Non Profit vs. Social Profit
According to CRA rules, non-profit organizations are permitted to make a profit, not its members, just the organization itself. Prudent organizations set up rainy day funds or invest in infrastructure with their profit.
The significance of the word non-profit is that making money is not the primary purpose of the organization, unlike all for-profit operations. So instead of describing the purpose of non-profits in the negative, let’s describe it in the positive.
Farah Mohamed, CEO and Founder of G(irls)20 and most recently one of CBC Canada Reads Book Champions, describes non profits as social profits organizations. Farah articulates the purpose in the positive – organizations motivated and mandated by social, civic, recreational, or cultural purposes.
While social profits are not driven to make money, they often need money to accomplish their social purpose. Money is the means, not the end. Now, unfortunately, sometimes that need becomes so great or desperate, confusion arises. Money begins to take on the guise of the end.
This confusion creeps into discussions about project-based funding and the percentage of a budget allowed to be allocated to administration. One concern is that project-based grants contribute too little to the administrative or core functioning of an organization. Yes, they often do. But remember, the delivery of the project and achievement of its outcomes are the primary mandate. The project is the end, not the means.
Organizations need to ask if they really want to deliver a project and sometimes the answer is no. And that is okay. But if an organization does really want to deliver a project, then the pursuit of grant funding is always worthwhile, even if the administrative allowance is negligible.
It is no surprise that I am partial to grants. I love writing them. I love getting them approved. I love that grants are about social profit.