Compliance Assessment Summary Report: Arctic Buying Company Inc.
For Funding Agreement no. 1819-HQ-000022 between Crown-Indigenous Relations and Northern Affairs Canada and Arctic Buying Company Inc.
March 31, 2021.
Name: Arctic Buying Company Inc.
Location: Winnipeg, Manitoba
Time period covered by audit: April 1, 2016 until March 31, 2019
Total amount of CIRNAC funding received from 2011 to 2019: $358,086
At the request of the Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC), Samson performed a desk compliance assessment of the Funding Agreement between Nutrition North Canada (NNC or the 'Program’) and Artic Buying Company Kivalliq (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 2016/2017, 2017/2018 and 2018/2019 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, 2016 until March 31, 2019. 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.
Recommendation #1: The recipient should review the invoices and review their software to understand the error and correct their software if necessary.
Recommendation #2: The recipient should ensure that a second review is performed prior to submitting the claim for payment and should review the billing software to correct the error found.
Based on the sample tests, discussions with the Recipient and the other procedures performed, we can conclude the following:
- Management practices in place to support program delivery are, for the most part, adequate;
- Amounts paid to the Recipient over three fiscal years (2016/17-2018/19) have were appropriately claimed in accordance with the terms and conditions of the Recipients agreement;
- Subject to the limitations of conducting a desk audit, recipients comply with the visibility requirements detailed in the Recipient Program Manual and the subsidy is presented on the invoices;
- The recipient only passed on the subsidy to eligible customers;
- The recipient uses the most efficient and cost-effective supply chain arrangements and routes;
- The recipient has transferred the full value of the subsidy to consumers and the value of the subsidy is not eroded by mark-up practices; and
- We have two recommendations to improve the recipient's management systems, processes and practices to address the deficiencies identified.
Overall, it is our opinion that the funding provided to the recipient was spent for the purposes intended and in accordance with the terms and conditions of the funding agreements signed with the Department for fiscal years 2016-2017 through 2018-2019.
Action Plan for Arctic Buying Company Inc. (ABCK)
The table below summarizes the recommendations identified by the auditor, the actioned measures required to be undertaken by the retailer/supplier, and their status.
|Auditor’s recommendation(s)||Action Plan||Status|
|1. Implement a process whereby its invoicing/software is reviewed to ensure that the subsidy is fully transferred to the consumer.||Following the review of the Compliance Management Letter, ABCK indicated that they have gone to great lengths to automate their system. They have hired someone to maintain up to date subsidy levels. They are working towards more automation with their accounting system. They have eliminated a great deal of errors by launching a website that performs the calculations to ensure the proper subsidy is being applied to each item.||Complete|
|2. Implement a process to ensure a second review of the itemized shipment report is performed prior to submitting a claim for payment.||ABCK is working with an engineer to create a system to cross reference items to ensure that subsidy amounts are up to date and accurate.||Complete|
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