Financial and Record-Keeping Requirements
Understanding what TICO expects from travel agencies and wholesalers
Managing money and keeping proper records are some of the most important parts of running a travel business in Ontario. TICO wants to make sure every registered travel agency and wholesaler handles their finances honestly and transparently — and that they’re financially stable enough to protect consumers.
This chapter will help you understand:
- What financial reports must be submitted
- How often they must be filed
- Who can prepare them
- What happens if the rules aren’t followed
These rules are found under Section 22 of the Regulation.
💼 8.1 Financial Statement and Document Reporting Requirements
Every TICO registrant (that means every travel agency or wholesaler registered with TICO) must file financial statements or a verification statement with TICO at least once a year.
The type of document you file depends on how much travel you sell in Ontario each year.
Let’s break this down.
📊 Annual Sales Determine Reporting Type
| Annual Ontario Sales | What You Must File | Deadline |
|---|---|---|
| Less than $2 million | Verification statement or annual financial statement | Within 3 months (90 days) of year-end |
| $2 million – less than $10 million | Annual financial statement | Within 3 months (90 days) of year-end |
| $10 million – less than $20 million (Travel Retailer) | Annual financial statement + semi-annual financial statement | Annual: within 3 months; Semi-annual: within 45 days after each half-year |
| $10 million – less than $20 million (Wholesaler or both Retailer & Wholesaler) | Annual financial statement + quarterly financial statement | Annual: within 3 months; Quarterly: within 45 days after each quarter |
| $20 million or more | Annual financial statement + quarterly financial statement | Annual: within 3 months; Quarterly: within 45 days after each quarter |
🧾 What’s a Financial Statement?
A financial statement shows how healthy and stable a business is.
It must include:
- A statement of sales in Ontario
- A balance sheet (what the company owns and owes)
- An income statement (profit and loss summary)
- A cash flow statement (money coming in and going out)
- A reconciliation of trust accounts (how customer money is handled)
These statements must be prepared by a Licensed Public Accountant and accompanied by:
- A review engagement report, or
- An audit report (for larger businesses or as required under the Business Corporations Act)
💡 Review engagement vs. audit:
Both are checks done by accountants to make sure the numbers are accurate.
An audit provides a higher level of assurance than a review.
🧮 What’s a Verification Statement?
Smaller businesses with less than $2 million in annual sales can file a verification statement instead of full financial statements.
This form (available on the TICO website) must include:
- Total assets and liabilities at year-end
- Total revenue and expenses for the year
- Any other information requested by TICO
The form must be signed and certified as accurate by:
- The registrant (if an individual)
- A director or officer (if a corporation)
- A partner (if a partnership)
By signing, this person is legally confirming that the information is correct.
🕒 Filing Deadlines and Extensions
- All financial or verification statements must be filed within 90 days of your fiscal year-end.
- The Registrar can grant an extension, but it’s not automatic — it’s at their discretion.
⚠️ Tip for the Exam:
The 90-day rule and who signs the verification statement are common test questions!
💵 What Counts as “Sales in Ontario”?
When calculating your sales volume, “Sales in Ontario” means:
- For travel retailers:
The total amount paid or payable to or through the retailer for all travel services sold in Ontario. - For travel wholesalers:
The total amount paid or payable to or through the wholesaler for all travel services sold in Ontario.
This definition is important because your sales volume determines what kind of financial reporting TICO expects.
📘 Key Definitions
Licensed Public Accountant (LPA):
A professional licensed under the Public Accounting Act, 2004 who can perform audits or review engagements.
🧠 Summary for Exam Prep
Here’s what you should remember:
- All registrants must file either a financial statement or verification statement every year.
- $2 million in annual Ontario sales is the main cutoff between verification and financial statement filing.
- Deadlines: 90 days after year-end for annual reports; 45 days for quarterly/semi-annual reports.
- Prepared by: Licensed Public Accountant (for financial statements).
- Verification statements can only be used by smaller agencies under $2 million in sales.
- Registrar extensions are possible but not guaranteed.
Financial and Record-Keeping Requirements
Running a travel business in Ontario means keeping your finances organized and transparent. The Travel Industry Council of Ontario (TICO) has specific financial reporting and record-keeping rules that every registrant must follow. These rules help ensure consumer protection and business accountability.
