Compliance Assessment Summary Report: Parkes General Store

Context

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 Parkes General Store (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 2019/2020 through 2021/2022 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, 2019, until March 31, 2022. We determined our sample size by applying professional judgement based on the frequency of claims and the number of items in each claim.

The 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 the 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.

Conclusions

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 2019-20 to 2021-22 Funding Agreements signed with the Department. However, the findings and recommendations under section 1.2 were identified and should be read in conjunction with these conclusions.

• Except for the errors noted under section 5.1, we can confirm that the amounts disbursed to the Recipient over three fiscal years (2019/20 – 2021/22) were appropriately claimed in compliance with the terms and conditions of the Recipient’s Funding Agreement. Furthermore, the subsidy claimed for reimbursement by the Recipient relates to the type and nature of eligible cost requirements of the program.
• The Recipient is not adhering to and is not in compliance with the visibility requirements detailed in the Recipient Program Manual with the exception that the receipt provided to the customer does indicate the subsidy rebate.
• Based on discussions with the Recipient, they are aware of the requirements preventing the sale of subsidized products to ineligible businesses and establishments and the review did not identify any sales to ineligible businesses.
• The Recipient is using the most effective and cost-effective supply chain arrangements and routes;
• Due to the limited size of the Recipient and the quick turnover of its inventory, there is no database for the inventory and no recommendation is proposed.
• The Recipient did sell to Third-Party Retailer. 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.