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The Ultimate Guide To Creating Nonprofit Annual Reports

Tatiana Morand 02 October 2019 0 comments

nonprofit annual report

 

“We really have to do an annual report this year,” development director Hannah’s boss told her. “Donors want it, our foundation funders are asking why we don’t have one, and everyone else in our service area is doing one.”


“Sure! I’m on it!” Hannah assured her, thinking, “How difficult could creating an annual report for a youth centre be?” 


But when she sat down to get started, she quickly got stuck. 


What should she include? What should she leave out? How should she structure the document? 

She knew an annual report was a great opportunity to showcase her organization and tell their story to their supporters. It could show off their accomplishments, promote trust and transparency, and inspire donors to get more involved. The potential was great, and Hannah thought an annual report was definitely worth doing… just as soon as she figured out how. 

As Hannah started making notes, she quickly arrived at two conclusions: 1. An annual report was a  big undertaking. 2. She felt a headache coming on.

In this post, we'll look at:

I’ve also included a lot of examples from real nonprofit annual reports, so you can get inspired by what other organizations have created.

4 Essential Elements of Annual Reports

 

Once she’d taken a few deep breaths (and some Advil), Hannah started by looking at as many nonprofit annual reports as she could get her hands on. 


As she read over them, she started to note some commonalities in the ones she thought were really good: they focused on their mission, hit the highlights of the year, told captivating stories, and were easy to read and engage with. 

1. Make It About the Mission

Your annual report is, above all, an opportunity to showcase your mission. 

It may feel redundant to emphasize your mission to people who've already supported it, but you'll find that your supporters spend a lot less time thinking about the details of your mission than you do, and the specifics of your goals may not be at the top of their minds.

Emphasize your mission not only by including your mission statement, but by using the content of your report to demonstrate how you're pursuing it.

The Voluntary Sector Reporting Awards (VSRAs) established Best Practices in Charity Annual Reporting. In relation to content, they recommend:

  • State clearly the organization’s mission and relate the activities back to the mission throughout the report.

  • Give a clear statement of performance objectives and targets and describe how they link to the mission.

  • Disclose your organization’s risks, issues and challenges in the context of the mission.

  • Tell the reader how your organization governs itself and how that governance structure reflects the mission of the organization.

  • Avoid committee reports in favor of one broad-based board report that tells the organization’s story in a compelling and integrative manner. The committee reports can be posted to the website if they are considered important disclosures.

nonprofit annual report

Sarnia-Lambton Rebound reminds their supporters of their mission right from the beginning.

2. Hit the Highlights

It's impossible to include everything your organization has accomplished in a year. 

Or rather, it’s possible, but no one will read it (sorry!). 

Instead, you'll need to choose a few major accomplishments to feature. Keeping it concise will ensure your readers don’t lose track of the important points you want them to get out of the report. 

Consider gathering a committee or group that is tasked with the annual report development and ask yourselves:

  • If we could only tell donors about one thing we accomplished this year, what would it be? Don't worry, you'll be able to tell them about more than one! But it can be helpful to see what different people consider top priority. Most of the time, a handful of accomplishments will emerge as the agreed-upon “best.”

  • What are our key messages? The accomplishments you choose tell a story. What is it? 

  • Is there a theme that might be fitting? How do your key messages relate to each other? Is there a theme, like growth, perseverance, hope, or family?

  • How do these accomplishments relate to our mission? Spell it out, even if it feels very obvious. Again, clarity is key so that your supporters know exactly how you’ve helped support your constituents.

nonprofit annual report

Navos shares their year’s accomplishments with quick facts and engaging graphics.

3. Your Secret Weapon for Driving More Impact

The best way to showcase your accomplishments is through storytelling.

A long list of achievements or a collection of facts won’t engage donors' interest, let alone their hearts. But putting a human face on your cause never fails.

Look at the accomplishments you want to highlight, then find a human story for each one. 

