Is Your Annual Report Doing Its Job?


Now that organizations have received their audited numbers and 990s, it’s time to start thinking about your annual report. We’re going to dig deep into what it is, why you should send it, and what format I like to use. Because I think it’s important to treat your nonprofit as a business, I like to combine a for-profit model with non-profit logic.


What is an Annual Report?

An annual report is a comprehensive report on an organization’s activities throughout the preceding fiscal year. Annual reports are intended to give shareholders and other interested people information about the company's activities and financial performance.


Why should you send an Annual Report?

In the nonprofit world, your annual report is not only a report of your organization’s performance, it is also an incredible fundraising tool. Your annual report is your opportunity to capture your donor’s attention, show them the great work you are doing, and remind them of why they should continue to give.


THIS IS NOT A TIME TO CUT CORNERS!


This is not the document to save money by printing in black and white, one sheet of paper, no pictures, etc. This is the document that needs careful planning:

  • Who am I trying to reach?

  • What do I want them to do after reading this?

  • Which delivery system is the most effective way to reach our audience - print, digital, both?

  • How can I best tell my story in an engaging way?

Before I designed my first annual report, I did some online research and met with a PR professional to figure out what should go into this document. I discovered that I preferred a combination for-profit/non-profit format because I wanted to tell my story, but I also wanted to connect with my stakeholders, many of whom have a strong business sense. I wanted them to feel secure in their support of my organization and that we were stewarding their investment wisely.


Here is an overview of the format I use to create my annual reports. It’s important to understand that everyone must arrange their annual report to fit their needs. Feel free to use this model as a starting point for your annual report:


1. Accomplishments of previous fiscal year and vision of the future

I like to include a narrative of this in a letter from the President of our Board of Directors. This letter should contain an overview of what happened during the past fiscal year, including details about successes and challenges. It should also look to the future and include insights about growth or success opportunities.


If possible, I would recommend sending your Board President a list of accomplishments you would like included in the letter so that it fits the intended purpose of the annual report. Even better if you can write the letter and send it to the Board President for any edits or changes they would like to make.


2. Financials

This is your opportunity to provide the financial information that stakeholders use to determine how well the company performed financially. I think that the size and performance of your organization will dictate how detailed you should be with presenting your financial statements.


You should ALWAYS be transparent about your finances. But if you are performing well, I think it’s appropriate to list your revenue vs expenses and spend more time focusing on the human side of your work. However, if you are struggling financially, this is the time to explain. Use your annual report as a tool to present your detailed financials for the previous one to three years, whatever it takes to paint a picture of what is challenging your organization and how you are going to fix it. No one wants to donate to a sinking ship, but if you are honest and can present a plan to recover the ship, you can make a case for your supporters to stick with you.


The question of “should I include a donor list in my annual report?” feels like it goes back to the beginning of time and I don’t feel there is a good answer. I have seen some organizations print every single donor grouped by giving category. But will your donors be embarrassed that their name is listed in the lower giving group? Some organizations only list their “major donors.” But what happens if you check and double check and forget to include the name of a high-level donor?


Personally, I think that donor lists should be based on the organization. One organization I work with is a 30-year old housing organization with strong Anabaptist roots. Historically, Anabaptists refused to take part in violence of any kind and often live very simple lives. The Mennonites, Amish, and Church of the Brethren are all considered Anabaptists. This organization knows that while many of their donors have considerable resources, they would be embarrassed if their name was included in a list identifying them as a high level donor. Because there are too many donors to list every single person, the organization decided to omit listing donor names and instead focus on thanking all donors for their support and highlighting the impact their support is having on the families being served.


3. Discussion and Analysis

This section should include your program numbers, volunteer statistics, and human interest stories. This is your opportunity to show off the work you are doing and thank your supporters for their investment. This is also the place that will help convince people to be involved, whether financially or by volunteering their time. Use lots of pictures and testimonials to paint a picture of the work you are doing and why more people should get involved.


Here is one last tip I received after one of my first annual reports was mailed out…


I viewed the annual report as an opportunity to showcase the work and thank the supporters, but not necessarily as a solicitation tool. BIG MISTAKE! I received a phone call from a fundraising professional who had received the mailing letting me know they were so impressed with the annual report they wanted to contribute. They grabbed their checkbook and looked for an envelope to send in a donation but didn’t find one, so they didn’t send in any money. She said she had learned many years before to ALWAYS include an envelope, and now I am passing along that information to you.


If you need assistance creating a compelling annual report, reach out to me to schedule a FREE 15-minute consultation to start the conversation about your needs and if I might be able to help.

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