Nutrition North Canada—Aboriginal Affairs and Northern Development Canada

Opening Statement to the Standing Committee on Public Accounts

Nutrition North Canada—Aboriginal Affairs and Northern Development Canada

(Chapter 6—2014 Fall Report of the Auditor General of Canada)

23 March 2015

Michael Ferguson, CPA, CA
FCA (New Brunswick)
Auditor General of Canada

Mr. Chair, thank you for this opportunity to discuss Chapter 6, Nutrition North Canada—Aboriginal Affairs and Northern Development Canada, from our 2014 Fall Report. Joining me at the table is Glenn Wheeler, Principal, who was responsible for the audit.

Many communities across Canada’s three territories, as well as in the northern parts of several provinces, are accessible only by air for part or all of the year. Necessities such as perishable foods must be flown into these communities, and this increases the prices of these items on store shelves. According to Statistics Canada, feeding a household in Nunavut costs, on average, twice as much as it does elsewhere in Canada. Since the late 1960s, the federal government has managed programs to help reduce the high cost of food in the North.

In April 2011, Aboriginal Affairs and Northern Development Canada introduced the Nutrition North Canada program. The Program has an annual budget of $60 million. A subsidy is provided directly to northern retailers through contribution agreements to help lower the prices of nutritious foods. Retailers are responsible for passing the full subsidy on to consumers by reducing their prices on eligible foods.

We examined whether the Department has managed the Nutrition North Canada program to meet its objective of making healthy foods more accessible and affordable. We also examined whether the Department obtained the information needed to verify that the subsidy is fully passed on to consumers. We did not audit the northern retailers.

We found that Aboriginal Affairs and Northern Development Canada has not managed the Program to meet its objective of making healthy foods more accessible, as it has not identified eligible communities on the basis of need. For example, there are two communities in Northern Ontario that are about 20 kilometres apart and are similarly isolated. One is eligible for a full subsidy of $1.60 per kilogram of food, while the other is eligible for only a partial subsidy of 5 cents per kilogram.

We also found that the Department has not managed the Program to meet its objective of making healthy foods more affordable, as it has not defined affordability or verified that northern retailers are passing the full subsidy on to consumers.

The impact of the subsidy may be negated if the profit margin is subsequently increased. Therefore, in our opinion, determining whether the entire amount of the subsidy is being deducted from the selling price of a food item requires an examination of profit margins—both current and over time. However, the Department did not require information on profit margins, either in its contribution agreements with retailers or through its compliance reviews of retailers.

Department officials told us that information from the northern retailers’ monthly reports on food prices, which are used to calculate the cost of the Revised Northern Food Basket, allows the Department to verify that the full subsidy is passed on. We have a different view. We found that the Department had limited assurance of the accuracy of these prices provided by the retailers, as it did not systematically verify the accuracy of prices reported.

Furthermore, at least 30 stores were excluded from the calculation of the Food Basket because their price data was unavailable. Finally, this information did not allow the Department to know whether the full subsidy was being passed on to consumers because the Food Basket included prices for both eligible and ineligible items.

If Aboriginal Affairs and Northern Development Canada could verify that the full subsidy is being passed on to consumers, some of the public skepticism surrounding the Nutrition North Canada program might be lessened. This would benefit the Department, northern retailers, and the residents of Canada’s North.

The Department has agreed with our recommendations, and it has prepared an action plan to address each of our recommendations.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the Committee may have. Thank you.