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Friday,  May 24, 2024 2:35 AM 

Ontario Auditor General notes "significant concerns" in TICO audit; Richard Smart, ACTA respond

Ontario Auditor General notes "significant concerns" in TICO audit; Richard Smart, ACTA respond
TICO’s CEO Richard Smart. (Pax Global Media/file photo)
Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

This article was updated on Thursday, December 7 at 7:10 a.m. EST.

The Office of the Auditor General of Ontario (OAGO) has identified opportunities for Travel Industry Council of Ontario (TICO) to enhance its operations in administrating the Travel Industry Act, 2002. 

In its 51-page value-for-money audit report, the province made 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.

In a news release, TICO said it 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.

“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,” stated TICO’s CEO Richard Smart on Wednesday (Dec. 6). 

“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.”

TICO CEO Richard Smart photographed last year. (Pax Global Media/file photo)

Comp. Fund revelations 

The audit found that while the travel industry has changed significantly since 1997, TICO’s structure and responsibilities “have remained largely unchanged.”

It compared TICO to travel regulators with similar regulatory requirements and found that other jurisdictions utilized consumer protection organizations or broader government organizations whose mandate included “significantly more” than just regulating sellers of travel.

The report also notes how the Australian government repealed the country’s travel seller regulations in 2014 because it determined that due to changes in the travel industry and other existing consumer protections, “they were no longer necessary.”

READ MORE: TICO releases proposal for funding model, registrants can expect “modest adjustment” to total fees

In addition, the audit found that TICO’s cost to administer the Compensation Fund “may outweigh the benefits it provides to consumers.”

Over the past ten years, TICO’s registrants booked over $133 billion in travel services for consumers, the audit says.

Meanwhile, 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.

The report also calculated that since 1997, TICO used an estimated $31 million from the Fund to cover its own operating costs.

“Significant concerns”

The report goes on to outline other “significant concerns," noting the following:

  • TICO could not demonstrate the justification for holding as much as $2 million in security deposits from registrants.
  • TICO’s registrant risk rating system was not used to effectively oversee registrants.
  • 30 per cent of TICO registrants had not received a compliance inspection in the last 10 years.
  • The Ministry and TICO have not established a disciplinary process for registrants.
  • TICO did not know whether complaints involving violations of the Act were referred for enforcement action.
  • TICO had been unable to address gaps in key competencies among Board members.
  • 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).
  • The Ministry did not collect sufficient information to monitor and assess TICO’s performance in meeting its mandate.

The audit concludes 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.

READ MORE: TICO announces new directors following tech glitch; Dawson, Townshend join board

The report says TICO 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.”

READ MORE: ACTA launches letter campaign to protest TICO’s proposed funding model

In addition, the audit found that TICO’s oversight and enforcement activities “were not always risk-based.”

Specifically, TICO had not assigned a risk rating to 37 per cent of its registrants, and it had not established guidelines for how a registrant’s risk rating should be used to drive TICO’s compliance and enforcement activities, the audit says.

“We also found that TICO was not in alignment with key provisions of the Act and its regulation. The regulator could not demonstrate the justification for holding as much as $2 million in security deposits from registrants who may be eligible to have their deposits returned. On average, these deposits had been held by TICO for approximately seven years,” the report reads.

Smart responds

Richard Smart posted a letter on Wednesday to address some of the audit's concerns. 

On the need for an updated funding model, Smart referred to the five-week industry consultation that was held in November and how feedback from that report is being collected. "We’ll keep all registrants updated as this process continues," Smart said. 

On TICO holding onto security deposits for more than two years, Smart said TICO held on to deposits during the pandemic "in the interest of consumers" and is now reviewing and returning them "where it’s appropriate." 

"If we were holding on to your security deposit longer than we should have, we apologize," Smart wrote, noting that TICO, since Jan. 1, has returned approximately $1 million of eligible security deposits and "are in the process of working our way through the remaining deposits." 

TICO CEO Richard Smart. (Sceenshot/TICO)

Smart added there are times in which "we may hold on to security deposits for longer than two years, for reasons that include late filings and compliance issues." 

"We are making enhancements to our processes to  ensure security deposits that are eligible to be returned are processed in a timelier manner," he wrote. 

On transformational changes in the travel industry, Smart said TICO welcomes the recommendation to implement changes that reflect the way consumers purchase travel and how businesses operate. 

"The purpose of the OAGO value-for-money audit is to find things that aren’t working as well as they should be," Smart wrote. "At TICO, we are using the recommendations as an opportunity to enhance administrative and procedural items where we can do better, and we are eager to make those enhancements."

Action plan

Ontario’s Auditor General recommends the Ministry to conduct a comprehensive review of the Travel Industry Act and its regulation, and of TICO’s existing mandate, structure and responsibilities.

Then, based on that review, the Ministry will propose regulatory updates to make Ontario’s regulatory framework "more efficient and effective."

The Ministry says it will also analyze the results from TICO’s fee and Compensation Fund review process, including stakeholder feedback received in fall 2023, as part of this process.

"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 said in a statement, noting that it will present an implementation plan to the Minister of Public and Business Service Delivery in early 2024. 

TICO says it will also report on its progress to address the recommendations through a Public Action Plan, which will be posted on TICO’s website.

The recommendations come on the heels of TICO closing consultations on its funding framework and fees, which are under review. 

The process has faced ongoing criticism from travel industry associations, like the Association of Canadian Travel Agencies and Travel Advisors (ACTA) and the Canadian Association of Tour Operators (CATO). 

ACTA responds 

ACTA issued a statement on Wednesday, responding to the OAGO's audit, saying it was "pleased" to read its findings. 

"The 51-page report is comprehensive and clearly reflects the fact that the Travel Industry Act and current oversight of the industry do not properly reflect the environment of today’s travel industry," ACTA wrote. "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, alongside its 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."

To read the Auditor General of Ontario's full report, click here. To view the report at a glance, click here.  

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