Let’s break down the key financial requirements you’ll need to understand for the TICO Supervisor/Manager Level Exam.
Financial Statement Reporting Requirements (Section 8.1 Recap)
Every TICO-registered travel agency or wholesaler must file financial statements or verification statements every year. The type and frequency of filing depend on your annual sales volume.
Here’s a summary (from Table 8.1):
| Sales Volume (Ontario) | Type of Registrant | Reporting Requirements | Filing Deadline |
|---|---|---|---|
| Less than $2 million | Retailer or Wholesaler | Verification Statement or Annual Financial Statements | Within 3 months after fiscal year end |
| $2–$10 million | Retailer or Wholesaler | Annual Financial Statements | Within 3 months after fiscal year end |
| $10–$20 million | Retailer | Annual Financial Statements + Semi-Annual Financial Statements | 3 months (annual), 45 days (semi-annual) |
| $10–$20 million | Wholesaler or Retailer + Wholesaler | Annual Financial Statements + Quarterly Financial Statements | 3 months (annual), 45 days (quarterly) |
| $20 million or more | Retailer, Wholesaler, or both | Annual Financial Statements + Quarterly Financial Statements | 3 months (annual), 45 days (quarterly) |
What If TICO Needs More Information?
If the Registrar believes your financial documents don’t give a full picture, they may request additional or consolidated financial documents.
Consolidated financial statements combine the results of:
- All the entities under the registrant’s control, and
- Any related subsidiary operations.
This helps TICO see the complete financial health of the business.
For example:
- If your travel business owns another travel company, both may be combined into one financial report.
- If you’re a corporation, you may also need to include financial data from major shareholders.
If TICO Suspects Financial Trouble
If the Registrar believes a business might be in financial difficulty, they can request a written statement of your working capital (or proof that you are exempt from that requirement).
The Registrar may also require that the financial statements or written confirmation be verified under oath (affidavit).
Understanding Working Capital (Section 8.2)
What Is Working Capital?
Working capital shows your business’s ability to pay its short-term debts as they come due.
It’s a simple way to measure the financial health of a company.
Here’s the formula: Working Capital=Current Assets−Current Liabilities
In plain words —
Working capital is what’s left after you subtract what your business owes (liabilities) from what it owns (assets) in the short term.
Examples
- Current Assets (can be turned into cash within one year):
Cash, bank accounts, accounts receivable, and short-term investments like stocks or mutual funds. - Current Liabilities (must be paid within one year):
Accounts payable, taxes payable, and short-term loans.
Positive working capital means your business can pay its bills easily — this is what TICO wants to see.
Negative working capital means you owe more than you own in the short term — this signals risk.
Section 24 of the Regulation
Under Ontario’s Travel Industry Act, registrants must maintain positive working capital at all times. This ensures your business can meet its financial obligations and protects consumers who book travel through you.
However, not all assets count toward working capital. The following are excluded:
- Security deposits from new applicants
- Capital belonging to an “interested person” (like shareholders or related companies)
- Intercompany receivables or payables (money owed between related businesses)
- IATA deposits or credit card processor deposits
Who Is an “Interested Person”?
According to TICO’s definition, an interested person is someone who:
- Has a beneficial interest in the business
- Controls or influences the business directly or indirectly
- Has provided or may provide financing to the business
In short, it’s anyone financially tied to your company who could affect its stability.
Exemptions to the Working Capital Requirement
Some organizations are exempt from maintaining positive working capital if they meet all of the following conditions:
- The registrant is a not-for-profit corporation without share capital.
- They have a transfer payment or funding agreement with:
- The Ontario government (the Crown), or
- A municipality.
- The agreement is:
- For at least one year,
- Still in effect, and
- Requires the organization to promote tourism in Ontario.
- A copy of the agreement is filed with the Registrar.
- Any requested additional information is provided within the specified time.
- The registrant informs TICO of any changes to the agreement promptly.
These organizations are considered low-risk because they are government-funded and not-for-profit.
Key Takeaways for the Exam
✅ Businesses must file financial or verification statements every year — deadlines depend on sales volume.
✅ TICO can request extra or consolidated financial documents for clarity.
✅ All registrants must maintain positive working capital — assets > liabilities.
