As a nonprofit professional, you care deeply about your mission and making a difference in the world. Consolidating a year’s worth of your nonprofit’s activities into a digestible and engaging document might feel like a less exciting task.
That’s what you’re faced with when creating a nonprofit annual report.
What is an annual report?
An annual report is a document that nonprofits compile and release every year. It’s designed to highlight the organization’s major accomplishments, inspire readers about the organization’s mission, build trust, and thank donors for their support.
That’s a tall order, so we understand why the task can seem daunting. As a nonprofit professional, you care deeply about your mission, about making a difference in the world. Consolidating a year’s worth of your nonprofit’s activities into a digestible, engaging, convincing document is probably less of a passion. But the nonprofit annual report presents a wonderful opportunity for your organization. Why?
Your organization’s annual report is a valuable fundraising tool. Ultimately, it can be used to cultivate new partnerships with major donors and sponsors as well as recognize those who have helped you reach your goals thus far.
A successful, captivating annual report can make the difference between reaching your goals for the upcoming year or falling short. With so much at stake, it’s important to take the creation of the annual report seriously—and seek guidance if you need it.
At DonorSearch, we’re no stranger to helping nonprofits reach their goals. We provide nonprofits with valuable data on donor prospects to maximize fundraising and financial capacity. We’ve had a hand in helping missions across the country realize their potential and be the best they can be.
So take a deep breath. You’re in good hands. We’re confident you’ll find all the information you need right here to create a stellar nonprofit annual report. We’ll cover:
- Why to create an annual report
- What to include in your annual report
- Choosing a format for your annual report
- Best Practices for writing an annual report
From in-depth brochures to interactive web pages, there are endless options for exactly how you approach your report. Regardless of the plan of attack you choose, with our help, you’ll end up with a report that inspires your audience to help you succeed. Let’s get started!
Why to Create an Annual Report
We know you’ve probably asked yourself this before: Are nonprofits required to create an annual report? The answer is no, but there are still many persuasive reasons to create one.
The annual document you are required to produce is called an Annual Filing.
Annual Reports vs. Annual Filings
An Annual Filing, also known as a Form 990 or an Annual Information Return, is an annual financial report that nonprofits with 501(c)(3) (tax-exempt) status must file with the IRS. This form is not optional; if an organization fails to file, it could be faced with penalties and eventually lose its tax-exempt status.
Annual Filings are essentially government accountability tools; they are designed to show the federal government and the public that the nonprofit is legitimate and is working honestly in pursuit of its mission.
Meanwhile, an annual report is an optional informational report that nonprofits produce to serve their own purposes.
Benefits of Annual Reports
The benefits of an annual report can vary depending on the needs of your organization. Regardless, it’s vital to first establish the broader purpose for your report. It’s not merely a fact sheet; if you treat it as such, it’s likely to be disorganized and overwhelming. Having a plan and an ultimate goal for the report helps focus the material around a common objective and keeps the report as effective as possible.
For most nonprofits, the ultimate goal—and the ultimate benefit—of the annual report is simple: to retain current supporters and attract new supporters. In order to accomplish this, the annual report must realize several smaller purposes, each of which is a huge benefit to the long-term health of the organization:
- Inspire the audience about your mission
- Show the effectiveness and impact of your organization
- Build trust through financial transparency
- Show appreciation for your current donors
Even though annual reports aren’t required, you can see why nonprofits create them anyway.
Benefits for Prospect Research
It’s commonplace for nonprofits to include their major donors and which project they contributed to somewhere in their annual reports. Did you know that this information can help feed charitable giving databases? DonorSearch, for example, culls hundreds of annual reports to collect the giving history of major donors.
Your organization can generate prospects using this major donor history.
For example, let’s say that your nonprofit helps feed hungry children. If a local hospital highlighted a major donor in their annual report who contributed to the hospital’s pediatric intensive care unit, your organization might want to target that person as a potential major donor. Prospect research professionals can find a wealth of ideal prospects for your nonprofit just by looking at the annual reports of similar organizations.
While your annual report is a tool that can be used to cultivate better relationships with existing donors and encourage others to support your cause, you can also use the information from other nonprofit reports to fuel your prospect research.
