Five years after reporting a surplus of $2 million, the Atlantic City Rescue Mission is struggling with its finances.

The nonprofit reported a budget shortfall of $1 million in 2011, double that of 2010, according to its latest financial statements.

Based on Bacharach Boulevard, the Rescue Mission is one of the largest shelters in the state, with assets in 2011 of $5.4 million, according to the latest financial statements provided to The Press of Atlantic City. That represents a sizable decrease from 2010, when total assets were about $1 million more, according to a publicly released financial report for that year. Assets include 10 properties across South Jersey.

In recent years, the mission has experienced high growth, particularly after receiving a windfall from a generous benefactor and her estate in 2007 that resulted in a $2 million surplus. It allowed the mission to pay off its mortgage, buy properties near the shelter and add services.

But growth has brought challenges, including spending levels that the mission will be unable to sustain long term unless it cuts expenses or finds new sources of revenue, shelter officials said.

“We’re hopeful and optimistic,” Board of Trustees Chairman Bob Stahler said. “We have taken steps to correct our financial expenditures and discussed more (steps).”

The Rescue Mission has had a track record of successful fundraising compared to other nonprofits. For the past couple of years, the mission has received $1.8 million in contributions, financial statements show. In contrast, another homeless service provider, the Cumberland Family Shelter in Vineland, received only about $17,000 in contributions, with the rest of its nearly $900,000 budget in 2011 coming from government grants and other revenue, according to that group’s tax returns.

The difference prompted Cumberland shelter officials to ask then-Atlantic City Rescue Mission Executive Director Bill Southrey to advise them on ways they could increase their private donations.

“They do a great job at the Rescue Mission,” said Michael Killeen, head of the board of directors for the Rural Development Corp., the nonprofit that operates the Cumberland shelter. “We’ve never been as successful as he has.”

Southrey was recently suspended from his post by the mission’s Board of Trustees for reasons Stahler said were unrelated to the group’s finances.

The Rescue Mission, which was founded in 1964 as a small storefront, has seen its operations almost double in recent years. Tax returns show the mission had more than $5 million in revenue in 2010 — about double revenue in 2002. But its expenses of nearly $6 million in 2010 also were more than double from eight years earlier, according to the tax returns. Both revenue and expense figures include the value of donated food items.

Part of the mission’s recent growth can be traced to 2007, when it received nearly $2 million in contributions, mostly from a single Ocean City benefactor, Mildred Durham, and her estate, according to Southrey and tax forms the nonprofit filed.

A year after this infusion, the mission bought the next-door properties at 1953 Bacharach Blvd. and 1926 Hummock Ave. for $350,000, according to Southrey and land records.

The nonprofit also acquired other properties for a nominal fee of $1, including two Willetts Point Lane parcels in Upper Township that came from Durham’s estate in 2008 and a 10-acre vacant lot in Hamilton Township from Daniel Brown and his wife in 2010. Brown is the mission’s chief operating officer.

During the prior year, the mission paid property taxes that included $2,116 for the Upper Township parcels and $1,647 for the Hamilton land. Mission officials could not provide a reason for why they accepted the transfer of vacant land from Brown. Stahler said he did not know the mission was paying property taxes on the land. Brown could not be reached for comment.

Southrey, who provided comment for this story prior to his suspension, said the mission also faced tough choices on what to do with investment securities, some which were part of Durham’s gift. At the end of 2008, the mission saw its investments in publicly traded securities double in one year to $2 million, with about $900,000 invested in mutual funds, financial documents show.

Southrey said the mission’s board of trustees voted to invest a sizeable portion of the holdings with a financial firm, which didn’t perform as well as expected, providing documentation that reported the mission lost about $200,000 in cost basis in 2009. A year later, the mission reported investments valued at about $1 million.

Expenses for the nonprofit also grew by 24 percent in 2010 compared to the preceding year. Revenue increased by only 15 percent.

Mission officials said the revenue growth was misleading because much of the money the mission received — some in the form of federal and state homeless grants — went directly to benefit individuals rather than to defer the mission’s expenses.

Nearly 60 percent of the money the mission received as shelter/welfare income in 2010 was earmarked to individuals who qualified for the aid, rather than to reimburse the mission, according to the nonprofit’s financial statements. The year before, only about 3 percent of the shelter/welfare income was earmarked for individuals, the financial statements show.

Southrey said he estimated the mission receives government reimbursement for only 7 percent of the people to whom it provides shelter services. He could not, however, provide documentation that would confirm that reimbursement level.

The mission’s latest financial report, however, shows that during the first six months of 2012, it received about $200,000 less in shelter/welfare reimbursement — which Atlantic County adminsters — than during the same period last year. That represented a 23 percent drop year over year.

Atlantic County Executive Dennis Levinson has been at odds recently with Southrey and the mission, saying he was angry to find out the mission ran advertisements he believed would encourage the homeless to travel into the city for services. Southrey said the ads were strictly to solicit donations, but Levinson said he believed the ads would draw more homeless to the area.

“We cannot continue to be the depository,” Levinson said. “If what we’re doing here in Atlantic City is making them think twice and return to where they came from, we’re doing the right thing.”

Levinson said he encouraged his social service workers “to do the right thing” when it came to referring clients to the shelter. Without a referral, the mission cannot receive reimbursement for its shelter services.

For instance, he asked that homeless families be sent to other lodging facilities, such as at a motel or hotel, rather than the mission, even though the shelter has separate facilities for single men and single women and a third for families.

The mission estimates it costs about $40 to house and feed a single man or person for a day, of which about $35 is reimbursed by the government.

Southrey said the shelter was serving people for longer periods of time. In 2011, the mission said it counted 114,000 bed nights at its shelter, the most recorded during a single year during the decade. However, the number of people it served that year remained steady at 3,000. That meant people were staying for much longer than they have in the past at the mission, said Southrey, who attributed the trend to people taking longer to find housing.

Among the shelter’s expenses that have increased over the years are wages and benefits, which increased by more than 14 percent in one year to $2.5 million in 2010, according to the nonprofit’s tax returns.

Southrey had been the highest-paid worker, making $104,000 in 2010, about $4,000 more than the preceding year, but less than in past years. In 2008, his total compensation was $112,000, and in 2007 it was $107,000, including benefits, according to the group’s tax returns.

The median salary of rescue mission executives in the Northeast is $90,000, said John Ashland, head of the Association of Gospel Rescue Missions, a trade group for Christian crisis shelters. Other shelter heads earn more. For instance, Mary Gay Abbott-Young, executive director of the Rescue Mission of Trenton, made $123,000, according to the group’s 2010 tax return.

Although the Atlantic City Rescue Mission is under financial stress, Charity Navigator, a Bergen County-based outfit that rates nonprofits across the country, gives the mission three of a possible four stars, saying the mission has enough working capital to operate for a full year.

Last year, to stabilize its cash flow situation, the mission obtained a $250,000 line of credit on property in Wildwood from Ocean City Home Bank, according to Southrey and land records. One of its board members is an executive for the bank.

Although the mission faces some risk, the line of credit is an advisable way to manage cash flow in light of the tough economy, said Ron Matan, an accountant with Essex County-based Sobel & Co., who specializes in nonprofits. It gives the mission more breathing room to make payroll and continue to operate, he said.

The latest finance report provided to The Press shows the mission has drawn all of the $250,000 from its line of credit but still has about $240,000 left in other accounts.

Contact Hoa Nguyen:

609-272-7203