✅ Certain government-funded, non-profit organizations are exempt from working capital rules.
✅ The Registrar has the power to demand more documents or verification if financial concerns arise.
Pro Tip:
For exam questions, remember this rule of thumb:
“The larger the sales volume, the more frequent and detailed the financial reporting required.”
8.3 Legal Responsibility for Deposits
Reference: Section 25 of the Travel Industry Act
When a travel agency or wholesaler (called a “registrant”) accepts money from a customer, they are legally responsible for that money.
In legal terms, they are “jointly and severally liable.”
This means they can be held fully responsible for refunding or repaying customers, even if other parties were involved in handling the money.
However, a registrant does not have to refund the customer if all of these conditions are met:
- 💰 Money was properly disbursed — The agency paid the correct supplier or another registrant for the travel services.
- 🤝 Acted in good faith and at arm’s length — The agency acted honestly, fairly, and without close personal or financial ties influencing the decision.
- 🚫 Did not deal with illegal operators — The other party involved must also be legally registered under the Act.
If all three of these points are satisfied, the registrant is protected from being held liable for a customer refund.
Key Definitions to Remember
- Jointly and Severally Liable — You’re legally responsible as both an individual and as part of a group.
- Good Faith — Acting honestly and fairly, without the intent to cheat or deceive.
- Arm’s Length — Doing business with someone who isn’t personally or financially connected to you.
These terms often appear in TICO exams — make sure you can recognize them and explain what they mean!
8.4 Trust Accounting
Reference: Sections 26 and 27 of the Regulation
Trust accounting is a consumer protection system that ensures customers’ money is kept safe until their travel services are provided.
Under this system, all money received from customers for travel must be placed in a separate bank account called a Trust Account.
This money cannot be used for the business’s operating costs — only for paying suppliers, issuing refunds, or transferring earned commissions after the trip is completed.
Purpose of Trust Accounting
✅ Protect customers’ money if a travel agency goes bankrupt or insolvent.
✅ Allow TICO to monitor agencies’ financial health.
✅ Prevent agencies from using customer funds for business expenses.
Requirements for Setting Up a Trust Account
- The account must be opened in an approved financial institution in Ontario, such as:
- A Schedule I or II bank under the Bank Act (Canada)
- A loan or trust corporation
- A credit union under the Credit Unions and Caisses Populaires Act, 1994
- The account must be in the legal business name of the registrant (for example, “DreamWorld Travel Inc.” and not “John Smith”).
- The account must be clearly labeled as a “Travel Industry Act Trust Account.”
- Any funds received from customers must be deposited within two banking days of receipt.
- All registrants must have at least one trust account, unless exempt under specific conditions.
Two Main Accounts a Travel Agency Operates
🟩 Trust Account
This account holds all customer payments for travel services.
Money in the trust account can only be used to:
- Pay suppliers of travel services
- Refund customers if needed
- Transfer earned commission or markup after suppliers are fully paid or services are completed
Important: The money in the trust account cannot be used to pay rent, salaries, or office expenses.
🟦 General Account
This is the business operating account used for expenses like rent, utilities, and wages.
Only after the travel services are completed and the supplier has been paid can commissions or markups be transferred from the trust account to the general account.
Clarifying “Money Received from Customers”
Section 26.1 of the Regulation defines what counts as “money received from customers for travel services.”
It includes any payment a registrant directly receives, but excludes:
- Payments made through the registrant directly to the supplier’s merchant account (because the agency never handles the funds).
- Payments for future services that are not due yet during that reporting period.
Example:
If a customer pays a deposit today and their final payment is due next month, only the deposit counts as money “received” right now.
However — if the customer’s credit card payment goes through the agency’s merchant account, then that money is considered received and must be deposited into the trust account.
Quick Recap for Exam Prep
| Term | Meaning | Key Point |
|---|---|---|
| Jointly and Severally Liable | Legally responsible both individually and as part of a group | Applies when registrants handle customer funds |
| Trust Account | Special account for holding customer payments | Money must stay there until services are completed |
| General Account | Business expense account | Used only after commissions can be transferred |
| Good Faith | Acting honestly and fairly | A key defense in liability cases |
| Arm’s Length | Unrelated, independent business dealings | Ensures fair transactions |
In short:
Trust accounting and financial responsibility protect consumers and ensure travel businesses stay compliant under Ontario’s Travel Industry Act, 2002.
