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Surplus for Sustainability: The Profit Paradox in Non-profits



This is the first of a four-part series,

Empowering Change: Exploring Sustainability and Social Impact at Home Suite Hope


by HSH Executive Director Sara Cumming, PhD



Welcome to a four-part blog series brought to you by Executive Director Dr. Sara Cumming, shedding light on Home Suite Hope's financial landscape. As our organization navigates through the ever-evolving challenges of funding, Dr. Cumming aims to address the queries surrounding our surplus and fundraising endeavors. Join us as we delve into the intricacies of Home Suite Hope's financial position, exploring the factors influencing our grant applications and donation drives amidst increasing reserves. Through this series, we endeavor to uphold transparency and offer insights into the financial dynamics shaping our mission.


In this first Blog post, our Executive Director discusses the need for a surplus in our current climate.


Successful businesses must generate profit. In for-profit entities, this hinges on maintaining a positive margin between revenue and expenses. This surplus serves as vital capital for growth and operational stability. Conversely, not-for-profit organizations face restrictions on surplus accumulation, a concept challenged by David Young in 1982. In the Harvard Business Review, Young (1982) argued that this limitation impedes not-for-profits’ ability to finance growth and asset maintenance. Fast forward to 2024, the imperative remains: stakeholders must recognize the value of surpluses alongside the ongoing need for funding.

 

Since 2018, Home Suite Hope has undergone remarkable financial and programmatic expansion. From a $516,000 budget with a $204,500 loss in 2018, we've evolved to a $950,000 budget with a $39,760 surplus in 2022. Concurrently, our asset portfolio has burgeoned. This growth has been fueled by strategic collaborations, enhanced staffing, refined programming, and prudent financial management. We grew from a reserve of $430,525 in 2019 to $813,364 by the end of 2022. We saw more growth in 2023 that will be viewed on our 2023 audited statements.

 

Yet, our journey hasn't been without challenges. Government grants often prioritize novelty over proven success, leaving established programs like ours grappling for sustainable funding. Relying solely on grants is precarious, given their cyclical nature and unpredictable focus areas. Hence, Home Suite Hope must embrace financial prudence while diversifying income streams to ensure stability.

 

Over the past six years, we've methodically expanded our team to align with our growth trajectory. Despite navigating obstacles like the pandemic and the housing crisis, we've remained agile, implementing short, medium, and long-term plans requiring varied financial commitments. To sustain our impact, we must bolster our housing reserves while continuing daily operations and fundraising efforts.

 

In essence, Home Suite Hope's sustainability hinges on maintaining surplus funds. Yet, as a not-for-profit, we're constrained by regulations against excess accumulation. Negotiating this paradox is pivotal to our organization's forward momentum.

 

Home Suite Hope stands at a critical juncture, balancing the imperative for surplus funds with regulatory constraints. Our ability to navigate this delicate balance will determine our capacity to continue delivering life-changing programs and services to those in need. As we strive for sustainability, we call upon our supporters, funders, and donors to recognize the necessity of surplus funds in driving our mission forward. Together, let's ensure that Home Suite Hope remains a beacon of hope and opportunity for years to come.


Please watch for all four Blog posts in this series appearing Fridays throughout April.


To contact Sara, email SaraC@homesuitehope.org


To donate via CanadaHelps, click CanadaHelps


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