Compliance Assessment Summary Report: Stanton Group Ltd.

Background

Crown-Indigenous Relations and Northern Affairs Canada ("CIRNAC") selected Stanton Group Ltd (the "Recipient") for an independent assessment for the funding period April 1, 2015 to March 31, 2017. CIRNAC contracted Ernst & Young LLP to provide an independent report examining certain aspects of the Recipient’s management of the funding received under the program. Specifically, the engagement was planned to:

• Perform an audit of the subsidy claimed for reimbursement as it relates to the type and nature of eligible cost requirements of the program;
• Review compliance with the program visibility requirements and transparency of the subsidy to consumers as it relates to the requirements of the agreement;
• Provide recommendations on the Recipient’s reporting and claiming systems and procedures which support compliance with the terms of the agreement;
• Provide recommendations on management’s processes related to supply chain practices; passing on the full value of the subsidy and related profit margin practices; and, sales to ineligible clients.

Ernst & Young LLP, an independent firm, was commissioned to undertake the engagement which took place at the offices of the Recipient.

Recommendations

Based on the procedures performed by Ernst & Young LLP, the following recommendations were provided to the Recipient for consideration:

• The Recipient management should implement a review control, whereby someone other than the preparer of the claim, is inspecting the information on the compiled subsidy claim to original
• supporting documentation and checking clerical accuracy of the final claim form, prior to signing as approver to submit the claim form to CIRNAC.
• The Recipient should monitor deadlines and provide required information to CIRNAC by the required deadlines. Also, in terms of document retention, the POS system should retain receipts for a period of seven years, as per the funding agreement.
• The Recipient should develop a policy, process and procedure for assessing profit margins on a quarterly basis for subsidized and unsubsidized food items to verify and support that profit margins are not eroding the subsidy that is to be passed to the customers, in accordance with the Nutrition North Canada ["NNC"] Program National Manual objectives.
• The Recipient should implement a process at the store level to prevent a subsidy from being offered to an ineligible customer and/or establishment.
• The Recipient should have a signed agreement with the airline company to ensure the negotiated rates are locked in for specified terms, in order to mitigate the risk of any fluctuations charged by the airline.

Current status

The final report has been issued.