Compliance Assessment Summary Report: B.K. MacKinnon's Inc. (Mackinnon's Group Inc.)
For Funding Agreement no. 1718-HQ-000005 and funding agreement no. 2021-HQ-000043 between Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and B.K. MacKinnon's Inc. (Mackinnon's Group Inc.)
Name: B.K. MacKinnon's Inc. (Mackinnon's Group Inc.)
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: $3,351,317
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 B.K. MacKinnon's Inc. (Mackinnon's Group Inc.) (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 general, 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, except, we noted six duplicate invoices (claimed and paid twice) for a total of $488.61 which, should be recovered.
- The Recipient is adhering to and is in compliance with the visibility requirements detailed in the Recipient Program Manual, and the subsidy is presented on invoices. In addition, in relation to Objective #2 a), there was no requirement for the monthly food price reports to be presented to NNC.
- Based on discussions with the Recipient, they are aware of the requirements preventing the sale of subsidized product to ineligible businesses and establishments and the review did not find any sales to ineligible businesses.
- The Recipient is using the most effective and cost-effective supply chain arrangements and routes;
- In our opinion, the Recipient 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 The Northern Shopper||The Northern Shopper Action Plan||Status|
|The Recipient should ensure the itemized shipment report is appropriately reviewed to reduce the number of errors and avoid duplicate invoices being claimed prior to submitting the claim for payment to NNC.||After the review of the management letter, the Recipient is currently conducting a technology review (ISED Canadian Digital Adoption Program) with the goal of improving audit controls with various automations and software upgrades. The company has already chosen a new ERP to manage the business cycle, which will further reduce errors.||Complete|
|The Recipient should review its invoicing process/software to ensure that the subsidy for which the customer is entitled to is passed on.||After the review of the management letter, the Recipient ensure that the assessment included dates wherein our current billing system was not yet in place. We believe the current billing system eliminated this type of error in August 2019. Northern Shopper is currently implementing new Enterprise Resource Planning (ERP) Software to better handle the invoicing cycle, and NNC claim submission cycle.||Complete|
|The Recipient should ensure that all the claims are submitted on the prescribed date established by the Program in the Funding Agreement.||After the review of the management letter, the Recipient will make every effort to submit claims within the prescribed time and expect the technology improvements we are undertaking will further eliminate the chance of orders leaving our warehouse before being invoiced, thus correcting any future issue of late claim submissions.||Complete|
Thank you for your feedback