As a TICO supervisor or manager, you must understand how to handle customer deposits, maintain trust accounts, and meet all regulatory deadlines.
Understanding Security Instead of Trust Accounting
Chapter 8: Financial and Record-Keeping Requirements
When running a travel business, it’s important to protect customer money. Normally, travel agencies must keep customer payments for travel services in a trust account.
However, if a business has proven financial stability, it can choose another option — providing a security deposit to TICO.
Let’s go through how this works, step-by-step.
What Does “Security Instead of Trust Accounting” Mean?
According to Section 28 of the Regulation, some registrants (travel agencies or wholesalers) can use a security deposit instead of maintaining a trust account.
Definition
In simple terms, the “money received from customers for travel services” means:
- The money that the registrant actually gets from customers during a certain period.
- It does not include:
- Payments made directly by customers to another company through the registrant.
- Travel sales that are made during that period but are paid for after the period ends.
Who Can Use a Security Deposit?
Only registrants who have been continuously in business for at least one fiscal year are allowed to use this option.
Instead of having a trust account, they must file a security deposit with TICO — for example:
- A letter of credit
- A bank draft
- Collateral, like a GIC (Guaranteed Investment Certificate)
How Much Security Is Required?
The deposit amount must be equal to or greater than one-sixth (1/6) of all customer money received for travel services over the last 12 months.
Required Security = Total Customer Payments (last 12 months) ÷ 6
The financial statements submitted to TICO must show:
- The total amount of money received from customers for travel services during the reported period.
TICO must receive the security deposit within 30 days after the registrant files financial statements.
Note: The registrant must keep their trust account active until they get an official letter from TICO confirming that the security deposit has been accepted.
New Applicant Security Requirement
According to Section 25 of the Regulation, any new applicant (someone not registered in the past 12 months) must provide a $10,000 security deposit when applying to TICO.
TICO will return this deposit after:
- The registrant has filed two complete and consecutive annual financial statements, showing financial stability, and
- The Registrar has no concerns about compliance with the Travel Industry Act or its regulations.
If there are concerns, TICO may hold the $10,000 until those issues are resolved.
New registrants must also operate both a trust account and a general account.
What If the Business Closes or Goes Bankrupt?
If a registrant with a security deposit becomes bankrupt, insolvent, or closes down, TICO will return the security after at least six months.
However, any amount used to pay customer claims will be deducted before the security is returned.
Exemption for Low-Risk Tourism Businesses
Some lower-risk organizations may not need to file a security deposit.
To qualify for this exemption, the following must be true:
- The registrant is a not-for-profit corporation without share capital.
- It has a funding agreement (e.g., transfer payment agreement) with:
- The Ontario government, or
- A municipality.
- The agreement:
- Has a term of at least one year.
- Has not expired.
- States that the registrant’s purpose is to promote tourism in a specific area of Ontario.
- A copy of the agreement is provided to the Registrar.
- The registrant provides any additional information requested by the Registrar.
- The registrant notifies TICO in writing of any changes or amendments to the agreement.
If the agreement is with a municipality, two more conditions apply:
- The municipality must have a financial arrangement with TICO (e.g., guarantee or indemnity).
- The Registrar must confirm in writing that this condition is satisfied.
If the Registrant Stops Qualifying for the Exemption
If a registrant loses its exemption, what happens depends on timing:
1. Before Two Annual Statements Filed
They must immediately provide $10,000 in security to TICO.
2. After Two Annual Statements Filed
They must notify TICO in writing as soon as possible.
After receiving the notice, the Registrar will:
- Confirm if there are no compliance concerns, or
- Set a deadline to provide the $10,000 security deposit, or
- Specify any repayment amounts needed for claims that may be made from the Compensation Fund (up to $10,000).
If the registrant already has an approved municipality financial arrangement with TICO, no further action is needed.
When and How Security Is Returned
Once the registrant has filed two full annual financial statements, and there are no outstanding compliance issues, TICO will return the security.
If TICO has paid out or expects to pay out any claims related to:
- Bankruptcy,
- Insolvency, or
- Business closure,
then those amounts will be deducted from the returned security.
