Whether reporting data to the IRS, explaining to prospective donors what you do, or thanking supporters for their contributions, it’s crucial that your nonprofit tracks and reports its activities throughout each year. In fact, 90% of people say that knowing how their funds will be used is important to their decision to give, and 65% of donors would give more if they knew the impact of their gift.
To show you’ve made the most of your strategic plan and thank donors for their support, you’ll need a comprehensive nonprofit annual report. In this guide, we’ll explore the essential elements you should include to make sure you don’t leave anything out.
1. Statement of mission and values
At the top of your annual report, emphasize your organization’s mission and values. This ties your nonprofit’s purpose to its activities and sets the stage for the data you’re about to share, adding context to help readers know why these numbers matter.
Since this section sets the theme for the entire report, it’s important to frame your mission around donors and volunteers. For example, emphasize that partnership with donors makes your mission possible. Instead of feeling like only their money matters, donors will know they’re a vital part of your nonprofit’s mission.
If you’re writing an annual report for a church, for example, remember that your audience will be much more specific, likely targeting existing congregation members. In this case, readers want your annual report to address pain points or concerns, since they’re personally invested in the organization. For example, you may highlight that a core value of your church is generosity to the community and describe your community outreach efforts, like your free food pantry. In addition, detail your church’s bookkeeping practices to prove that you responsibly steward tithes and donations.
2. Financial data and statistics
Next, add specific information about your organization’s financial position. Use the following tips to make this section more easily readable:
Use infographics. Colorful graphs and charts can brighten up your annual report and turn a long list of percentages and dollar signs into an eye-catching illustration. Incorporate your nonprofit’s brand colors to increase the visual appeal in this section and make it cohesive with the rest of your report.
Provide insights. While your nonprofit should know the ins and outs of its books, supporters often don’t have the context to understand your financial approach. Provide insightful metrics that directly relate to your goals, such as cost-per-success, which shows donors how much is needed for one beneficiary to have a successful outcome. This bridges the gap between the numbers you’ll report and their impact on your mission.
Show progress. To demonstrate your nonprofit’s growth and improvements over time, provide comparisons to previous years. For example, you might point out that your year-end fundraising initiative raised $10,000 more this year than last, meaning your fundraising efforts are increasingly effective.
Being transparent with your nonprofit’s financial numbers shows donors that you’re responsible with their funds—and trustworthy when reporting how you spent them.
3. Outcomes and Impact
Donors want to know the measurable difference you are making. According to Foundation Group’s Form 990 filing guide, nonprofits must provide a list of their charitable programs by name or purpose to the IRS annually. Use this list as an outline to detail your nonprofit’s outcomes and impact, sharing at least one positive outcome from each program. Consider answering the following questions:
What projects did you start?
What are the key demographics of your participants?
How well did you serve your participants?
How are your participants better off as a result of your programs?
Which fundraising campaigns were most successful?
What are some opportunities for improvement that will increase your impact on individuals and families in the future?
Make this section even more compelling with pictures of your nonprofit’s work and beneficiaries. The type of images you include will depend on your nonprofit’s industry. For example, an animal shelter might feature before and after pictures of a stray dog that was rescued by the organization and nursed back to health. If you’re including images of people, remember to get their permission first.
Although you included financial data in a previous section, don’t be afraid to incorporate data when describing your key accomplishments, too! Data-driven impact stories show off just how powerful your nonprofit’s work is and inspire donors to take action.
4. Donor appreciation
While you should strive to keep every section of your annual report donor-centric, direct donor appreciation is one of the most important elements you can include. Be sure to show your gratitude to everyone who contributes to your organization, such as:
Volunteers: Your nonprofit needs more than just funding to fulfill its mission—the time and effort donated by volunteers have a significant impact on your nonprofit’s work. Emphasize this in your annual report to show that your volunteers are valued equally as much as those who give monetarily. Plus, Fundraising Letters’s volunteer appreciation guide notes that showing your gratitude fosters an environment in which they want to work, meaning that including volunteers in your annual report could be an effective way to keep them coming back.
Major donors: Your biggest contributors should get a special shoutout for the significant amount they donate, especially since major gifts typically make up 80% of a nonprofit’s revenue. Just be careful to include that gifts of all sizes are appreciated, and your nonprofit needs all the support it can get, no matter the size of the contribution.
Corporate partners: If your nonprofit receives support from corporate contributors, perhaps as a part of their participation in corporate social responsibility (CSR), mention them in your nonprofit’s annual report. This not only shows these corporations how much you appreciate their support but also adds credibility to the support your organization receives by naming well-known establishments.
Feel free to include brief, contextual information to answer questions like, “What is a 501(c)(3)?” and “Why does this organization need donations?” This helps readers understand the nature of your nonprofit, why donations are vital to your mission, and why you’re able to solicit them.
Ultimately, your nonprofit’s annual report should reflect your successes throughout the year (while drawing attention to the people who made those successes possible) and demonstrate the credibility of your leadership team. This way, supporters and prospective supporters alike can have a front-row seat to your nonprofit’s activities over the year and know that your organization is truly working to fulfill its mission.