What to Include in Your Nonprofit Annual Report
If you look at several nonprofit annual reports, you’ll find that they contain some common elements. While it’s fine to get creative so your report stands out, you also need to make sure that some essential information is always present.
When you look at a well-executed annual report, you’ll find that the organization has included the following:
- A clear mission and focus. If you could boil down your organization’s values and purpose into a single sentence you would have your mission statement. Since supporters won’t be the only people reading your report, your mission statement needs to be at the very beginning. Readers should know about your organization’s mission and what change you hope to make before jumping into the data.
- Major achievements of the past year. From fundraising events to volunteer efforts to community programs, let readers know what your organization was able to accomplish in 12 short months. The majority of your report should focus on these projects, breaking down your achievements into powerful statistics your readers can easily understand.
- A financial statement. Let’s face it: supporters want to know how their money is being used. Being honest about your organization’s expenses helps to establish trust among your supporters. Plus, it shows potential donors that your nonprofit can manage funds responsibly and effectively.
- An account of major contributions. In addition to showcasing your organization’s success, your annual report is also about thanking those who helped you achieve your goals. Listing out and thanking your major contributors, influential staff, and board members is a necessary part of your report.
Nonprofit Annual Report Template
The image below is a representation of a possible layout for a page of your annual report or a shortened digital version to deliver via email. The use of graphics and images is an effective way to divide the space and produce a more visually appealing layout:
As you can see, this template includes all the essential elements of the nonprofit annual report, including:
- A mission statement
- Success statistics/results
- Financial information
- Major donors list
Choosing a Format for Your Nonprofit Annual Report
To begin with, you’ll almost certainly want to publicize your annual report on a dedicated page of your website, usually one reserved specifically for providing your annual reports and public filings over the years. How you further publicize it to your donors and stakeholders will depend on what you know about your audience.
Not all of your donors will need or want to receive your full annual report. Smaller one-time donors, for example, would likely appreciate a postcard or a brief email announcing the release of your report with information about where to access it. Meanwhile, your high-impact donors, partners, sponsors, and grant funders will want to read your full PDF or printed pamphlet. Being conscious of each supporter’s level of interest will allow you to meet them at their commitment level and provide the appropriate type of report for them.
Cost is another factor to consider when it comes to choosing how to format your report. If you like the space offered by a bound book format but want to avoid high printing fees, consider printing books for only your most significant donors and sticking to digital for the rest of your supporters. It’s totally up to you to decide what will fit your organization’s (and your donors’) needs.
In general, a combination of hard copy and digital annual report materials will reach the widest audience. Let’s discuss some of the most popular forms of each.
Hard Copy Reports
- Traditional bound book: These can range from a few to around 100 pages long and are great for containing a large amount of information in a substantial, tangible way. If you find yourself leaning toward this option for your annual report, just make sure to keep the content engaging–it’s not meant to be an essay!
- Self-mailer: These are convenient because they don’t require recipients to open an envelope—the document is the envelope. This ensures that more recipients actually read your annual report. Self-mailers have enough room for a combination of copy, images, and tables/charts/graphs.
- Postcard: If you’d like to maximize digestibility, postcards are a good choice. With well-designed infographics, pictures, and statistics, supporters can understand how your organization did last year without putting in very much effort. Because of space limitations, you’ll have to sacrifice some copy, so if you want to tell detailed stories or include a long list of donors, stick to a longer-form option. Here’s a really well-designed postcard annual report from Literacy Volunteers.
- Brochure: Still considered a quick read, brochures are a middle ground between a postcard and a book. Because the space in brochures is naturally divided by folds, design may come a little more easily than with a self-mailer.
- PDF: If you want the room that a book offers, but don’t want to print, PDFs are a good solution. You can make them as long or short as you like, plus you have the benefit of embedding other digital content like links, videos, and PowerPoint presentations. This one from the ASPCA is easy to read and engaging.
- Video: Video annual reports are effective because they show rather than tell the audience what you’ve been able to accomplish. Make sure your final video comes across as professional—pay close attention to everything from scripts to lighting and camera angles. The World Wildlife fund put together a great video annual report you’ll want to check out.