This is more likely to stick in your supporters’ minds, because telling a story helps associate emotions to events.

And once someone has had an emotional response to something, they’re much more likely to remember it.  

That’s why just sharing statistics may be more comprehensive, but because a list of dates and numbers won’t provoke the same emotional response, it’s less likely to stick in people’s minds. 

And how can you do that? For example, if you built a school, interview a volunteer who swung a hammer, or a student who attends it. 

If you created a new program, introduce readers to the problem it solved, via one person's story. A great example is this one from Nuru-International, which focuses on the story of Josphat, a single farmer. 

nonprofit annual report

4. A Few Elements of Style to Consider

Audience

You may have a number of potential audiences for your annual report, but it’s important to determine who you are targeting. After all, you want to be sure you include the information this audience is looking for in a voice that resonates with them.

For many nonprofits and charities, key audiences include:

  • Donors and prospective donors

  • Funders

  • Volunteers

  • Partners and sponsors

For associations, clubs and other membership organizations, key audiences include:

  • Members and prospective members

  • Volunteers

  • Partners/Sponsors

Tone

An annual report is an opportunity to connect with your community. It shows what you've accomplished, that their donations have impact and importance, and that your cause matters. The tone with which you communicate these points is as important as the message.

As you establish a tone for your report, think about your key audiences and what will resonate with them. For more nonprofits a friendly, warm, but authoritative tone will hit the right note. However, for the right organization an irreverent, strident, or even silly tone can work. You probably already know if that's you.

...And A Few Things to Leave Out

Some things do not belong in your annual report. Avoid:

  • Jargon and acronyms
    Cut nonprofit professional and field-specific jargon. Your annual report is for a general audience, who may not be familiar with what an “in-kind gift” or the details about different kinds of trusts. Likewise, spell out all acronyms the first time you use them, followed by the acronym in parentheses. It makes your report more readable, and your readers feel more included.

  • Boring administrative details
    The new copier may have made every single day of your year better, but it doesn't deserve a spot in your annual report. Be careful about focusing too much on staffing changes and building improvements that aren't directly related to the mission.

  • Too much fundraising talk
    You can update your supporters on campaigns, and of course include your annual totals in your financial statements, but raising money isn't the goal of this report. 

What About Associations?

The key difference between a nonprofit or charity annual report and one for an association or membership organization is that you need to it to be “member-centered” rather than”donor-centered.” 

This means that rather than demonstrating how donations were spent, you need to outline the association or club’s accomplishments. Members want to see the return-on-investment (ROI) of their membership dues or fees, and feel good about their membership.

I’d also suggest that you think about this in terms of telling your organization’s story — offering tangible examples of how the organization has benefited members throughout the year. Using real-life examples or quotes from members can have just as much impact for associations as it does for fundraising organizations. You want to show them the outcomes of key initiatives, projects or committees and demonstrate the value these have added to their personal or professional lives through their membership.

Like a nonprofit, membership groups will also want to thank and recognize volunteers, partners and sponsors. This doesn’t mean simply listing all committees and their members – instead, describe their work and acknowledge the individuals whose achievements have benefited the membership.

A Sample Annual Report Table of Contents

 

After she’d surveyed several reports from other organizations, Hannah felt ready to sketch out a table of contents. Just looking at it on the page made her feel better. Now she had a structure to work in, along with the best practices to guide her. 

What does an annual report look like? It depends on the format, of course, and your communications goals. However, here's an overview for a traditional, printed report.

Welcome Letter/Introduction

Summary of Highlights

Financial Information

Story of Accomplishment

Another Story of Accomplishment

One More Story of Accomplishment

Donor List

nonprofit annual report

DeafBlind Ontario Services follows a simple, traditional structure for their annual report.

And what would this look like in practice? 

Well, Hannah decided her report would start with a letter of welcome from the executive director, followed by a collage of photos with captions about the year’s highlights. 

