Here are five common questions I get about nonprofit annual reports, along with my answers.
If you are still trying to figure out how to produce your 2010 nonprofit annual report, join us tomorrow’s webinar (2/8/11 at 1:00 pm Eastern, 10:00 am Pacific), where I’ll explain how to create a “New and Improved Nonprofit Annual Report.” When you do, you can also purchase the e-book, How to Write a Nonprofit Annual Report, at half-price.
This will be our first annual report. Where should we start?
Writing an annual report can feel overwhelming and daunting, especially for first-timers. Perhaps that’s why you haven’t written one in the past.
Always begin with your key message and your achievements. What three things are you most proud of from last year? What aspects would you emphasize if you only have five minutes to tell a stranger about your nonprofit’s good work? Your annual report should flow from the answers to these questions.
If your organization has been around for several years, but this is your first attempt at an annual report, you may be tempted to talk about all of your accomplishments over the years. In this case, I recommend that you call the document a “progress report” that spans a certain timeframe, e.g., 2008-2010. At the end of 2011, you would write an annual report for that year alone.
What’s the most important part of an annual report?
The most important part of a nonprofit annual report is the description of your accomplishments. Your readers want to know what you did, but more importantly, they want to know why you did it. What were the results? Why did you spend your time and money the way you did? What difference did it make? Connect the everyday activities of your organization to your mission statement. Don’t assume that readers will automatically understand how your activities help you achieve your mission. Connect the dots for them.
If we only highlight our biggest accomplishments, won’t those staff members whose work is left out be upset? What about a board member’s pet project?
The purpose of an annual report is to highlight the organization’s accomplishments as a whole, not the work of any one particular staff member or project team or board member. Look for other ways to recognize the contributions of others who aren’t featured in the annual report. You don’t want the annual report to be the only place where good work is publicly recognized.
We have some bad news. How do we talk about it in the annual report?
Very carefully. Honesty is extremely important in annual reports. Yet, your annual report should also project a positive image of your organization.
The best way to handle bad news is to address it directly, but to surround it with good news. The executive message is a good place to address the issue. Start with some of your accomplishments. Then describe the bad news as a “challenge” or “transition” and immediately explain what you have done to address it. Emphasize the positive results, or the silver lining, associated with the bad news.
For nonprofits, bad news is often associated with their financial statements. In this case, include a narrative that outlines the financial difficulty then immediately explain what was done to address the situation.
What needs to go in the financial section?
The financial section of a nonprofit annual report should clearly explain where revenues come from and how they are spent. In addition to the information provided in traditional financial statements (abbreviated formats are fine in an annual report), it’s also helpful to include pie charts, bar graphs, or other visuals that help readers see the big picture and understand financial trends. A short narrative description is also essential. Explain in plain English the meaning behind all those numbers.