Aboriginal Affairs does not know whether retailers in the North are passing on savings to consumers as a result of its Nutrition North program to make healthy food more affordable in remote northern parts of the country, the federal auditor general has found.

In his fall report, Michael Ferguson looked at the $60-million program that provides funding to some northern communities to help offset the cost of food, which can be much more expensive in the north because of increased shipping fees.

But the department doesn't require merchants report their profit margins.

"This data is necessary to determine whether the full subsidy is passed on," the report says.

Aboriginal Affairs claims retailers' monthly reports on food prices allow it to confirm the subsidy is passed onto consumers, but even then the audit found the department doesn't check the prices reported.

AG Report 20141125

Auditor General of Canada Michael Ferguson speaks during a press conference at the National Press Theatre following the tabling of the 2014 Fall Report of the Auditor General in the House of Commons Tuesday November 25, 2014 in Ottawa. (Adrian Wyld/Canadian Press)

Instead, Aboriginal Affairs collects data on the "product landed cost," the sum of the wholesale cost of the food, ground transportation and air freight, and the selling price.

The auditor general's office also found the program, which was intended to promote healthy food choices, also subsidizes foods such as ice cream, bacon and processed cheese spread.

The tabling of the auditor general's report comes just days after Ottawa announced it was pumping more cash into the subsidy.

Nutrition North problems numerous

It isn't the first time the department has been warned about the problem. A 2013 internal audit found the compliance reviews "provided insufficient information."

Other problems with Nutrition North:

  • Eligibility isn't determined based on need. 
  • Publicly reported data isn't always accurate. In one report, the year-over-year food basket price difference was off by 10 percentage points, the AG's office found.
  • Retailers aren't required to report on spoilage, despite the department pledging to measure it.
  • The department's stated goal is to make food more affordable, but it hasn't defined what is affordable.

Communities are chosen for the program in part by how much they used the previous food mail program, which the government cancelled in 2011. But the lack of clear guidelines leads to "inconsistencies," the report notes.

In northern Ontario, for example, two communities 20 kilometres apart and lacking year-round road access get two different subsidies: one gets the full $1.60 per kilogram subsidy, while the other gets the partial five-cent per kilogram subsidy.

Ahead of the auditor general's report, Northern lawmakers and residents have were expressing doubts about its effectiveness.

"I don't think it's working here right now," said Tony Akoak, a Nunavut MLA for Gjoa Haven.

"When we buy groceries here in Gjoa Haven, there's just two small bags worth over $100 and that's just going to feed one person throughout the day. Not even a family. Not even a week."

Akoak says the Food Mail program which Nutrition North replaced in 2011 should make a comeback.

with files from CBC News and the Canadian Press