A nonprofit organization is a legal entity typically focused on addressing societal issues and serving the community. These organizations often rely on the support of donors, volunteers, and stakeholders to fulfill their missions.
One crucial tool in maintaining transparency, accountability, and trust with donors is the nonprofit annual report. So, how do you prepare this report, and how does board meeting software help power effective nonprofits?
What is an Annual Report?
An annual report is a comprehensive document produced by nonprofit organizations at the end of each fiscal year to summarize their financial and programmatic activities. The report provides a window into the organization’s achievements, challenges, and financial health, offering a snapshot of its impact on the community and the prudent use of resources. Creating an annual report is often stipulated in the nonprofit’s articles of incorporation, so make sure you know the difference between articles of incorporation vs. articles of organization.
Failing to prepare and file an annual report can have severe consequences for nonprofits. Just like with a limited liability company, legal and regulatory requirements mandate that nonprofits submit an annual report.
Noncompliance can result in penalties, loss of tax-exempt status, and even legal issues. Furthermore, without a compelling annual report, nonprofits may miss out on potential donors and supporters, impacting their ability to fulfill their mission.
How to Prepare a Nonprofit Annual Report
Creating a nonprofit annual report is a multifaceted process that involves several essential steps. To prepare a comprehensive nonprofit annual report, follow these key steps.
1. Set Objectives and Goals
The first step in preparing your annual report is defining your objectives and goals. What is the purpose of your report? Are you primarily looking to inform your donors, showcase your impact, or attract new supporters?
- Identify your target audience: Understanding who your audience is will help tailor the content and design of your annual report. Are you addressing donors, members, grantors, or the general public?
- Outline key messages: Determine the key messages you want to convey. These should align with your nonprofit’s mission, accomplishments, and future plans.
- Set specific goals: Define clear, measurable goals for your annual report. For instance, you may aim to increase donor engagement, improve transparency, or secure new partnerships.
These objectives will serve as a guiding compass throughout the report creation process.
2. Gather Information
Once your objectives and goals are clear, the next step is to gather the necessary information for your nonprofit annual report. This stage involves collecting financial data, impact stories, and other relevant content.
Work with your registered agent and finance team to compile financial statements, including the income statement, balance sheet, and cash flow statement. Ensure that the financial data is accurate, precise, and presented in a reader-friendly format.
Collect success stories, testimonials, and real-life examples that demonstrate the positive effects of your nonprofit’s work. These stories should align with your key messages and help connect the readers emotionally.
Gather photographs, charts, and graphs illustrating your organization’s activities and achievements. Include an organizational overview, including your mission, vision, history, and governance structure. This helps provide context to readers who are less familiar with your nonprofit.
3. Design and Create Content
The design and content of your nonprofit annual report play a critical role in engaging your audience and making a lasting impression. Pay attention to the following elements:
- Visual identity: Ensure your report follows your organization’s branding guidelines, including logos, colors, and fonts. Consistency in visual identity is key.
- Layout and format: Choose a clean and reader-friendly layout. Use headings, subheadings, and bullet points to break up text and make it more digestible. Incorporate white space for an uncluttered look.
- Storytelling: Craft compelling narratives that convey your nonprofit’s impact. Use storytelling techniques to make the report more relatable and emotionally resonant.
- Visual assets: Integrate images, infographics, and data visualizations to make the report visually appealing and to reinforce key messages.
Remember to write clearly and concisely. Avoid jargon and acronyms that may confuse readers. Also, use language that is accessible to a broad audience.
4. Review and Approve
Before finalizing your annual report, undergo a thorough review and approval process to ensure accuracy and alignment with your organization’s goals. Start with an internal review involving key staff and board members, who can offer valuable insights into the report’s content and structure.
Pay attention to compliance by ensuring that your annual report meets any legal requirements set by your state’s Secretary of State or relevant authorities. The document should also align with your operating agreement. Consult legal counsel to ensure the report complies with legal requirements or regulations.
Finally, present the draft report to your board of directors for approval, as their input can be instrumental in ensuring that the report effectively communicates your nonprofit’s achievements and financial position.
5. Prepare and Distribute
Once your nonprofit annual report is approved and finalized, it’s time to prepare and distribute it to your stakeholders. For printed versions, collaborate with a professional printer to produce high-quality copies. For digital versions, create PDFs optimized for online viewing and downloading.
Distribute your annual report through multiple channels, including your nonprofit’s website, email newsletters, social media platforms, and mailing lists. Consider making printed copies available at key events or for mailing to major donors.
To maximize the report’s impact, promote it actively through various outreach methods, such as social media posts and email campaigns, and encourage your supporters to share the report within their networks.
Annual Report Examples
Reviewing examples from other organizations can help you better understand nonprofit annual reports. Here are a few nonprofits that have produced effective annual reports.
Focus on the Family
Focus on the Family is a nonprofit dedicated to supporting and strengthening families worldwide. Their annual report typically includes clear, concise messaging about their mission and impact, engaging visuals showcasing families and children benefiting from their programs, highlights of successful initiatives and programs, and a detailed financial summary demonstrating transparency.
Navy SEAL Foundation
The Navy SEAL Foundation provides support to U.S. Navy SEALs and their families. Their annual report features compelling stories of SEALs and their families facing challenges and how the foundation has helped.
They also provide a breakdown of financials, emphasizing the allocation of funds to various programs, testimonials from SEALs and their families expressing gratitude for the foundation’s assistance, and recognition of donors and supporters.
OnBoard Powers Effective Nonprofits
Preparing a nonprofit annual report maintains transparency, accountability, and stakeholder trust. By following the steps above, you can create an effective annual report that meets legal requirements and engages and inspires your supporters.
OnBoard’s board meeting management software enhances your organization’s effectiveness to streamline important work such as creating your nonprofit annual report. Board portal features simplify collaboration, ensure security and compliance, offer accessibility, and enhance engagement.
Download OnBoard’s free board meeting minutes template to streamline your nonprofit board meetings today.
About The Author
- Gina Guy is an implementation consultant who specializes in working with nonprofit organizations get the most from their board meetings. She loves helping customers ease their workloads through their use of OnBoard. A Purdue University graduate, Gina enjoys refinishing furniture, running, kayaking, and traveling in her spare time. She lives in Monticello, Indiana, with her husband.
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