims and reporting:
- The review revealed that the weight claimed to NNC does not reconcile with the weights reported on the detailed shipment report.
- The review revealed that the order form and the internal document used to identify the product's level of subsidy and weight are not always kept for reference.
Recommendations
The Compliance Review Report has outlined specific recommendations for each of the observations made:
- The recipient should review the weights entered in the accounting system and ensure that the weights claimed to NNC reconcile with weights reported on the detailed shipment report.
- The products indicated on the order form should be referenced to the subsidy level form. These documents should also be kept with the invoices for future reference.
Status
NNC and the retailer are working to resolve the issues raised by the compliance review, and a management plan has been developed. The Newfoundland Multi-Foods Ltd. action plan to address the recommendations is posted online.
North West Company LP
The compliance review for North West Company LP determined that the retailer was in full compliance with the terms and conditions regarding passing on the subsidy, program visibility and respect of program rules.
The compliance review made one observation regarding claims and reporting:
- The review revealed one instance where a product was identified under an incorrect subsidy code for a period of four months, misidentifying it as a higher subsidy Level 1 item that should have been a lower subsidy Level 2 item.
Recommendations
The Compliance Review Report has outlined one specific recommendation for the observations made:
- The recipient should review their database to ensure that the appropriate subsidy codes reconcile with the eligible products.
Status
The Program was reimbursed for the $1,199 in excess savings received by customers due to the error. The North West Company action plan to address the recommendations is posted online.
The issue has been corrected and North West Company is now in full compliance with the terms and conditions.