Operating a nonprofit involves much more than running programs. Behind the scenes, your team may also invest in new tech or hire essential staff to further your mission-centric efforts. However, supporters don’t see this side of your operations—unless you show them.
Your annual report highlights your organization’s accomplishments and challenges over the past year, offering a glimpse into how it uses supporters’ contributions. A well-structured report acknowledges your supporters, transparently communicates your nonprofit’s financial circumstances, and ultimately builds trust with your community.
This article discusses the five key elements that every nonprofit annual report should include.
1. Background Information
Most annual reports start with brief messages from a nonprofit’s chief executive, board chair, or both. These statements can reinforce major organizational themes and strategic direction, and they attribute the report as coming from and being endorsed by the real people responsible for its performance.
Additionally, your report should highlight your nonprofit’s mission statement as a foundational element of its efforts. Your mission statement serves as a guiding principle for your organization’s work, directing its programs, leadership decision-making, and accomplishments. Starting your annual report in this way supports the connection between your purpose and the outcomes you deliver.
For example, let’s say your nonprofit’s mission statement reads, “Our mission is to empower underserved communities by providing access to high-quality educational resources and opportunities.” This statement sets the stage for supporters to review all revenue and expenses in this light.
This beginning section should also mention your nonprofit’s current strategic goals and progress in its strategic plan. This gives readers the full context for your nonprofit’s goals and efforts to achieve them.
2. Impact Stories
After recapping your mission statement, your annual report should showcase the ways you’ve furthered your mission over the past year. The most powerful way to illustrate your impact is through real-life stories, such as:
- Testimonials from beneficiaries
- Quotes from donors or volunteers
- Stories of community-wide transformations
According to UpMetrics, storytelling makes your message memorable, especially when you incorporate high-quality visuals. By accompanying storytelling with compelling images, your nonprofit can capture readers’ attention and ensure your message sticks with them long after they finish reading.
To see an example of this in action, consider how CURE International uses compelling images to tell Natnael’s story in its annual report:
3. Major Accomplishments
While impact stories are powerful ways to illustrate your nonprofit’s work, they need to be accompanied by transparent facts about how you achieved your goals. Following these stories and images, list your nonprofit’s key achievements from the past year using specific metrics to demonstrate success. This could include:
- Number of people you served: How many people benefited from your nonprofit’s work?
- Number of programs you launched: How many new initiatives did you start recently?
- Amount of volunteer hours contributed: How much time did volunteers spend serving with your nonprofit this year?
- A list of community partnerships you formed with other organizations: How many collaborations did your nonprofit establish to help further its mission?Â
- Operational accomplishments: How did your nonprofit work to improve its operations? For example, you may have enhanced your hiring processes to expand your team with qualified individuals. Or, perhaps you upgraded technology in every department of the entire organization. Operational enhancements should be designed to create efficiencies or uplevel services so that you’re doing more of what matters and less of what provides little value.
- Mission-specific data: What successes are tied directly to your mission? A nonprofit addressing food insecurity, for instance, might list the number of families fed.
Additionally, mention any awards or recognitions your organization received throughout the year. Doing so helps emphasize your credibility, boost your organization’s reputation, and instill trust in your constituents.
4. Financial Data
As your nonprofit’s financial supporters, donors likely want to know exactly where their money goes after they’ve made a gift. After all, they’re the connection between your vision and its achievements—you wouldn’t be able to complete your mission-critical work without them.
Include a breakdown of key financial data, including:
- Revenue: List your total revenue, then break that number down according to your various funding sources (e.g., individual donations, corporate sponsorships, government grants, and non-cash donations).
- Expenses: Outline your nonprofit’s total expenses for the year, including a clear distinction between operational costs and program costs. That allows donors and granters to determine how much of every dollar donated supports program versus administrative costs.
- Year-over-year comparison: Compare this year’s key financial figures to numbers from the previous year. For example, how much did you raise this year compared to last year?
Use simple visuals, like pie charts or infographics, to present financial information clearly. However, keep in mind that some supporters may want a higher level of detail when reviewing finances. While your annual report should summarize financial data in an easily digestible format, you should also attach financial statements as appendices for readers who want to learn more.
As the Chazin firm’s guide to financial statements explains, most nonprofit professionals aren’t well-versed in nonprofit accounting practices. Consider working with an experienced, knowledgeable, outsourced accounting firm to ensure your financial reporting follows appropriate requirements and is consistent with stakeholders’ needs. This way, you can attach financial statements to your annual report with confidence, knowing they provide a clear and accurate picture of your nonprofit’s financial activities.
5. Supporter Recognition
View your nonprofit’s annual report as a funnel. It opens with a broad reminder of your organization’s mission and gradually narrows into a specific breakdown of how you achieved your goals in the past year. As you bring the report to a close, get even more granular by tying your accomplishments to the specific individuals who contributed.
Extend your gratitude to:
- Donors: Offer a general appreciation message to all donors and specifically mention those who gave the most significant gifts. For example, summarize the importance of every dollar donated to your mission, then list the names of major donors who gave your mission an extra push.
- Volunteers: In a general message for volunteers, thank those who contributed their time, skills, and leadership. While your organization likely has too many volunteers to mention every one of them by name, you might want to spotlight one or two longtime, dedicated volunteers.
- Corporate sponsors: Acknowledge corporate sponsors and the specific events, programs, or initiatives they helped fund. Clearly lay out how their involvement has contributed to your nonprofit’s success.
- Staff members: Highlight team members, both in-house and outsourced, who made your mission possible. For example, perhaps you’ll thank your outsourced nonprofit CFO for their understanding and support of your nonprofit’s mission. Or, you could call out grant proposal writers who secured significant funding for your work.
To make this section especially personal, include a thank-you message from your nonprofit’s leadership. Ask your executive director or board chair to write a heartfelt thank-you message, and include their picture and signature to humanize your appreciation.
Keep in mind that your organization should create a separate report if conducting a public fundraising campaign. This report should financially and narratively share the campaign’s progress and impact, even before its conclusion.Â
While your annual report should not be another request for donations, it should end on a hopeful note that sets the stage for future engagement. Hint at upcoming initiatives or goals and encourage readers to stay in the loop by following your nonprofit on social media or signing up for your newsletter.
