Compliance Assessment Summary Report: Distribution Côte-Nord Inc

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 Distribution Côte-Nord 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 2020/2021 through 2022/2023 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, 2020, until March 31, 2023. 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 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.

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 2020-21 to 2022-23 Funding Agreements signed with the Department. However, findings and recommendations under section 1.2 were identified and should be read in conjunction with these conclusions.

• Except for the errors noted under sections 5.1.1, we can confirm that the amounts disbursed to the Recipient over three fiscal years (2020/21 – 2022/23) were appropriately claimed in compliance with the terms and conditions of the Recipient's Funding Agreement and the sample revealed no overpayment. Furthermore, we believe that the contribution for which reimbursement is requested is related to the type and nature of eligible costs required by the NNC program.
• We noted that the program was not visible during our verification period for the following reasons:
  • There is no information on the customer's invoice indicating that certain products are subsidized by NNC; and
  • The beneficiary does business with third-party retailers, but no contracts were signed with them during the audit period. However, contracts were signed between the beneficiary and the third-party retailers in January 2025.
• 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 find any sales to ineligible businesses.
• Our review demonstrated that the recipient uses the most efficient and cost-effective supply chain arrangements and routes. In addition, for the months of April 2020, January through March 2021, April 2021, February and March 2022, and April 2022, February 2023, and March 2023, NNC's contribution was fully remitted to the Société des Transports du Québec to cover transportation costs during that period. Our review of the STQ's transportation costs versus the contribution received from NNC revealed that, for the audited period, the transportation costs incurred exceeded the total amount of the Ministry's contribution. The Recipient's database is appropriately coded.
• Our review found that the database used by the recipient was appropriate.
• Based on our review and discussions with the recipient, we can conclude that the subsidy is not eroded by the prices charged to the recipient's customers.
  Third-party retailers:
  Our review showed that, during the period audited, the beneficiary did business with several third parties, such as Accomodation Malouin, B&B Variety, Coopérative de consommation de l'Ile d'Anticosti, Dépanneur Bellecourt, Épicerie Emmaly, Green Repair, Les Viandes Kennedy, Magasin du Portage, Magasin LM, North West Company Ltd, Quincaillerie Kamatshenan, R&M Detail, Realm, and Seaside Supplies. The beneficiary informed us that it had not signed any contracts with third-party retailers for the period covered by our audit and that it was not aware of this requirement. However, contracts were signed with the above retailers in January 2025.
• Five recommendations were identified to improve the Recipient's management systems, processes and practices in order to 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.