Compliance Assessment Summary Report: Distributions G.F.D. Inc.

Objective 1: Compliance of claims with the terms and conditions of the Agreements

The preparation of claims is the result of an unusual process as sales invoices to customers are issued through the Natrel's financial system. Orders are forwarded to the managers in the warehouse who group and weigh the products ordered by eligible category according to the coding set up by the Program. They prepare a summary indicating the total weight for each category, the subsidy amount per kilogram and the total value of the subsidy. This summary is then forwarded to the person responsible for preparing the claims and serves as a reference document for the reference document for the bill of lading issued by the motor carrier responsible for transporting the goods to the airport. Each week, the person in charge enters the data that has been sent to him or her into an Excel file. At the beginning of the next month, the person in charge manually transposes the data from her Excel file to the portal and ensures that the totals in her Excel file match the totals in the claim before transmitting the file.

As of March 2017, the documentation submitted by the beneficiary in support of their claim is limited to the bill of lading for road transportation from the warehouse to the airport, which confirms the weight of the goods delivered to the airport. According to the Recipient, this deviation from the process was approved by the by the Program because of the difficulties encountered in obtaining the bill of lading from the airlines. During our review, we noted that the weights on the summaries matched the total weight on the bills of lading. In our review, we noted that the weights on the summaries were consistent with the total weight on the motor carrier bills of lading and with the weights claimed by category.

Conclusion: Although the Recipient has submitted claims prepared using the tools put in place by the Program and Program and that the goods transported to the airport are supported by an appropriate bill of lading, the fact remains that the absence of documentation supporting the air transportation of to the communities does not allow the validity of the amounts claimed to be established.

Recommendation 1: It is recommended that the Recipient obtain a copy of the bill of lading issued by the air carrier to match the bill of lading issued by the motor carrier and with those issued by the road carrier to confirm the final transportation of the goods to the remote communities.

Objective 2: Program visibility and Transparency to customers

Although Distributions G.F.D. Inc. has signed contribution agreements with the Nutrition North Program Canada, it relies on the Société des traversiers du Québec to inform northern communities of the subsidies available during the period of disenclavement. In this context, the procedures put in place by the recipient are limited to calling its clients in remote communities to inform them of the start of the transportation of eligible products by air. It is the Société des traversiers du Québec that incorporates the terms and conditions of the Program in its notices of opening by indicating that eligible foods are authorized by the Nutrition North Canada Program and adds a link to the Program's website.

Although the actions taken by the Société des traversiers du Québec contribute to ensuring the visibility of the Program, the fact remains that this is the responsibility of the Recipient and that it would be appropriate that a more formal process than a phone call to ensure the visibility of the Program should be in place. This process could include a written communication that describes the terms and conditions of the Program and/or links to the Société des traversiers du Québec website and the Program website.

Conclusion: Although the Société des traversiers du Québec notifies clients of the implementation of the Program, the fact remains that promoting the visibility of the Program is the responsibility of the recipient. It would therefore be appropriate for the Recipient to put in place a formal process that would confirm that it has assumed this responsibility.

Recommendation 2: It is recommended that the Recipient notify its clients of the implementation of the Program during the opening period by means of a written communiqué

Objective #3: Client eligibility to the Program and efficiency and effectiveness of the recipient's supply and distribution chains

Client Eligibility for the Program. The business relationship that exists between the Recipient and the Société des traversiers du Québec has an impact on the procedures put in place by Distributions G.F.D. Inc. to authenticate the eligibility of clients to the Program. Again, the Recipient has not established specific procedures to confirm that its clients are eligible for the Program and relies on the controls put in place by the Société des traversiers to identify eligible clients. As part of its controls the Société des traversiers maintains an up-to-date list of customers eligible for marine rates by community during the period of the opening period, which it shares with the Recipient.

Conclusion: The Recipient does not have procedures in place to authenticate client eligibility for the Program but is able to confirm this using the list prepared by the Société des traversiers du Québec.

Recommendation: No recommendation is required.

Objective #4: Transfer of contribution to the client and profit margins to the recipient

The Société des traversiers du Québec is responsible for all logistics related to the transportation of goods during the opening period. As compensation, the amount of the subsidies claimed by the beneficiary is remitted in full to the Société and, in principle, it is the latter that must ensure the transfer of the subsidies to the clients.

In order to do so, the Corporation requires the last air carrier to charge eligible customers a rate per kilogram based on the ocean rates as published in the Company's notices of clearance. The information provided to customers is limited to the ocean rates charged and the amount of subsidy amount for each order is not shared with customers.

The particular relationship between the Recipient and Natrel includes assistance with billing customers. In fact, it is Natrel that issues invoices to Distributions G.F.D. Inc. financial system and establishes the price list once a year. The Recipient therefore has no control over the cost and price of the products it sells and is not able to provide information that would allow it to confirm that the profit margin is applied to the net cost of the products.

Conclusion: Although the recipient does not benefit from the subsidies granted under the Program, the recipient is unable to confirm that the subsidies were fully returned to the clients as required by the terms and conditions of the Program.

Recommendation 3: It is recommended that the recipient develop a procedure to notify its clients of the amount of subsidies received under the Program when eligible goods are delivered.

Objective #5: Recipient's management system, processes and practices

Preparation of the claim. The process supporting the preparation of the claim submitted to the manager is linked to the activities performed at the warehouse when orders are passed on to the order managers. To support the claim, they prepare a summary indicating the total weight for each category, the subsidy amount per kilogram and the total value of the subsidy. There is no comparison with the invoice issued to the client since the invoices do not include information on the weight of the products purchased.

Each week the administrative assistant enters the summary data into an Excel file and at the beginning of the following month, she manually transposes the data from her Excel file to the claims manager portal. Before submitting the claim she ensures that the totals in her Excel file match the totals in the claim.

The process in place does not allow for verification of the accuracy of the weights claimed by category as the recipient has no list of weights by product and the invoices generated by Natrel's system do not indicate any. Therefore, our audit was limited to comparing the weights on the summaries with the weights on the motor carrier bills of lading and those claimed on the Shipping Report. In this review, we found no discrepancies between the information recorded on the various documents.

Conclusion: The process established by the Recipient to calculate the amount of subsidy per client is incomplete since it is impossible to establish a direct link between the invoices and the summary prepared by the warehouse.

Recommendation 4: It is recommended that the Recipient develop a procedure that would match the information on the invoices with the information on the summaries prepared by the warehouse.

Submission of Reports. Under the terms of the Program, the Recipient must submit claims by the 15th day of the month following the claim period and the March report by April 6. A review of the claim submission dates demonstrates that the Recipient has met the requirements of the Program related to this obligation with the exception of the February 2019 claim which was submitted one day late.

Conclusion: Claims are submitted according to the terms of the agreement, except for the claim February 2019 submitted one day late.

Recommendation 5: It is recommended that the Recipient ensure that claims are submitted in accordance with the terms of the agreement.