Then, she’d create a visual breakdown of the year’s financial information with a pie chart demonstrating the major areas of revenue and expense. 

Next, she’d feature the year’s biggest accomplishment: adding weekend programming at the centre. 

That would be followed by an interview with a homework help volunteer to introduce readers to the afterschool program, and finish up with a story the Youth Advisory Board participating in Global Youth Service Day. 

Then, she’d add her donor list, and… be done!  

Suddenly, the end was in sight. 

How To Choose an Annual Report Format

There are several different considerations that I’ve seen nonprofits wonder about as they prepare their annual report. 

Should you mail out a printed report? 

What kinds of images should you include? 

And is it really necessary to have every donor’s name listed? 

While the answer to a lot of these questions will depend heavily on your organization, here are a few things to consider throughout the process. 

Online Vs. Printed?

While most of us think of annual reports as printed documents that involved a lengthy and complicated production process, that doesn’t have to be the case.

Today, there are many options to consider when you create your annual report.

The format you choose will depend on both the nature of your organization, the objectives for your annual report and your audience’s preferences. Many nonprofits are finding it both less expensive and more environmentally-friendly to do less printing. For many years organizations produced printed reports that they also turned into PDFs for inclusion on their website. Now, a number of organizations are only mailing out printed copies or event postcards to those who request a non-digital version.

However, if you know that you have a group of donors who expect to receive a printed piece or if you know that your printed reports are shared and have an effective use and shelf life, you'll want to continue with a printed version. 

There are also a few alternative formats you might want to consider if your audience is tech-savvy
(or just sick of the traditional ones). These include:

  • Online documents (housed on your existing website)

  • Mini-sites (separate URL)

  • PDFs (that reside on your website)

  • Postcards (usually with a link to a more extensive online report & financials)

  • Video

  • Printed pieces (brochure-style; 2-page; 4-page; poster-style)

If you’re not sure about the best format for your key audience, you could consider conducting an online survey to gather a consensus from your constituents.

nonprofit annual report

This fundraising postcard from Think Tank Creative reports on outcomes for the first half of the year.

What About Visuals?

No one wants to read blocks of text, especially in the Internet age. 

So, if you want to make sure people keep reading, interesting and well-placed photos and graphics throughout your report can take it from dreary to dynamic. Visuals will also help to draw the reader in, capture attention and break up the text in both print and digital reports.

Remember to keep design clean and easy-to-read. Don’t use too many typefaces or fonts and whether online or print, make sure you include sub-heads to pull the reader through and help those who are scanning.

Sometimes a photo conveys a message clearly with just a simple caption – helping keep your text to a minimum. Look through the photos you’ve taken at events and other activities – this might also help you identify some individuals you might be able to connect with for testimonials as well.

Digital annual reports make it possible to use as many full-color images as you like. If you're creating one document for printing that will double as your online PDF, you'll be constrained to what you can afford to print. 

nonprofit annual report

DeafBlind Ontario Services uses a 3-color design throughout their report.

Note that while full-color images are engaging, they're not an absolute necessity. Ask your designer to consider your budget, and advise you on black and white or 3-color options.

Breaking It Down: Every Section You Should Include in Your Report

 

What should you include in your annual report? 


How should you approach each section? 

I’m so glad you asked! 

Each section of your report offers a different way to connect with your audience. 

Your introduction gives them a one-on-one experience with the leadership. 

Top stories show your programs in action, and how you’re making a difference. 

Financials demonstrate your transparency, and the donor list shows that they’re part of a community. 

Introduction: Meet Our Leader

Letters or messages from the Executive Director and Chair of the Board are standard fare in an annual report for good reason. It is important for those leading the organization to both report and comment on the year’s accomplishments and state of affairs. The opening letter can introduce the theme, summarize the content, and give a personal touch to the report.

