TICO - Travel Industry Council of Ontario Trust Accounting Requirements Questions and Answers 1 — Questions and Answers
Question 1: According to Ontario Regulation 26/05, what is the maximum amount of time a TICO registrant has to deposit customer funds into their designated trust account after receiving them?
- By the following Monday
- Within two banking days (Correct answer)
- Within five business days
- By the end of the calendar month
Correct answer: Within two banking days
Section 27(3) of Ontario Regulation 26/05 explicitly states that a registrant must deposit all money received from customers for travel services into their trust account within two banking days of receipt to ensure the funds are protected promptly.
Question 2: A travel agency owner needs to pay the monthly office rent and temporarily uses funds from the customer trust account, intending to replace them when a large commission cheque clears. This practice is known as what?
- A trust surplus transfer
- A standard trust reconciliation
- Commingling, and it is a serious breach of the regulations (Correct answer)
- Bridging, and it is acceptable if the funds are returned within 48 hours
Correct answer: Commingling, and it is a serious breach of the regulations
Using funds from the trust account for any purpose other than paying suppliers for that specific customer's travel or issuing a refund is strictly prohibited. Mixing trust funds with general operating funds is called commingling and is a major violation of the Travel Industry Act, 2002.
Question 3: Which of the following represents a permissible disbursement from a TICO registrant's Travel Industry Act Trust Account?
- Paying for a new advertisement in a local newspaper
- Issuing a payroll cheque to a travel counsellor
- Transferring funds to a supplier to pay for a client's cruise (Correct answer)
- Purchasing foreign currency for a different client's trip
Correct answer: Transferring funds to a supplier to pay for a client's cruise
Funds in a trust account belong to the customer and can only be used for two main purposes: paying the supplier for the travel services the customer purchased, or refunding the customer. All other expenses must be paid from the agency's general operating account.
Question 4: An agency's trust account has earned $50 in interest over the past quarter. According to TICO's trust accounting rules, who is entitled to this interest?
- The interest must be paid directly to TICO
- The interest belongs to the customers whose funds generated it
- The travel agency, which can transfer it to the general account (Correct answer)
- The bank where the trust account is held
Correct answer: The travel agency, which can transfer it to the general account
While the principal funds in the trust account belong to the clients, any interest earned on those funds belongs to the registrant (the travel agency). The agency can and should transfer this interest to its general operating account.
Question 5: A registrant performs a trust account reconciliation and discovers the total trust liability (money owed to customers/suppliers) is $50,000, but the trust bank account only holds $48,000. What is this situation called?
- A trust surplus
- A trust deficiency (Correct answer)
- A positive reconciliation
- An asset float
Correct answer: A trust deficiency
A trust deficiency occurs when the total trust assets (cash in the bank) are less than the total trust liabilities (what is owed to customers and suppliers). This is a serious violation that must be rectified immediately, as it means not all customer funds are protected.
Question 6: Which of the following is NOT a required component of a TICO registrant's trust accounting records?
- Records of all deposits and withdrawals from the trust account
- A sales journal and copies of all customer invoices
- Monthly payroll records for all employees (Correct answer)
- Bank statements for the trust account
Correct answer: Monthly payroll records for all employees
Trust accounting records must provide a clear audit trail for all customer funds. This includes deposit and withdrawal records, invoices, and bank statements. Payroll records are part of the agency's general operating expenses and are not directly related to the administration of the trust account.
TICO - Travel Industry Council of Ontario Trust Accounting Requirements Questions and Answers 1
According to Ontario Regulation 26/05, what is the maximum amount of time a TICO registrant has to deposit customer funds into their designated trust account after receiving them?