🧠 Key Points to Remember for the TICO Exam
- Trust account or security — Registrants must protect customer money either way.
- Security amount = 1/6 of last year’s customer payments.
- New applicants → Must pay $10,000 security.
- Exemptions exist for government-linked not-for-profits.
- Security is returned only after two full financial years of compliance.
8.6 Record-Keeping
Reference: Section 29 of the Regulation
Every TICO-registered business must keep accurate and complete business records. These records are important for accounting, audits, and ensuring compliance with the Travel Industry Act.
📘 Key Rules for Record-Keeping
- All business records must be kept at the main office (principal place of business) or another location approved in writing by the Registrar.
- Records must be kept for at least six years after the date of the transaction.
🧾 Types of Records You Must Keep
- Accounting records – These should detail your business income and expenses. You must include all supporting evidence such as:
- Invoices
- Statements
- Receipts (each with a unique serial or reference number)
- Banking records – These must show all financial transactions linked to your business.
- Payment records – Keep written records of all money paid to or from your business for travel services.
Each transaction must be easy to identify by a unique number or code. - Refund or alternative service records – If you offer customers refunds or alternative travel services due to changes in plans, you must keep a file showing:
- What happened
- What action your business took
- Whether the customer accepted the alternative or refund
All these records must be available for inspection by the Registrar at any time.
8.7 Financial Inspection Program
TICO uses a risk-based financial inspection program to make sure all registrants are financially stable and following the law. This helps protect consumers and keeps the travel industry trustworthy.
🔍 Why TICO Inspects Financial Records
TICO staff check whether:
- Financial statements are filed on time
- Businesses maintain enough working capital
- Trust accounts are properly set up and used
If a registrant fails to meet these standards, TICO may issue warning letters or even propose to revoke the registration.
🔹 The Financial Inspection Program Has Two Main Parts:
1. Financial Statement / Document Bench Review
Once a registrant’s financial statements are submitted, a TICO financial inspector (usually a CPA) reviews them.
During this bench review, the inspector looks at:
- Sales
- Working capital
- Profit or loss
The goal is to check if the business meets the working capital and trust account requirements of the Regulation.
2. Site Inspection
If TICO suspects potential problems—like weak financial health, improper trust account use, or repeated losses—a site inspection is conducted.
During this visit, a financial inspector:
- Reviews the registrant’s records in detail
- Determines if there is a compliance issue
- Prepares a full Inspection Report for the Registrar
🚨 Other Reasons for Site Inspections
Site inspections can also happen if:
- Consumers or other registrants file complaints
- TICO staff notice red flags during reviews
- The registrant is a new business (all new registrants are inspected within their first year)
TICO monitors all registrants regularly and follows up on any non-compliance issues.
Registrar’s Requests for Further Information
After reviewing the Inspection Report, the Registrar may ask for more details.
Here’s what might be required:
- Written Statement of Current Working Capital
- If the Registrar believes a business might be in financial trouble, they can ask for a written and verified (by affidavit) statement of working capital.
- Exemption from Working Capital Requirement
- Businesses that qualify for an exemption must still provide a written statement confirming that they meet the exemption criteria.
- Audited Financial Statements
- The Registrar can request audited and consolidated financial statements (including related businesses or shareholders) if needed for a complete review.
Why Compliance Matters
The goal of TICO’s inspection staff is to help registrants comply, not to punish them unnecessarily.
If a business fails to meet working capital or trust account requirements, TICO will:
- Notify the registrant
- Give them time to fix the problem
However, if the issue isn’t corrected, TICO can take administrative action—including the revocation of registration.
So, registrants should always resolve financial issues quickly to prevent them from escalating into serious problems.
✅ Chapter Summary
By the end of this chapter, you should understand:
- How to properly keep and store financial records
- How TICO monitors financial compliance through inspections
- What happens if your business fails to meet financial standards
- The importance of maintaining transparency and cooperation with TICO
📘 Study Tip:
TICO exam questions from this chapter often focus on:
- How long records must be kept
- What documents are included in record-keeping
- What triggers a site inspection
- How TICO handles non-compliance
🧠 Quiz Reminder
You’ve completed Chapter 8: Financial and Record-Keeping Requirements!
Log into your MyTICO account and try the Chapter 8 quiz to test your understanding.
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