Did your organization’s fiscal year-end on December 31st? As we turn the calendar page to a new month and new year, many nonprofits realize it’s time to produce an annual report. How do you know if your organization should do this? What should it look like? What’s the timeline for it?
The truth is, although it is not required by law (like a Form 990), an annual report is an excellent tool for a nonprofit’s cultivation of new donors and stewardship of past faithful supporters. The report can be a cornerstone of your communications strategy and valuable throughout the year. An annual report can spotlight program successes, impact stories, and how the organization was a responsible and transparent caretaker of donors’ financial gifts. In addition to the cut-and-dry financial tables, an annual report allows a nonprofit’s leaders to speak directly to donors and friends, showcase the volunteers and staff who make the organization unique, and illustrate how the programming is valuable and needed within the community.
Writing an Annual Report for NPOs
Your organization’s annual report will likely attract the eye of different audiences within your support community. In addition to current donors and prospective supporters, the annual report will be of interest to institutional (foundations) and corporate funders that have underwritten your programs. They’ll be curious to see how their funding made a difference to your organization, and the stories and statements from your nonprofit will fill in some blanks for them. Additionally, an annual report may interest future partners, who can use it to screen for programmatic matches for their funding opportunities. Finally, if your organization receives government support, your report will interest local committees and elected officials who make those budget decisions.
What does this report look like? An organization’s annual report does not need to be a high-cost, glossy full-color magazine – it needs to be authentic and represent the highlights of your group’s year. The report can be an old-fashioned hard copy or a digital-only version (or both!). You can produce it in-house with online publishing tools, or you can opt to hire an outside vendor.
The design or layout does not need to be complicated. At its most basic, an annual report ought to include the financial story from the past year, perhaps in table or graph form, or a combination. How much of your revenue came from which streams (donations, earned income, government funds, etc.)? How was it spent (administrative, programmatic, etc.)? Donors and funders will want to see clearly how these donations impacted the organization’s work.
What Else Should My Report Include?
An annual report can also highlight the nonprofit’s leadership, from the Executive Director to the Board Chair. A letter from the ED or the Board Chair (or both) highlighting the successes is a great way to open the report. Equally as important, though, are the program staff, the volunteers, and the clients you serve. However, what makes an annual report stand out from others are the stories it can tell. Impact and outcomes will always be the highlight of any report. Do you have a volunteer who can share a paragraph about the work they have done? Is there a long-time or beloved staffer who can speak to the fulfilling work they do? Do you have any great photos of your programs in action? Tell your audience the wonderful and unique story of your organization!
One optional section of an annual report that has proven helpful for donor cultivation, retention, and stewardship is the roster of donors. Often left toward the end of the publication, this list of donors provides a visible “thank you” and a compelling nudge to support the organization based on the “peer” factor. Research has shown that seeing your name on a donor list may remind you to make a second gift if asked, but also, not seeing your name provides a nudge to make that first gift!
The timing of your report is important – the information needs to be current and compelling. The best way to ensure its relevance is to publish it within the first quarter of your new fiscal year. With good database software and management, many parts of an annual report are easily pulled together: financial information, donor information, and volunteer and programmatic statistics are often easily at hand. Securing the letters and statements from contributors such as board members or volunteers may require more hands-on management; it is best to begin this process before you even begin to design the report itself!
With planning and compelling storytelling, the annual report can be an authentic representation of your nonprofit’s important work. It will allow readers to have a sense of the value your organization places on transparency, accountability, and impact. An excellent annual report will satisfy current donors and funders and attract new support. Within a few short pages, your organization will make a case for support that can retain its loyal friends and entice new ones!
Annual Report Examples
Make preparing your next annual report easy with our guide and template!