- Interactive report: Don’t shy away from dedicating a page on your website to an interactive annual report. Your audience could click through slides, expand graphs for more information, or hover over GIFs and videos to play them, making for a more tailored experience of your report.
If you take the approach of using multiple methods, consider who the audience is for each type. For less engaged supporters, condensed versions of your annual report are appropriate, while your institutional funders will be interested in a more comprehensive report.
Best Practices for Writing a Nonprofit Annual Report
1. Create a plan for your nonprofit annual report.
When your organization starts a new fundraising campaign, creating a strategy is the first step—and the same goes for your annual report. You’ll need the help of multiple departments to assemble all the information as well as compile and design the document.
First, every successful nonprofit annual report has a clear purpose and audience that your organization needs to determine.
It’s likely that your audience will be your supporters as well as prospective major donors, corporate sponsors, and foundations. At its core, your annual report should persuade your audience to support your cause, but you might have smaller objectives (i.e., highlighting a new project or attracting more local sponsors) specific to your nonprofit’s goals.
Now that you’ve established your audience and goals, you can schedule your plan of action. Your annual report strategy might include:
- Delegating responsibilities and timelines to team members.
- Interviewing supporters for their feedback.
- Compiling financial statements.
- Collecting key metrics from fundraising campaigns.
Depending on your organization’s fundraising campaigns and programs, you might not be able to cover everything you’ve accomplished. That’s why you should try to boil down all your activities to a few major achievements.
By centralizing your accomplishments around 3-5 core themes, you will help keep your annual report focused, leading supporters to your core objective.
When your nonprofit has a clear plan, not only will the process of creating your report run smoothly but the end result will also have more direction and purpose.
2. Focus your annual report on your donors’ accomplishments.
As we’ve mentioned before, your annual report is a chance to present all the good your nonprofit was able to accomplish. That being said, it’s easy for nonprofits to get stuck in the mindset of celebrating their accomplishments without focusing on their donors’ support.
Instead of centering your report on your achievements, make it about your donors. This goes beyond switching the language of your report to address your donors. A nonprofit annual report that puts donors first focuses on how projects and programs were realized because of your supporters’ donations and time.
For example, your annual report can focus on the many volunteers that donate their time to your organization, like in the image below:
In the volunteer section of this report, the hospital focuses on recording statements from volunteers and displays images of them helping patients.
Alternatively, when you talk about the various projects your organization has implemented, make sure to mention the campaign that funded the project. Let readers know that your supporters helped you reach (or even exceed) your fundraising goal and how their funds and support impacted your cause.
This should go for all the types of support that your community shows you. In addition to your volunteers and major donors, don’t forget to highlight the support that comes from smaller donors submitting matching gifts or volunteer grants, or in-kind donations.
By showing readers that your accomplishments were achieved because of supporters, donors and volunteers know that you’re aware of all they do. Not to mention, it shows potential donors that your nonprofit is built on the support of passionate people.
Therefore, your team should take every opportunity to direct attention to your supporters’ accomplishments.
3. Use visuals in your annual report to keep readers engaged.
When your team creates your nonprofit annual report, they will compile all your efforts and data from the past year and condense it into a single document. That’s a lot of information you want supporters and prospective donors to read!
With so much information to convey, using visuals is a great way to turn information into an image that readers can easily understand. Plus, the more visuals, the more engaged your readers will be.
Think about it: if you were asked to read a report full of paragraphs of text, you’re likely to skim the information or give up after reading the first page.
Once your team spends all their time and effort creating an annual report, you want people to read what you’ve put together.
Visuals have many benefits, such as:
- Breaking up blocks of text so the reader has a more enjoyable experience.
- Transforming complex data into easy-to-understand information.
- Conveying your cause in a way that puts your readers in the shoes of those you support.
After all, you’ve been tracking key fundraising metrics. It’s important that information is captured in a way that will interest the reader and show how you’ve progressed.
In the image above, the Inner City Hospital used charts to break down the source of funds they received and how those funds were used throughout the hospital’s various projects and departments.
If your organization is creating a report on the web, incorporating interactive elements that allow donors to click through information or watch videos can also keep donors engaged in your report.
