An annual report tells a story. Filed each year, an annual report allows for a nonprofit organization to build a bridge between its inner workings and the community at large. The community includes donors, constituents, service recipients, neighbors, legislators, government entities. “The annual report is an
accountability document that may be used for many purposes and it should not be assumed that every reader knows exactly what the organization does and why.” (Salterio, 2010). An annual report helps a non-profit to be transparent in its work. When a non-profit is transparent, it builds trust. McDougall & Lam (2014) studied the distrust that community members have of not-for-profit. In their study, when community members understood and had awareness about the organization’s goals, the community
members’ level of confidence in the organization increased. An annual report is a path to gaining confidence from its stakeholders.
For this lesson, a distinction between an annual filing and an annual report must be made. A nonprofit must file annually with the United States Internal Revenue Service.
501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the
creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.
To prove that a non-profit has complied with the law, non-profit files a Form 990, on an annual basis. For interactive training on keeping the tax-exempt status of a non-profit, please visit the Internal Revenue Services website at www.stayexempt.irs.gov. For another outline of annual reporting requirements, you can visit the National Council of Nonprofits for more information.
An annual report allows for a transparent accounting, in a short and legitimate format. For example, an annual report outlines how much money a non-for-profit has brought into the organization, how much money has left the organization, the number of constituents, and the types of communities it serves. An
annual report explains the progress that the organization has had on its goals. Annual reports must be honest. Good and strong non-profits have a diverse pool of funding sources. To encourage funders from a variety of sources, a non-profit must be able to show these donors how effective the money was
spent in the organization. An annual report communicates to these donors how wisely and effectively the organization utilizes the money. Donors, no matter how much they give, are an important resource to be appreciated. An annual report is an excellent time to indicate an organization’s gratitude. Rather than listing the donors by the amount of money that they gave, find creative ways to show how grateful the organization is for their financial sacrifice. Encourage donors who have limited resources to continue
to fund your organization. Recognize all your donors, without listing each one with the amount they gave.
Any good communication must consider its audience. And if your message is not accessible, it limits who receives the message. An important component of an annual report first and foremost is its story for the year. The story explains its highs and lows, the threats and risks it survived. An annual report is short, to the point, and does not sacrifice design for meaning and solid information.
Important style elements include how accessible is the annual report to various types of people with disabilities. Using this as a guiding principle, one must consider the different types of computer software for assistive technology that will be used by the readers of the annual report. Ensuring that the content
meets the accessibility guideline set by the World Wide Web Consortium as well as 508 guidelines is an important step. Further, assurance the literature is at a reading level that accommodates all levels of literacy gives your annual report an edge above others. An annual report that assures all people are included communicates to your stakeholders that they are welcome in the nonprofit.
In addition to accessibility for disabilities, messages also must include the various types of human experience your readers may have. Including images and messages from your organization that reflect various hair types, skin color, eye color, sexuality, and body shape helps your readers to feel that the nonprofit is invested in them. An annual report either draws its readers to be more invested financially or through service to its mission or it loses their interest. Take great strides in an annual report to
express the organization’s interest in recruiting each reader into its mission and goals.
Keep annual reports brief and clear. Experiment by having only one page for an annual report! While challenging, the point is to keep the report engaging and interesting. The more pages an annual report is, the more likely its content loses its punch and importance in the reader’s mind. Remember, an annual report intends to communicate how sustainable and powerful your organization is in making a difference and accomplishing its mission. If your annual report has to take 15 pages to explain its
influence, a serious reconsideration of its content must be made.
The best annual report will use the numbers and data only as guideposts to illustrate a human interest story. For example, a nonprofit may have served thousands of plates of nutritious and hot food. However, the numbers cannot compare to the emotional appeal of a father who is working several jobs whose health and well-being are improved by a hot meal reliably served by an organization. Give that father a name and a face through
photography and the power of the thousands of meals is explained exponentially. Today, the many ways to tell a story has been enhanced through technology. One can use graphics, an anecdote, and even video. Annual reports can utilize online and social media for video as waves to demonstrate its impact.
Annual reports draw more people to the nonprofit. Missions of many worthy organizations have fallen when no one wishes to sustain it. Through brevity, clarity, honesty, and a compelling story, an annual report can be the bridge to an organization sustained into the future.
My Five Step-Approach to Producing An Impactful Annual Report
The Old Annual Report in the New Digital Age
Best Nonprofit Annual Reports 2019
Annual Filing Requirements for Nonprofits
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