Compliance Assessment Summary Report: Tlicho Investment Corporation

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 Tlicho Investment Corporation (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, due to the significant number of errors identified in the weights claimed, as described in paragraph 5.1.2, we were unable to obtain sufficient appropriate audit evidence to determine the accuracy of the amounts claimed for the audit period. Accordingly, we do not express an opinion on the accuracy of those amounts.

In addition, as described in Section 5 of this report, the Recipient complied, in all material respects, with the Objectives set out in Section 2.3 of the report.

The findings and recommendations described in Section 1.2 should be read in conjunction with the above conclusions.

• Errors were noted under section 5.1.1 and 5.1.2 of the report, due to the significant number of errors identified in the weights claimed, as described in paragraph 5.1.2, we were unable to obtain sufficient appropriate audit evidence to determine the accuracy of the amounts disbursed to the Recipient over three fiscal years (2020/21 – 2022/23). Accordingly, we do not express an opinion on the accuracy of those amounts.
  Notwithstanding, the above, we found that only eligible items were claimed.
• The Recipient is not adhering to and is not in compliance with the visibility requirements detailed in the Recipient Program Manual.
• 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.
• The Recipient is using the most effective and cost-effective supply chain arrangements and routes.
• Inventory at each store is independently maintained and kept accurate through a POS-integrated system that offers real-time tracking and automated low stock notifications.
• The Recipient did not 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.
• Six 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.