TICO Trust Accounting Requirements 5 — Questions and Answers
Question 1: A travel agency is winding down operations. Under TICO requirements, what must happen to the funds remaining in the trust account?
- They revert to TICO's consumer protection fund automatically
- They may be retained by the agency owner as final revenue
- They must be refunded to clients or remitted to suppliers as applicable (Correct answer)
- They must be donated to a registered charity within 60 days
Correct answer: They must be refunded to clients or remitted to suppliers as applicable
Upon closure, all trust funds must be properly disposed of by refunding clients or paying suppliers — they cannot be kept by the agency.
Question 2: What does 'trust account reconciliation' require a travel registrant to compare?
- Monthly revenue against projected sales targets
- Trust account bank balance against client liability records (Correct answer)
- Number of bookings against supplier invoices received
- Operating account balance against payroll obligations
Correct answer: Trust account bank balance against client liability records
Reconciliation means confirming that the trust account bank balance equals the total of all outstanding client liabilities held by the agency.
Question 3: A client cancels a trip and is entitled to a full refund. Under TICO trust accounting rules, the refund should be paid from:
- The agency's general operating account
- The trust account, since the funds were held there (Correct answer)
- A special refund reserve account maintained separately
- Either account at the agent's discretion
Correct answer: The trust account, since the funds were held there
Since client funds are held in trust, refunds must be issued from the trust account to maintain proper accounting.
Question 4: Which of the following best describes the purpose of TICO's trust account requirements?
- To ensure travel agencies maintain profitability
- To protect consumer funds in the event an agency defaults or closes (Correct answer)
- To give TICO oversight of agency investment strategies
- To simplify tax reporting for travel registrants
Correct answer: To protect consumer funds in the event an agency defaults or closes
Trust account requirements exist primarily to safeguard consumer funds so travelers are protected if an agency fails before the trip occurs.
Question 5: A travel agency receives a supplier commission rebate into its trust account by mistake. What should the registrant do?
- Leave it in the trust account as an offset against future client liabilities
- Transfer the commission to the operating account promptly after identification (Correct answer)
- Report the error to TICO within 24 hours and await instructions
- Apply the amount toward the next client deposit to simplify bookkeeping
Correct answer: Transfer the commission to the operating account promptly after identification
Non-client funds such as commissions must not remain in the trust account; they should be transferred to the operating account as soon as identified.
Question 6: Under TICO regulations, how often must a registered travel agency perform a trust account reconciliation at minimum?
- Daily
- Weekly
- Monthly (Correct answer)
- Quarterly
Correct answer: Monthly
TICO regulations require that trust account reconciliations be performed at least monthly to ensure ongoing accuracy.
Question 7: A prospective client asks why their deposit cannot be held in the agency's regular bank account. The best explanation is:
- Regular accounts earn lower interest rates, reducing client returns
- Mixing client funds with agency funds makes it impossible to protect consumers if the agency becomes insolvent (Correct answer)
- TICO requires separate accounts only for deposits over $5,000
- Regular accounts are audited too infrequently for proper oversight
Correct answer: Mixing client funds with agency funds makes it impossible to protect consumers if the agency becomes insolvent
Commingling client and agency funds creates a risk that consumer money could be lost if the agency faces financial difficulty, which is why segregation is mandated.
TICO Trust Accounting Requirements 5
A travel agency is winding down operations.
Under TICO requirements, what must happen to the funds remaining in the trust account?