commented today on a report issued by the Internal Audit Division of Ontario's Ministry of Finance on the 2006 failure of Ottawa-based One Step Travel which hit the compensation fund in excess of $1 million; the largest single industry failure prior to Conquest Vacations.
Bowing to ongoing pressure from the industry, in February 2009, TICO announced that it would itself organize an independent review, but rather than accept the parameters and mandate of the review established by the registrants stemming from the 2008 TICO AGM, TICO created its own parameters and scope of the review, loading up on issues which were never called into question such as handling of consumers and management of claims.
On Thursday, 07 October 2010, TICO held a press conference to detail the report "findings", however, TICO's overview of the review was almost entirely focused on the broad assessment by the Ontario Government that TICO had generally followed proper and established procedures in the overall handling of One Step Travel. Those findings were mostly influenced by TICO's consumer and claims management; issues which were never part of the key concerns expressed by registrants.
While TICO acknowledged that the review did find shortcomings in a variety of areas, TICO did not offer specifics as to the depth or sizing of the areas which the review found significantly lacking. In fact, as to the main issue, the primary issue raised by registrants being financial compliance, scrutiny, and sanctions, TICO was not in compliance with its own policies and procedures; far from it.
The review stated, among other things, the following:
- "TICO was not in compliance with sections of their policies and procedures manual relating to when proposals to revoke registration are to be issued."
- "TICO did not have supporting documentation on hand in several instances to allow for an assessment of whether or not certain oversight procedures had been adequately completed."
- "In some cases inspection activities and oversight procedures, as documented, were not sufficient to meet the requirements of TICO’s established policies and procedures."
- "Without more detailed documentation to support the inspection observations and conclusions, it is difficult to assess whether the inspection process was conducted in accordance with the requirements of TICO’s policies and procedures."
- "TICO’s management felt that a report was required whenever deficiencies were found, and was unaware that these finding reports had not been prepared."
- "TICO only issued a proposal to revoke OST’s [One Step Travel's] registration once in the ten-year period noted (in 2003), when the policies and procedures manual would have required more enforcement be exercised."
- "OST’s June 2003 year-end working capital deficiency of $90,000 had not been fully corrected until May 24, 2004. Despite this correction, its June 2004 year-end financial
statements indicated a working capital deficiency of $28,000 which took OST until December 22, 2004 to correct."
- "Based on our review, inspections had been conducted at OST’s Head Office; however, these inspections missed a significant portion of OST’s operations."
- "TICO should have been aware of these operations and should have conducted a review of them, as these two branches were registered and were in the TICO database under the OST profile."
- "There was no documentation available to provide evidence that either of these procedures was performed during the financial inspections."
- "It was noted that although TICO had set a requirement for OST to comply with regarding filing of monthly trust account reconciliations, there was no documentation to evidence that TICO reviewed the reconciliations for reasonableness or in comparison to other available information such as financial statements."
The review also revealed that at least one claims payment to a travel supplier had never been ratified by TICO's board (as is required) and that TICO's executive committee failed to notify the board of directors of the results of its internal review of staff handling of One Step Travel in June 2007. The board was notified almost a year later in June 2008.
Given the results of the Government's assessment, it is clear that TICO mishandled suspension and revocation, bungled documents, failed to properly audit the agency and its operations, and kept its full board in the dark for almost a year after reviewing its internal handling of the failure. The report's conclusion that sanctions against One Step Travel were not invoked was the identical finding of the Ontario Court of Justice when the matter went to trial.
"We are pleased that the Government's analysis of the One Step Travel matter affirms our suspicions that TICO was remiss in suspending an agency which for 10 out its 10 years was woefully late in filing financial statements and had gross working capital deficiencies, including years of negative working capital. What may have ended up being a fraud by the owners could have been prevented by a suspension that simply never took place. Ontario travel companies reached into their own pockets to finance this demise. Add that to findings by the Conquest bankruptcy trustee that TICO did not comply with regulations, and is it any wonder that registrants are being asked for a 336% increase over the next three years in larger compensation fund contributions?", said ARTA Canada President Bruce Bishins, CTC.