A charity can make a surplus, providing it is used to further its charitable purposes. Generating a surplus is generally considered good practice for charities.

A surplus is important for the financial viability of a charity and can help account for expected and unexpected expenses in the future.

There may also be times when a charity experiences a deficit. A planned deficit, as part of financial management and overall operations of the charity, may in fact be helpful for the charity’s long term success. For example, a charity may experience a deficit in order to deliver immediate relief during a disaster.

There are a number of ways that surplus can be used, depending on the charity’s purposes and any relevant requirements in its governing documents or the law.

A charity could use a surplus by:

  • implementing a new project or service
  • keeping some money in reserve
  • making a payment on a loan
  • acquiring investments, or
  • donating funds to another charity with a similar charitable purpose.