Compliance Assessment Management Letter: Marché Central du Nord

RE: Compliance Assessment Report Results and Follow-Up

Dear Mr. Fogarty:

In February 2016, Deloitte conducted a Compliance Assessment of your organization for the 2015-2016 fiscal year to ensure that Recipients are compliant with the terms and conditions outlined in their Contribution Agreements with Nutrition North Canada. Specifically, our Auditors were looking to verify the following:

• Whether the Recipient is passing on the full value of the subsidy to consumers;
• Whether program visibility requirements are met and that the subsidy is transparent to consumers;
• The Recipient's reporting and claiming systems and procedures with regards to gaps and controls issues; and
• Whether the Recipient respected program rules in regards to sales to ineligible clients.

The attached Compliance Assessment Report describes the Auditor's observations, conclusions and recommendations for your organization. They found that the full subsidy is being passed onto consumers, however given the systematic weight error and other errors, the auditors analysis was inconclusive as to whether the full benefit of the subsidy was being passed onto the consumers. As such, they have noted a need for improved controls and provided five recommendations. Please provide a written response within 30 days of the date of this letter with a plan that outlines how your organization has addressed or will be addressing the recommendations below:

1. 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 Nutrition North Canada data is reviewed after data input in order to ensure the validity and accuracy of claimed amounts.
2. Implement a process whereby there is an independent review of claims prior to submission to Nutrition North Canada for processing. This has the potential to reduce the number of errors in the claims.
3. 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. Establish a defined pricing policy (markups and fees) and implement controls to ensure consistent application of the policy in establishing customer sales prices.
5. Obtain and retain supplier information related to the cost of goods to be able to consistently and accurately price products for sale.

As the audit firm was unable to conclude whether the subsidy has been eroded by the profit margins or by the consumer retail prices set, it will be important for you to fully address the recommendations and to ensure you have all supporting documentation to ensure going forward there is clear compliance with this objective. Furthermore, it was found that an amount of $1,546.09 was over claimed by your organization between fiscal years 2013/14 – 2015/16 and should be reimbursed to the Crown. The Program will contact you to discuss options for repayment.

Please note that the Compliance Assessment Report, Management Letter and Action Plan will be posted to the Department's website.

Should you have any questions or concerns regarding this Compliance Assessment or the posting of the information within it, please do not hesitate to contact your Nutrition North Canada representative.

Sincerely,

Diane Robinson
Director
Nutrition North Canada