Error when trying to upload an image

Hi

I have a single site setup with WP 3.6 + Directory 2.2.3.8

I've set up the Directory correctly (I have experience with installing and setting up directory on another site).

However when a user (role:Author) edits their listing and tries to upload a featured image, it comes back with this error: An error occurred in the upload. Please try again later..

&bulll; I've enabled the Author role with all the capabilities
&bulll; I've tested it on different themes including the Directory installed one and Twenty Twelve
&bulll; I've also set my php.ini file to include
memory_limit = 32M
upload_max_filesize = 32M
post_max_size = 32M
file_uploads = On

Can anyone help please?