Advice on Nonprofit Annual Reports

A few months ago, I spoke to a group of nonprofit executives about the types of information nonprofit donors prefer. You can read more about that in a previous blog post.

I received an email following that presentation asking for some advice about whether or not to do an annual report. I thought I’d share my response here.

First of all, why should a non-profit organization do an annual report? They are not required by the Securities and Exchange Commission (SEC) as they are for public companies. This could be seen as a good thing if you’ve ever read the SEC’s instructions for an annual report, called a 10K in government parlance.

But many nonprofit organizations do annual reports anyway, and with good reason. One reason is simple accountability. Donors who contribute money in various amounts all want and deserve to know how well it was spent, and what was the return in terms of organizational mission. Staff, recipients of services, government agencies, and other publics may also expect to know what the organization did in the past year.

The annual report also serves as a fine promotional tactic and should be seen as a strategic aspect of the organization’s ongoing communication plan. Donors feel compelled to give again–or for the first time–when reading about accomplishments and seeing who else gave. Community members have a deeper understanding of the organization as opposed to just name recognition. This can lead to referrals for services and partnership opportunities as well as support.

The woman who emailed me also asked if an annual report could replace their newsletter. That’s a possibility, but you lose some frequency since annual reports only come out once a year. Another option is to make the annual report the fourth issue of a quarterly newsletter. It saves the money of an additional publication but maintains top-of-mind communication with key audiences and fulfills the purpose of an annual report. It could be an insert in the newsletter or a special issue format.

So then the question becomes, what sorts of content should you put in a nonprofit annual report? Here’s a suggested list:

  • First, have a theme each year that is told both in words and graphically. The theme should tie in to the organization’s mission generally but also be specific to unique success in the past year or a vision for the year(s) to come next.
  • Include a letter  from the president and/or board chair that reflects on the past year, looks ahead, and incorporates the theme. Go for personality and creativity as opposed to perfunctory, pedestrian language.
  • Include a list of board members and their affiliations as well as staff with titles. This is a form of transparency, but also personalizes the organization and provides implicit endorsement.
  • Donor profiles. Telling the stories of donors, including who they are and why they give, serve as both grateful recognition and powerful testimonials to motivate repeat and new giving.
  • Success stories. Nonprofits don’t exist to just gather funding, they have a mission. Telling personal stories about real people who benefited from that mission puts a face on the cause, treats the recipients of services with dignity, and provides all readers a deeper and more  accurate understanding of the organization’s work.
  • Finally, include the financials. This would include both sides of the ledger. For donations received, name donors (with permission) and possibly put them in tiers or categories of giving to show that all sizes of gifts are  welcome. If gifts were earmarked for specific projects or programs, show that also. Then, show how money was spent by category of mission, including administrative costs. This is again both a form of transparency and good promotion to show the need, responsibility, and diversity of organizational assets.

A good idea is to include an envelope or web address for additional giving. Track the responses that come from it, as well as comments from key publics for future reference.

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