Winery Audit Process Overview

Presented by LCBO Store & Winery Audit Department VQA Workshops Prince Edward County – Friday January 17, 2014 Lake Erie North Shore – Thursday January 23, 2014 Niagara Peninsula – Friday January 31, 2014

Agenda

• Preparing for the audit • The audit process – Pre visit – Visit • Typical deficiencies and follow up • Question and answer period

Preparing for the Audit

• Current tank records with volume, variety and vintage • Current inventory of cased goods and off-site warehouse inventory • J10s since last audit and ledgers to support sales data • VQAO Sales Reports, Direct Delivery VQA and non-VQA, Duty Free • Volume of sales and promotional use for the part month up to the day of the audit • Blending and bottling records and disposals • Grape Growers of Ontario reports, weigh bills

Preparing for the Audit

Key People: • • • Winemaker/Owner/Manager in regard to bottling, blending and volumes of bulk wine through harvest or purchase Bookkeeper in regard to sales information and also in deciphering of said information Retail Staff in regard to stock locations, recording of promotional inventory and general winery information

The Audit Process – Pre-visit

• Review inventory from last audit • Review stage of production from last audit • Review transfers, disposals and other correspondence • Retrieve sales data reported to LCBO • Retrieve data for VQA applications since the last audit

The Audit Process - Visit

Count Inventory Verify increases to previous inventory Verify decreases to previous inventory Compare inventory change to establish loss Ensure loss is within allowance (LCA Reg 717 sec 13) Complete audit testing for VQAO, AGCO, LCBO

Summary of Allowances

• 5% for first 6 months (October 1 to March 31) • 1 ½% for next 6 months (April 1 to September 30) • 3% thereafter • Prorated based on timing of audit visit

LCBO Audit Criteria

• Direct Delivery invoicing and fees • Container Deposit remittances • Collection of Special Occasion levies and remittances • Offsite warehouse authorization • Pricing verification

AGCO Audit Criteria

• Compliance with Wine Content and Labeling Act • Import records and blending requirements • Production recovery • General record keeping requirements under WCLA and Liquor Licence Act • Compliance with Winery Retail Store Authorization • Made Policy • Rules for wineries located outside DVA • On-site retail store • Non-Grape winery rules

Audit Process - Visit

Supporting Documents • J10’s • VQAO Applications • VQAO transfer forms • Sales documentation • GGO harvest information • Weigh Bills • Brix Reading • SetGo forms • Winemakers notes, tank records, daybook, etc.

VQA Audit Program

1. Requirements for the identification of geographical indication prescribed in Table 2 of the Rules 2. Viticultural and Oenological requirements outlined in Table 2 of the Rules 3. Minimum brix level requirements as set out in Appendix A of the Rules 4. Requirements for vintage dating set out in Section 3 of the Rules

Grape Growers of Ontario

P.O BOX 100, VINELAND STATION, ON L0R 2E0 Phone 905.688.0990 Fax 905.688.3211 www.grapegrowersofontario.com

Growers by Processor

Report Year: 2013 Report Generated On: 03-Jan-2014

Processor Name

ABC WINERY ABC WINERY ABC WINERY ABC WINERY ABC WINERY ABC WINERY

Grower Name

NIAGARA PENINSULA NIAGARA PENINSULA LENS LENS SHORT HILLS ABC WINERY

Weigh Bill Variety

13214301116001 13214301114000 13214301111001 3214301116500 13214301116000 13214301111000 CHARDONNAY (025) CABERNET FRANC (014) PINOT GRIS (086) CHARDONNAY (025) CHARDONNAY (025) PINOT GRIS (086)

Harvest Date

11-Oct-2013 06-Nov-2013 7.9350

30-Sep-2013 21-Oct-2013 15-Oct-2013 25-Sep-2013

Net Weight

1.5490

5.0220

4.7040

6.0350

7.3630

BRIX

22.0

22.7

20.3

21.9

22.0

19.5

VQA Audit Program

5. Miscellaneous requirements set out in Section 6 of the Rules including: • Addition of water • Fortifying wine • Chaptalization • Sweetness descriptions, sugar levels, acid levels 6. Production Recoveries 7. Information from Wine Transfer Form 8. Use of terms, descriptions and designations within the winery’s on-site retail store

VQA Audit Program

9. Reported litres sold of each VQA product listed on the Vintners Quality Alliance Product Sales Report and corresponding VQA literage fees 10.Other observations related to VQA Act

Common Deficiencies

1. Inaccurate reporting of sales volume/ literage fees 2. Inaccurate information or lack of VQA transfer form 3. Inaccurate label content compared to approved application 4. Non-VQA products using VQA descriptors 5. Bottling deficiencies – No records or incomplete records available – – More than approved volume on application More than one year after approval granted

Common Deficiencies

6. Unable to verify blending requirements for VQA approvals – Wine makers records are not available/provided – Blending records do not match applications/approvals – Blending records are kept or unclear 7. Inaccurate sales reporting or missing documentation

LCBO Contacts

Niagara • Sheila Gayman • Peter Harris LENS • Jeff Dunlop PEC • Trish Moulds • Lorne Martin GTA and Other • Michael Roberts • Mark Silva Audit Project Managers  Dianne Scharf  Michael Lyck Department Manager  Chad McGregor