Your introduction should be:

  1. Short. A few succinct paragraphs will do the job. You don't have to fill a page.

  2. Conversational. Don't be afraid to let some personality shine through. Aim for a professional, but warm and friendly tone.

  3. Self-aware. If significant events are impacting your audience, organization, or cause, it's best to acknowledge them briefly. Even a short nod to difficult circumstances, like, “Losing our building to a fire was incredibly challenging, but we’re still fighting the good fight,” or “Despite instability in the region, we were able to provide services in three new villages,” can assure your audience that you’re in touch. 

  4. Candid. It's okay to acknowledge setbacks and challenges. In fact, it’s not a good idea to say how great the year was if it wasn't. Your donors and supporters don't expect perfection, but they do expect transparency.

  5. Positive. Be honest, but project a hopeful, positive attitude. Hint at a few things you’re excited about for the coming year. Stay upbeat.

nonprofit annual report

Short and sweet gets the job done in this executive message from Sarnia-Lambton Rebound.

Top Stories: Look at All the Change We’re Making! 

Show your mission in action with a story about each major accomplishment. A good nonprofit annual report story:

  • Is true. You can simplify a story, and change details to protect privacy. However, the bones of the  story should be true. After all, you're using it as proof that you deserve support.

  • Focuses on a central character. As I mentioned before, it's easier to connect with the story of one person than a group. Use one, named person as the subject of your story.

  • Uses the person's own words as much as possible to tell the story. Quotes and first-person narratives are most compelling.

  • Shows a change as a result of the nonprofit's action and the donors' gifts. Use a storytelling structure with a beginning, middle, and end to show what changed.

Quotes and captions are part of storytelling, too. Here, Marian House uses a quote from a client to introduce a new program. 

nonprofit annual report

Financial Information: Transparent and Responsible

It's important to share your financial information in a way that makes sense to your audience. 

Clearly explain where revenue comes from, and how it is spent. It's fine to abbreviate the format and show an overview. In addition to the information provided in traditional financial statements, it's helpful to include visuals like pie charts, bar graphs, or infographics to help readers see the big picture and understand financial trends. A short narrative description is essential; explain in plain English the meaning behind all those numbers.

On the topic of financial reporting, the VSRA Best Practices suggest:

  • Have management discuss the financial information in light of the organization’s mission, vision, and values

  • Link that discussion to present operations, risks and future plans

  • All should be written in a concise “discussion and analysis” section of the report. 

 

nonprofit annual report

 

Aurora Cultural Centre promotes accountability, but doesn't overwhelm their audience with their financial statement.

 

nonprofit annual report

They also demonstrate what your numbers mean with visual organizers like charts and graphs.

Donor List: Look At YOU!

Many organizations decide to print the names of the year's donors and the levels of their gifts. This is a way to say thank you, and show donors that they’re part of a large community of supporters. Still, it’s a list of names, and thus, likely to be skimmed. People look for their own names, but rarely read the entire list. Intersperse quotes and photos to get more value out of the pages. And of course, make sure all spelling, titles, and giving levels are correct — double and triple check!

Call to Action: Keep This Party Going

What do you want people to do upon reading your annual report? Give them a next step with a strong call to action, reiterated throughout your report. 

For most organizations, this will be some variation on “Donate,” but consider requesting other ways to engage, like volunteering, following your social media, or advocating for your cause.

nonprofit annual report

SC Thrive closes their report with more ways to get involved.

Don't Fear Your Annual Report

 

Creating an annual report is definitely a major task. 

 

But as Hannah dug into her first annual report, she found it wasn’t all new. 

 

She was using a lot of skills that she already had — storytelling, communicating impact, and showing gratitude to donors. 

 

Likewise, you’re probably more prepared to create your annual report than you might initially think. 

 

Follow our guide, and you’ll be more than ready to create a report that engages your donors and tells your story! 


Tatiana Morand

Posted by Tatiana Morand

Published Wednesday, 02 October 2019 at 11:13 AM

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