An Ontario Auditor General report has some harsh words about the performance of the Travel Industry Council of Ontario, including criticism over the cost of its Compensation Fund, the holding of security deposits, and a lack of compliance inspections.
The new report said auditors found that “TICO’s cost to administer the Compensation Fund may outweigh the benefits it provides to consumers.
“TICO’s estimated annual cost to administer the Fund for 2022/23 of $1 million is nearly three times more than the average of $350,000 in compensation paid from the Fund to consumers on average over the last 10 years,” the report notes.
“As well, using TICO’s own recent estimate for its updated fee model for allocating TICO’s expenses to the Compensation Fund, we calculated that since 1997 TICO used an estimated $31 million from the Fund to cover its own operating costs
In a statement, ACTA appeared vindicated in its criticisms of the management of the Travel Industry Act, saying it is “pleased to see that the long-awaited “Value for Money Audit - Travel Industry Council of Ontario” was released today.
“ACTA has been advocating for a thorough review and rewrite of the Travel Industry Act and that consumers and industry deserve much more than band aids on a broken system.
ACTA and our Ontario Travel Agency Advocacy Committee is pleased that many of our concerns and recommendation were listened to, and we will be reviewing the report in more detail and will have more to say following its analysis.”
Significant concerns identified in Auditor General’s report include:
- TICO could not demonstrate the justification for holding as much as $2 million in security deposits from registrants. Under the Act’s regulation, TICO is required to collect a $10,000 security deposit from each new registrant. Once the registrant has filed two consecutive financial statements with TICO, TICO is obligated to repay the security deposit if the Registrar has no concerns regarding the registrant’s compliance with the Act or its regulation. As of March 31, 2023, we found that 58% of the registrant deposits TICO was holding, which totalled $2 million, were from registrants who had filed at least two consecutive financial statements. On average, these deposits had been held by TICO for approximately seven years.
- TICO’s registrant risk rating system was not used to effectively oversee registrants. We identified several issues with how TICO assigns, calculates and utilizes its risk rating system to inform registrant oversight activities. For instance, as of March 2023, TICO had not assigned a risk rating to 37% of registrants. In addition, TICO’s compliance policy had no established guidelines for how the risk rating should be used to drive compliance and enforcement activities.
- 30% of TICO registrants had not received a compliance inspection in the last 10 years. As of March 2023, 30% of the 1,684 registered travel agencies and wholesalers had not been inspected by TICO to assess their compliance with requirements in the last 10 years, including 44 registrants who had not received a compliance inspection for more than 20 years.
- TICO did not know whether complaints involving violations of the Act were referred for enforcement action. We found that TICO did not track the outcomes of the complaints it handles in its information system, including whether they were resolved, whether they potentially violated the Act and its regulation, or whether they were referred for further investigation or enforcement action.
- TICO has used an estimated $31.3 million from the Compensation Fund since 1997 to cover its own operating costs. TICO has routinely used the Compensation Fund to cover its own operating costs, even though legislative requirements allow only reasonable expenses related to the Fund to be paid from the Fund.
- The cost to administer the Compensation Fund may outweigh the benefits it provides consumers. Over the 10 years from 2013/14 to 2022/23, TICO’s registrants booked over $133 billion in travel services for consumers. Over this same period, we found that, on average, the Fund paid approximately $350,000 in compensation to consumers annually, or less than 0.003% of annual travel services booked by TICO’s registrants. TICO’s estimated annual cost for 2022/23 to administer the Fund of $1 million is nearly three times more than the $350,000 in compensation paid from the Fund to consumers on average over the last 10 years.
- Almost half of Ontarians surveyed who were involved in travel planning for their household were unaware of TICO. Over the last five years, only 51% of Ontarians that were involved in travel planning indicated that they were either “definitely” or “somewhat” aware of TICO. In addition, only 31% of respondents indicated they were aware of the Compensation Fund. To increase consumer awareness, TICO developed a brochure for consumers with information regarding its regulatory role, registrant requirements, protections available under the Act, and Compensation Fund coverage. However, there is no requirement for registrants to distribute the brochure to consumers.
The report also blames the Ontario government to some degree, saying the “Ministry did not collect sufficient information to monitor and assess TICO’s performance in meeting its mandate. For example, TICO did not have performance indicators and targets that it reported to the Ministry to assess the degree to which it operates on a cost-recovery basis, a requirement under its Administrative Agreement with the Minister. We also found that performance indicators had not been established, or were insufficient, to monitor TICO’s operational performance in several key areas where our audit identified operational issues, including in the areas of inspections, security deposits, and complaint-handling.”
In the report’s overall conclusion, the Auditor General says the “audit concluded that TICO did not have processes to consistently administer the Travel Industry Act, 2002 effectively in order to register and regulate travel agents and wholesalers, and to protect consumers when purchasing travel services through a travel agent or wholesaler. TICO, for example, could not demonstrate that it effectively discharged its responsibilities under the Act to mediate and resolve complaints because it does not track the outcomes of the complaints it handles, including whether they were resolved or potentially violated the Act and its regulation, and whether they were referred for further investigation or enforcement action.
TICO released a statement on its website in response to the report.
“The Office of the Auditor General of Ontario (OAGO) has released its value-for-money audit of the Travel Industry Council of Ontario (TICO). The report identifies opportunities for TICO to enhance its operations in administrating the Travel Industry Act, 2002, while also considering the significant changes that have occurred in Ontario’s travel marketplace,” officials said.
“TICO values the objective third-party perspective that this review has provided and the opportunities to enhance the way we deliver on our consumer protection mandate,” said TICO’s CEO Richard Smart. “Our team is dedicated to addressing the recommendations presented in the report, a number of which are already in progress. We are committed to being transparent and accountable as we share our action plan in the months ahead.”
The OAGO’s report contains a total of 16 recommendations, with nine of those directed at TICO, six directed at both TICO and the Ministry of Public and Business Service Delivery (MPBSD) and one directed at MPBSD. TICO will enhance its policies and procedures, risk-based decision-making processes and its collection and analysis of data to improve business intelligence of the travel marketplace and the businesses it regulates.
The report also underpins the transformational changes that have occurred in the travel marketplace since TICO was created 26 years ago, including the way consumers purchase travel and the evolution of how travel businesses operate. TICO is committed to working collaboratively with MPBSD as it considers potential regulatory changes and what the future of consumer protection should look like in the years ahead.
TICO will provide its implementation plan to the Minister of Public and Business Service Delivery in early 2024. TICO will also report on its progress to address the recommendations through a Public Action Plan, which will be posted on TICO’s website.
