Compliance Assessment Summary Report: North West Company
For Funding Agreement no. 1617-HQ-000005 and funding agreement no. 1920-HQ-000043 between Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and North West Company.
Name: North West Company
Location: desk audit
Time period covered by audit: April 1, 2018 until March 31, 2021
Total amount of CIRNAC funding received from 2018 to 2021: $163,354,769
At the request of the Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC), Samson & Associés CPA / Consultation Inc. performed a desk compliance assessment of the Funding Agreement between Nutrition North Canada (NNC or the 'Program') and North West Company. (Recipient). Nutrition North Canada is a Government of Canada Program that helps make nutritious food and some essential items more affordable and more accessible to northern communities. The purpose of the assessment, in accordance with our engagement with NNC, was to provide information on:
- Whether the Recipient is passing on the full value of the subsidy to consumers;
- Whether the amounts disbursed to the Recipient through the fiscal years 2018/2019 through 2020/2021 were appropriately claimed in compliance with the Terms and Conditions of the Recipient's Funding Agreement;
- Whether program visibility requirements are met and that the subsidy is transparent to consumers;
- The Recipient's reporting and claiming systems and procedures with regard to gaps and controls issues; and
- Whether the Recipient respected program rules in regard to sales to ineligible clients.
The period covered by the compliance assessment is from April 1, 2018 until March 31, 2021. We determined our sample size by applying professional judgement based on the frequency of claims and the number of items in each claim.
Due to the Covid-19 travel restrictions, no on-site was performed and our compliance assessment was performed as a desk audit. As a result, our interviews were performed based on electronic communication with the Recipient to identify and document their key control activities, their procedures and processes related to the claim of funds to NNC, program delivery and reporting. In addition, due to the travel restriction we were unable to verify the accuracy of the weighting system used by the Recipient.
We subsequently performed detailed audit procedures on the accuracy and validity of the Recipient's claims and on the margin earned by the Recipient on the subsidized products.
Based on the procedures performed and as more fully described in our report, we did not find any significant deviations in the samples we selected; however, we identified improvements in the form of recommendations to improve the Recipient's control environment in relation to the Program.
Overall, we are of the opinion that the funding provided to the Recipient was spent for the intended purposes and in compliance with the terms and conditions for the 2018-19 to 2020-21 Funding Agreements signed with the Department.
- In the exception of the highlighted findings in Section 5, the amounts disbursed to the Recipient over three fiscal years (2018/19 – 2020/21) were appropriately claimed in compliance with the terms and conditions of the Recipient's Funding Agreement.
- The Recipient is adhering to and is in compliance with the visibility requirements detailed in the Recipient Program Manual and the amounts presented in the monthly food price reports presented to NNC were accurate.
- Based on discussions with the Recipient, they are aware of the requirements preventing the sale of subsidized product to ineligible businesses and establishments.
- The Recipient is using the most effective and cost-effective supply chain arrangements and routes.
- Except for the audit limitation2, in our opinion, the Recipient has passed on the subsidy to eligible clients and the value of the subsidy is not being eroded by the Recipient's profit margin practices.
- Three recommendations were identified to improve the Recipient's management systems, processes and practices that would address the deficiencies noted.
The table below summarizes the recommendations identified by the auditor, the actioned measures required to be undertaken by the retailer/supplier, and their status.
|Auditors Recommendation for North West Company||North West Company Action Plan||Status|
|We recommend that the Recipient review and correct their list 'Sku Data with NNC codes' to ensure that the list includes:
||After the review of the management letter, the Recipient as communicated with NNC to clarify the current NNC guidelines for eligible food criteria and classification require interpretation to determine specific item eligibility and appropriate classification based on product ingredients. In the fall of 2022, The North West Company (NWC) met with NNC to complete a full review of the eligibility criteria for codes identified as inaccurate or ineligible by the Claims Processors. In December 2022, NNC published an updated eligibility list and NWC subsequently completed a full review of all Sku data to ensure items are correctly coded.||Complete|
|The Recipient should ensure that an appropriate review process of the Itemized Shipment Report is put in place prior to its submission for payment.||After the review of the management letter, the Recipient included his respond within response #1. (under the existing NNC product eligibility and classification guidelines, some interpretation based on product ingredients is required when a new item is setup). Based on NNC audit work for the fiscal year ended March 31, 2022, 99.93% of items claimed were eligible and correctly classified. To further strengthen product eligibility and classification controls, in August 2022, NWC implemented quarterly product classification reviews as part of the new item listing and setup process.||Complete|
|The Recipient should ensure that an appropriate review process of the monthly food report is put in place prior to its submission to NNC.||After the review of the management letter, the Recipient regularly reviews and strengthens internal controls and reporting processes related to the NNC program. At the request of NNC, in May 2021 NWC improved the monthly food price report to address many of the data integrity issues identified in the audit prior to this time.||Complete|
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