For more inspiration on how to design an online annual report, check out DNL OmniMedia’s list of top nonprofit websites.
4. Be honest about your nonprofit’s progress.
While your nonprofit report is all about highlighting your success, it’s important to be honest about your organization’s progress. Sometimes your projects won’t go as planned—and that’s okay!
It might seem counter-intuitive to mention some of the challenges your organization faced over the course of the year, but being transparent is the best way to build your donors’ trust.
By briefly mentioning your missteps and how you plan to correct the issue in the future, you’ll show donors and prospects that you’re proactive in solving problems.
Use your annual report to address:
- Changes you’re going to make in the future based on the data you’ve compiled.
- How you plan to implement feedback from your supporters.
- The causes of your setbacks (if you know what they are).
Remember, you don’t have to go in-depth about your organization’s bumps in the road, but including them will paint a full picture of the previous year’s progress and show donors that despite your challenges, you were still able to accomplish so much.
5. Highlight major contributors in your nonprofit annual report.
As we mentioned in section two, focusing on your donors’ accomplishments allows you to show your appreciation in a genuine way. Part of showing your thanks is by highlighting donors that went above and beyond for your cause. These overachievers could be major donors, volunteers, or other supporters that helped your mission grow.
Traditionally, nonprofits will recognize major donors by listing out their names and the project they contributed to somewhere in their annual report. Although listing your major donors does highlight their support, it fails to tell their story in a way that captivates your readers. To show your appreciation in a more personal way, consider including stories about some of your major donors’ support, or ask them to share what your mission means to them.
Look at this example:
Not only does the example thank the major donors for their help, but it also tells the story of their support and how the funds went toward improving the pet-assisted therapy program at Inner City Hospital.
In contrast, your organization could highlight a volunteer through an interview, giving the supporter the opportunity to tell their story and reasons for supporting your cause.
There’s no better way to persuade prospective donors to get involved than letting them read about the experiences, motivations, and impact of other supporters in their own words.
Thank your supporters by featuring them in your nonprofit annual report and giving them the chance to speak about why they’re passionate about your organization. Getting a chance to share their thoughts can help cultivate deeper connections with your existing supporters and build new relationships with prospective donors.
6. Inspire supporters to take action.
Remember that your annual report has clear goals, and one of your objectives is likely to get people to contribute to this year’s fundraising campaigns. Make sure that your annual report leads readers to this goal.
What’s more, you’ve done a great job of conveying your mission and inspiring readers. After reading your report many readers might be wondering, “What’s next?”
Dedicate space in your annual report to let readers know how they can support your cause. Ask them for donations by linking to your online donation form (if your report is online) or directing donors to your nonprofit’s website (if your report is in print).
Additionally, direct readers to other ways they can get involved, including:
- Volunteer opportunities
- Corporate matching gift programs
- Upcoming fundraising events
- Online fundraising campaigns
The more opportunities you provide, the more likely they’ll find a way to contribute that fits their interests.
Finally, don’t forget to mention other places where readers can learn more. Include your website URL, phone number, address, and social media handles so potential donors can continue to learn more about your nonprofit.
An annual report is an effective way to close out the year by highlighting your achievements and thanking those who have helped you along the way. With our tips, you can create an effective annual report that donors look forward to every year.
And don’t forget, the annual reports of other nonprofits also offer value. The information within those reports can offer deeper insights into your prospects.
Want more information on annual reporting and prospect research? Check out even more helpful resources:
- DonorSearch’s Annual Report Philanthropy Database. Our database is the largest in the industry with over 140 million records. We update our database weekly with over 500,000 records. If your nonprofit would like to be added to our library, contact us for more information.
- 24 Actionable Annual Fund Strategies (That Donors Love). A great annual fund report starts with an effective fundraising strategy. Our comprehensive guide details ways organizations can grow their annual fund and get more donors to contribute.
- DonorSearch’s Charitable Giving Database. Want to learn more about the largest searchable giving database? Our guide explains how we obtain our data and why annual reports play a huge part in learning more about prospective donors.
- 11 Mind-Blowing Major Donor Fundraising Strategies. Annual reports can be a great stepping stone when engaging with major donors. Learn about other ways you can encourage these contributors to donate to your organization.