The Annual Report — The Most Important Tool in Your Nonprofit’s Toolbox
When a potential donor, volunteer, supporter, board member, employee, executive and others with an interest in a nonprofit seek information about that nonprofit, they typically look for an annual report first. These individuals are interested in the organization’s recent past and present situation. Plus, they may want to gain a peek as to what is ahead.
In attempting to secure an organizational annual report from a variety of nonprofits in the past, I have been wildly disappointed with the lack of nonprofits creating annual reports — or sharing any comprehensive information about their organizations for that matter — as well as the quality of nonprofit annual reports that do exist. Frankly, many nonprofit organizations lack the employee or volunteer skill set needed to create an effective piece that evokes positive emotions from important supporting constituencies.
What Is an Annual Report?
An annual report is a document that should describe, based upon a fiscal year time constraint, operations provided and the overall financial condition of a nonprofit. These reports focus on a given 12-month fiscal year timeframe, such as July 1 to June 30, Jan. 1 to Dec. 31, or Oct. 1 to Sept. 30 annually.
Components of an annual report should include:
- An introduction from an organizational leader
- Nonprofit mission, vision and values
- Summary of key organizational highlights during a specific 12-month period
- Overview of primary service priorities
- Financial results
- Stories of accomplishments
- Community problems that have been solved plus their impact
- A look at the next fiscal year goals and objectives
Determinations need to be given to when you highlight donors that are individuals, corporations, foundations, associations and organizations. An effective annual report should be published in the first quarter following the fiscal year recently ended.
4 Tips for Creating an Annual Report
Remember that a well-written and designed nonprofit annual report can be the perfect fundraising and friend-raising tool for your organization. You continually need to retain current supporters and attract new supporters.
Seek to expand your annual report audience. Your annual report, if done well, can inspire, show impact, build trust, show appreciation and stimulate greater organizational awareness. Here are four suggestions for your next annual report.
1. Determine the Annual Report’s Target Audience and Format
When creating an annual report, a nonprofit must understand and determine their target audience. Seek to develop annual report goals and a sense of how the annual report will be used.
In my experience, I have mailed the annual report to a broad audience, emailed the annual report with a letter to a specific prospect list and published a four-color annual report for face-to-face planned visits with prospects. I use the annual report for a combination of cultivation, solicitation or stewardship purposes.
The format may be different depending on if the report is a print or online version, but strive to maintain the same format each year. In many cases for many nonprofits, the annual report is the only community impact statement the nonprofit has at its disposal. I recommend the creation of a publication timeline and you may utilize a different annual report theme each year.
2. Be Transparent About Financials
The Charity CFO shared 10 elements every nonprofit annual report should possess, and one of those is disclosing financial information. The annual report is a great place to provide your financials and be completely transparent to donors. State how much your organization has raised, and how it was spent, including how much went toward administrative expenses.
3. Find Compelling Stories and Visuals
Make your stories compelling, relevant and engaging so they encourage continuous financial support. Promote your organizational brand through visual appeal. Your annual report should be an interesting read, have a beautiful look and be worthy of having a spot on a coffee table throughout the year.
To accomplish the visual appeal, utilize quality photos that capture organizational programs and events. Use a variety of photos featuring innovative programs and long-time successful programs. Reinforce activities for which you are known. Consider using infographics that show data in a pleasing and comprehensive way.
Ways to do this include sharing testimonials from constituents and showcasing key donors by name to thank them and also potential donors to see other prominent philanthropists have donated to this cause, according to The Charity CFO.
4. Promote Your Annual Report
Seek elements of blogging, social media posts and other methodologies to promote your annual report. This success may interest potential future funding partners. Think about focusing organizational internal and external leaders in the annual report.
An Annual Report Example
View effective annual reports for inspiration. For instance, there is the beautiful, colorful and informational 2022 Annual Report from Feeding America. This report, which has a theme of “A Bold Aspiration,” shows that the organization generated $4.48 billion in total revenue, as the largest charity in America, according to Forbes.
If you read the report, you will be immediately drawn into the feeding stories of Dayrl and Paula. You’ll notice that hunger knows no boundaries. There are hunger statistics and nonprofit shares that “People facing hunger are at the center of all we do.” Each heading shows bold impact, bold reports, bold actions, board of directors and leadership. This annual report makes you want to invest in this cause and organization.
Use your annual report to thank those who give time, talent and treasure to promote your nonprofit. If you do not have a communications tool, create an annual report that makes sense for your organization. Regardless of the size of the report, this communications tool shows people in your service community that you exist, are relevant and needed.
An annual report helps validate your good work. If you do not have an annual report, start today to establish this vitally important communications piece.
The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.
Duke Haddad, Ed.D., CFRE, is currently associate director of development, director of capital campaigns and director of corporate development for The Salvation Army Indiana Division in Indianapolis. He also serves as president of Duke Haddad and Associates LLC and is a freelance instructor for Nonprofit Web Advisor.
He has been a contributing author to NonProfit PRO since 2008.
He received his doctorate degree from West Virginia University with an emphasis on education administration plus a dissertation on donor characteristics. He received a master’s degree from Marshall University with an emphasis on public administration plus a thesis on annual fund analysis. He secured a bachelor’s degree (cum laude) with an emphasis on marketing/management. He has done post graduate work at the University of Louisville.
Duke has received the Fundraising Executive of the Year Award, from the Association of Fundraising Professionals Indiana Chapter. He also was given the Outstanding West Virginian Award, Kentucky Colonel Award and Sagamore of the Wabash Award from the governors of West Virginia, Kentucky and Indiana, respectively, for his many career contributions in the field of philanthropy. He has maintained a Certified Fund Raising Executive (CFRE) designation for three decades.