NNC Compliance Reports for 2015-2016

Under the Nutrition North Canada (NNC) program, Indigenous and Northern Affairs Canada (INAC) monitors retailers' and suppliers' compliance of the terms and conditions outlined in the funding agreements between the recipients and the Department.

Using a risk-based analysis tool, INAC selected the following retailers and suppliers registered with the NNC program to undergo compliance assessments for the 2015-2016 fiscal year:

The compliance assessments were conducted by an independent third-party, Deloitte LLP. The purpose of the compliance assessments was to provide information on

More information on the purpose and objectives of these assessments can be found under compliance reviews.

Findings

Arctic Connection

Based on the procedures performed by Deloitte, the compliance assessment for Arctic Connection found that the full subsidy is being passed on to the consumer and that profit margins applied were not eroding the subsidy. However, Deloitte noted the need for additional controls; five recommendations for improvements were provided:

Recommendations

  1. Processing and Reporting Controls: Implement a process whereby there is an independent review of claims prior to submission to NNC for processing.  This has the potential to reduce the number of errors in the claims.
  2. Processing and Reporting Controls: The Recipient should ensure that the preparers and reviewers of claims are familiarized with the most recent NNC coding and obtain clarification from NNC representatives where coding classification is unclear.  This will ensure that claims are maximized for the consumer.
  3. Ineligible Clients: The Recipient should establish a process to ensure that the ultimate consumer is an eligible consumer per the terms and conditions of the program. We recommend that the Recipient implement a process to ensure that ineligible parties do not have access to goods shipped by the Recipient under the Nutrition North Canada program.
  4. Profit Margin: The Recipient should establish a clear policy in regards to profit margins in order to ensure that markups calculated on goods and invoices are correctly applied and do not erode the subsidy. The Recipient should be able to demonstrate that the margins do not erode the subsidies.
  5. Supply Chain: The Recipient should consider implementing a process to periodically review their agreed upon rates with preferred airlines with market rates published online in order to ensure they are shipping goods at the most cost-effective prices.

Status

NNC outlined the auditor's recommendations in a management letter to Arctic Connection, requesting that they provide an action plan to address the recommendations for improvement.

Arctic Co-Operatives Ltd.

Based on the procedures performed by Deloitte, the compliance assessment for Arctic Co-Operatives Ltd. noted no significant exceptions in the compliance with the program; however, Deloitte recommended improvements in the areas of Processing and Reporting Controls & Profit Margins and Pricing Methodology:

Recommendations

The Compliance Assessment Report has outlined specific recommendations for improvement:

  1. Processing and Reporting Controls & Profit Margins and Pricing Methodology: The Recipient should consider implementing data entry controls to ensure subsidy rates and eligibility as entered into the retail system are accurate and appropriate. The auditors noted that the full subsidy was passed to the member co-ops however; they were unable to observe pricing methodology as well as profit margins applied to determine retail prices to end users at the member co-op level. The auditors also noted that the recipient does not perform profit margin analysis to determine a markup on goods sold, as sales are made to member co-ops at cost plus freight and fees.

Status

NNC outlined the auditor's recommendation in a management letter to Arctic Co-Operatives Ltd., requesting that they provide an action plan to address the recommendation for improvement.

The Northern Shopper

Based on the procedures Deloitte performed, the compliance assessment for The Northern Shopper found that no significant exceptions were found in the compliance with the program; however, Deloitte noted the need for improvement in the areas of Processing and Reporting Controls & Profit Margins/Pricing Methodology:

Recommendations

  1. Processing and Reporting Controls & Profit Margins/Pricing Methodology: The Compliance Assessment Report describes the Auditor's observations, conclusions and recommendations for your organization. They found that the full subsidy is being passed on to the consumer but were not able to assess your pricing methodology as policies were inconsistently applied. Deloitte also noted the need to improve control environment in order to detect any errors that may occur before submission to NNC. They noted that a new process has been implemented to standardize pricing methodology and to provide an independent review of claims.

Status

NNC outlined the auditor's recommendations in a management letter to The Northern Shopper, requesting that they provide an action plan to address the recommendations for improvement.

Marché Central du Nord

Based on the procedures performed by Deloitte, the compliance assessment for Marché Central du Nord noted several exceptions in the compliance with the program. Deloitte noted the following areas for improvement:

Recommendations

  1. Processing and Reporting Controls: Address weaknesses in its data integrity within the inventory management system used for reporting (i.e. weights, eligible communities, subsidy rates). We recommend that the Recipient ensure that programmed NNC data is reviewed after data input in order to ensure the validity and accuracy of claimed amounts.
  2. Processing and Reporting Controls: Implement a process whereby there is an independent review of claims prior to submission to NNC for processing. This has the potential to reduce the number of errors in the claims.
  3. Ineligible Clients: Implement a process to ensure that the ultimate consumer is an eligible consumer according to the terms and conditions of the Program. We recommend that the Recipient implement a process to ensure that ineligible parties do not have access to goods shipped by the Recipient under the Nutrition North Canada program.
  4. Profit Margin: Establish a defined pricing policy (markups and fees) and implement controls to ensure consistent application of the policy in establishing customer sales prices.
  5. Profit Margin: Obtain and retain suppliers information related to the cost of goods to be able to consistently and accurately price products for sale.

Status

NNC outlined the auditor's recommendations in a management letter to Marché Central du Nord requesting that they provide an action plan to address the recommendations for improvement.

Meechim North 2000 Inc.

Based on the procedures performed by Deloitte, the compliance assessment for Meechim North 2000 Inc. found that no exceptions were found in the compliance with the program; but noted that an improvement could be made to the recipients Processing and Reporting Controls

Recommendations

  1. Processing and Reporting Controls: Implement a process whereby there is an independent review of claims prior to submission to NNC for processing. This has the potential to reduce the number of errors in the claims.

Status

NNC outlined the auditor's recommendation in a management letter to Meechim North 2000 Inc., requesting that they provide an action plan to address the recommendation for improvement.

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