PACP Committee Report

The Honourable Kevin Sorenson, P.C.
Chair of the Standing Committee on Public Accounts
House of Commons
Ottawa, Ontario K1A 0A6

Dear Mr. Sorenson,

On behalf of the Government of Canada, I am pleased to respond to the Second Report of the Standing Committee on Public Accounts, entitled “Chapter 6, Nutrition North Canada – Aboriginal Affairs and Northern Development Canada, of the Fall 2014 Report of the Auditor General of Canada”.

The Government has acknowledged this criticism around the Program and has taken steps to address this, as noted in the published mandate letters for both the Minister of Health and the Minister of Indigenous and Northern Affairs, specifically calling on them to expand and update the Nutrition North Canada program in consultation with Northerners. Furthermore, Budget 2016 reaffirms the commitment of this Government to expand the Program and ensure that all isolated communities have access to perishable nutritious foods with additional investments.

I would like to thank the Committee for its work in reviewing this Chapter. The Government is pleased to report back to the Committee on its three recommendations.

Let me assure you, this Government is committed to reforming the Nutrition North Canada program in a manner that better meets the needs of Northerners and contributes to addressing food insecurity in the North.

Recommendation 1: That, by 31 March 2016, Aboriginal Affairs and Northern Development Canada report to the Standing Committee on Public Accounts on its detailed review of the criteria for community eligibility.

At the launch of the Nutrition North Canada program in 2011, a community was eligible for the Program if it lacked year-round surface transportation (no permanent road, rail, or marine access), and used the Food Mail Program, Indigenous and Northern Affairs Canada’s previous northern transportation subsidy program. Usage levels were determined from an examination of the Canada Post shipping data from the 2009–10 fiscal year. The Department’s internal audit (https://www.aadnc-aandc.gc.ca/eng/1375887194752/1375887248731) and internal evaluation (https://www.aadnc-aandc.gc.ca/eng/1395347953550/1395348287432) in 2013 recommended that community eligibility requirements be examined. These recommendations pointed out a situation that was in the interest of fairness of other isolated northern communities.

The Department undertook a detailed review of all isolated northern communities to better understand the challenges they face due to isolation in accessing perishable nutritious foods. Remote and isolated northern communities in three territories and seven provinces were examined, including their year-round access to approximately 30 supply centres. A common template and criteria were developed to allow for comparison of data collected, such as: community demographics, the number of grocery stores in each community, amount of time isolated, nature and condition of surface access when it exists and distance to supply centre by air. In the spirit of transparency, community profiles of all remote and isolated communities examined have been developed and are posted on the web.

In keeping with this Government’s commitment to helping isolated northern and Indigenous communities access healthy food, the criteria for community eligibility will be based on isolation (no year-round road, rail or marine access), and will no longer consider point-in-time usage of the former program. Any feedback will be analyzed and integrated in the review of community eligibility. To support this work, Budget 2016 proposes $64.5M over five years starting 2016-17 and $13.8 million per year ongoing to expand the Program to all isolated northern communities. Further details were announced on July 18 in Inuvik and can be found at: http://news.gc.ca/web/article-en.do?nid=1100309&tp=1

Recommendation 2: That, by 31 March 2016, Aboriginal Affairs and Northern Development Canada report to the Standing Committee on Public Accounts on the extent to which compliance reviews were able to determine that the full subsidy for the Nutrition North Canada program was passed on to consumers.

Indigenous and Northern Affairs Canada’s 2013 internal audit (https://www.aadnc-aandc.gc.ca/eng/1375887194752/1375887248731 () identified the need to look at profit margins and quality assurance of the compliance reviews. This finding was confirmed by the Auditor General. In Summer 2014, the Department amended the Statement of Work used to engage accredited audit firms for compliance reviews. The amended Statement of Work ensures that the compliance reviews appropriately determine whether the entire amount of the subsidy is being deducted from the selling price of food. Compliance reviews now report on whether, based on analysis of the application of the subsidy and the resulting calculations of profit margins of eligible items, the full subsidy is passed on to consumers. Further, the Department monitors the work of the compliance reviewer to ensure that requirements in the Statement of Work are met. In cases where compliance reviews make recommendations to retailers, the Department monitors their implementation.

Compliance reviews were conducted in 2014-2015 and 2015-2016 under the amended Statement of Work. Results from the draft 2015-2016 reports indicate that three of the five (60%) compliance reports concluded subsidies were being passed on to the consumers. The remaining two reports are inconclusive at this time, and require further investigation. The Program will consider a follow-up compliance review on this specific issue to ensure that profit margins are not eroding the subsidy after the recipient provides an action plan on how they will address the recommendation and this situation.

Recommendation 3: That, by 31 March 2016, Aboriginal Affairs and Northern Development Canada report to the Standing Committee on its engagement strategy for the Nutrition North Canada program.