Compliance Assessment Summary Report: Meechim North 2000 Inc.

Background

Indigenous and Northern Affairs Canada ("INAC") selected Meechim North 2000 Inc. (the "Recipient") for a compliance assessment for the April 1, 2014 to March 31, 2015 funding year.

INAC contracted Deloitte to perform a compliance assessment of the Recipient. The objectives of the compliance assessment were to provide the Government of Canada with information on whether the Recipient complied with the terms and conditions of the Agreement. Specifically, our compliance assessment was meant to consider whether:

• The Recipient has administrative controls in place that support compliance with the terms of the Agreement and that they are designed and implemented appropriately;
• The Recipient has financial controls in place that support compliance with the terms of the Agreement and that they are designed and implemented appropriately;
• The Recipient has reporting processes and systems that support compliance with the terms of the Agreement, and that they are designed and implemented appropriately to ensure the Recipient possesses accurate and reliable information in support of their claim related decision making; and
• Management practices for the provision of the subsidy to the ultimate consumers are effective and meet the goals of the NNC initiative.

Deloitte LLP, an independent audit firm, was commissioned to undertake the compliance assessment. The compliance assessment took place in March 2016.

Findings

Based on the sample tests, discussions with the Recipient and the other procedures performed, we observed the following:

• The Recipient does not perform a profit margin analysis to determine a markup on goods sold, as sales are made to customers at the cost incurred by the vendor. The Recipient earns profit from vendor rebates for large volume purchases. Financial analysis was performed to assess consistency of results with discussions with the Recipient, which showed that profit margins were not applied to the cost of goods in determining the selling price to the customer.
• Through our testing, invoices were reviewed to verify that the full amount of subsidy is passed onto the consumer. No errors were noted. Invoices were also traced to the respective customer payment to check that claimed weights were actually shipped. Invoices were also matched with respective waybills to ensure goods were shipped to the eligible communities.
• Per discussion with the Recipient, promotional material is provided to end customers in order to promote the NNC program.
• The Recipient is not involved in managing supply chain arrangements for shipment of goods to communities in the North as these are directly handled by vendors and customers. We were therefore unable to provide any observations with respect to objectives related to the management of the supply chain.
• The claims process is manual and performed by one person with no independent review aimed to detect errors. Through our testing, no errors were noted. However, we would recommend the Recipient implement a review-type control over the claim process in order to detect any errors that may occur before submission to INAC.
• Through our discussion and review of invoices throughout our testing, there were no indicators that the Recipient sells to ineligible businesses or establishments.

Recommendations

We recommend the Recipient consider implementing the following 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.

Current Status

The final report has been issued.