The end of the year is the time when organizations put together their annual reports. If you’re thinking “so much work and so little payoff,” consider this: The annual report is your organization’s No. 1 communications tool. What other vehicle has the potential to favorably impress new and prospective donors, volunteers, community partners, sponsors, board members, lending institutions, clients — and the media?
But putting together an effective report is no slam dunk. You’ll need to start with the basic elements, and add creativity along the way.
Covering the Bases
Most nonprofit annual reports consist of several standard sections. The board chair’s letter is typically an executive summary of the pages that follow. Because your annual report may be the best chance you have to tell the complete story about your organization, this letter should provide an overview of your activities, accomplishments and anything else worth highlighting.
The directors and officers are the face of your organization. Listing these individuals can have a big impact on potential donors. Make sure all names, professional affiliations and designations are accurate.
Highlighting Financial Information
The annual report’s financial information can be detailed or an abbreviated version with a synopsis that quickly gets to the heart of the matter. If included, your full audited financial statements will have the following sections:
- The independent auditor’s report states the CPA firm’s opinion about whether your nonprofit’s financial statements were prepared in accordance with Generally Accepted Accounting Principles.
- A Statement of Financial Position presents your organization’s assets, liabilities and net assets as of the last day of the fiscal year.
- A Statement of Activities records revenues earned and expenses incurred during the year (grouping expenses in the categories of “program,” “fundraising and “management and general”).
- A Statement of Cash Flows shows the sources and uses of cash and cash equivalents for the year.
- Footnotes expand on financial statement items such as leasing arrangements, commitments and debt.
Want to make your financial information easier to understand? Use simple graphs and diagrams to highlight specific points.
Describing your Accomplishments
The Description is the other major section of your annual report. Here’s where you can — and should — get creative.
First, explain your organization’s mission and goals and strategies for reaching those goals. Then, describe who benefits from your organization’s services and how they contribute to the entire community. Conveying your nonprofit’s accomplishments educates the public about the work you’ve done.
So that your report does justice to this work, consider including such elements as client testimonials to let those you’ve helped tell the story in a personal way. Or create a timeline that enables readers to see the progress you’ve made toward a long-term goal.
While this section should be clear and concise, there’s nothing wrong with using imaginative language. Metaphors can make otherwise mundane subjects vivid and interesting. A unifying theme can tie it all together.
Making it Visually Arresting
Your annual report should be as visually pleasing as it is interesting to read. Engaging photos, creative layouts and eye-catching graphics can go a long way toward that goal. For example, use a pie chart or other visual to show your organization’s allocation of funds between programs, fundraising and administrative expense — or to break down your incoming funds.
Make sure your graphic designer has experience with annual reports — preferably those of nonprofits — and understands the values and image your organization wants to convey. Keep in mind that many people will view the report via your website, so the online document must be as easy to read and navigate as a printed copy.
Remembering the Purpose
An effective annual report will help your organization reach the transparency that’s expected among your varied audiences. It’s also your single best chance to show the world your organization’s level of professionalism and to share its success at meeting its mission.