Increase your Donor Base with an Annual Report
As we near the end of the first quarter each year, the non-profit leader’s momentum of
“doing” is interrupted by a heavy dose of “reporting.” Last month we talked about one
form of mandatory reporting – the IRS Form 990. This month, we cover an optional, but
no less important form of reporting, the Annual Report. While it may be tempting to skip
this yearly review, do not underestimate the importance of this report. Your Annual
Report is a direct reflection of you and your organization, so take a deep breath, get out
your calendar and set aside some time to make it happen. Whether you are planning to
create the very first Annual Report for your organization, or you just need a refresher,
this month we are doing a deep dive into this very valuable tool.
Before you begin
To really do this right, you have to begin by appreciating the value of the Annual Report.
Much more than just a review, the Annual Report is a tool that moves you forward. The
purpose of an Annual Report is generally three-fold.
1. Shows current donors that their donations have been well spent.
2. Makes the case for a continuing need for donations.
3. Serves as an introduction to attract new donors to the cause.
Before you begin, know your audience, which is, in a word, donors. While the Annual
Report is a great morale builder for staff and volunteers, and a courtesy to patrons, there
are more efficient ways to inform these groups. The main audience for the Annual
Report is generally going to be your donors. We like to divide the world into three types
of donors:
Foundations, which are private, corporate or government institutions that
grant funds based upon their well-defined mission and strict IRS guidelines.
Major Donors are those who give above a certain threshold, often between
$5,000-$10,000 depending on your overall budget. These are usually the
lifeblood of most non-government funded organizations.
Individual Donors are those who give small gifts on a regular basis through
direct mail, online gifts, gala tickets, auction items, etc.
Approaching your Annual Report with this audience in mind will generate the most
possible value out of your report.
Benefits of an Effective Annual Report
Besides just a reporting tool, the Annual Report has several other benefits. It can help
members of the organization stay on track with mission and goals and act as a template
and resource to refer to throughout the year. While showing current donors that their
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contributions have been well spent, at the same time you are raising awareness on your
very important mission. Other benefits include:
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Maintaining mission fidelity
Benchmarking yearly progress
Keeping a consistent story and message
Efficient donor reporting
Well produced marketing piece
An opportunity to expand your audience
Team-building experience
Finding the Time
While preparing an Annual Report can be time consuming, it doesn’t have to be. You
can hire an outside firm to do it, or consider making it a team building exercise.
Encourage members of your organization to give their input on organizational
accomplishments. If you hire an outside firm to do your report, it is always best if the
firm has some history with your organization. Whichever route you choose in producing
the report, do not choose the path of ignoring it altogether. A well-written and thorough
Annual Report demonstrates professionalism in your organization and makes a
statement that you care enough about your donors to keep them informed.
Structure
There is no exact science to how your Annual Report is structured. We encourage you
to be creative with the structure, but follow the basic outline used in most reports. Keep
in mind that the less you write, the more they’ll read. Whenever possible, use charts and
photos over long descriptions. Remember that there are different learning styles. There
are those readers who love words, those that prefer pictures, and those who like
numbers. Annual Reports should have all three.
Most Annual Reports follow this general outline:
Letter from the Executive Director and/or Board Chairman
Think of this as your Executive Summary, which is the first thing a reader will see
when they open your report, though it is often the last piece that you will write. When
the report is near complete, take an objective read through it and then summarize in
a way that reflects both the organizations accomplishments and its gratitude towards
those who helped make it all happen. Either the Executive Director or Board Chair
can author this letter, but we recommend choosing one or the other, or doing a joint
letter, rather than two separate letters.
Organizational Information
Include a section that provides a basic summary of what your organization does.
This section should be short and sweet:
• Mission
• Vision
• History
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Within these three fundamentals, it should be clear what your purpose is, who you
support, and how your purpose is achieved.
Programs & Accomplishments
Focus on this section, as it is the bread and butter of your Annual Report. The
Programs & Accomplishments section should describe (in words, photos and charts)
the activities of the organization and show donors exactly where their money is
going. This is your time to explain to your donors “what you do all day” – and more
importantly, how their money is spent, so be thorough. Here is a checklist of
highlights you may want to include:
People served (In 2009, we served meals to an average of 100 homeless
people every day. That’s 36,500 meals served)
Growth (Our enrollment grew by 15%)
Partnerships (We partnered up with Foot Locker and provided 25 youth
baseball teams with brand new shoes)
Support (Over 1500 new people signed up on our website and pledged to
abstain)
Buildings (We increased our international presence by building an HIV
Prevention Center in India)
Improvements (80% of young people who participated in our free tutoring
sessions increased their ACT score by 1 point or higher)
Expense Reduction (We decreased our overhead expenses by 5%)
Results should be tangible and measurable. Donors like things that can be
quantified. This is also a great place to add special stories and testimonials. Remind
them of your organization’s good work, the programs in place, and how these
programs relate to your mission. But, most importantly, talk about accomplishments
in direct relation to the generosity of donors.
Future Goals
Although the Annual Report is a recap of the past, we suggest including a brief
section describing the future goals of the organization. Donors like to see progress,
but they also like to see realistic short and long term goals. This will encourage
donors to continue giving. Also, while writing the Annual Report, this section can
lead to great team discussions at your board or staff meeting, in which you can
restate and refine your goals and objectives.
Financials
The financial section will vary, depending on the type of nonprofit organization.
Generally Annual Reports will show Revenues and Expenses and sometimes a
Balance Sheet. While some readers won’t spend much time to look at this section in
depth, your major donors will, so make sure this section is accurate and clear.
Graphs and charts are a nice way to highlight the strengths of your financials and
show where the money goes. The pie chart below gives an example of making
financials easy to understand, by breaking the expenses down by category and
offering a visual aid.
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In addition to a visual aid, sometimes
nonprofits include a paragraph or two
explaining what the financials mean.
Numbers without notes leave people free to
draw their own conclusion. It is always a
good idea to help people understand the
numbers through explanatory notes and
comparisons to industry benchmarks and
previous years’ performance.
List of donors
These lists can get lengthy (or at least you hope so!). This is a good opportunity to
be creative with columns, rows and overall structure of the pages. It is important to
list everyone involved in the organization such as affiliates partners, staff and
volunteers, as well as your donors. For key staff and board members, list their
credentials and community affiliations. Double and triple check these lists, to make
sure everyone is noted and spellings are correct.
When a donor prefers to remain anonymous, they will usually let you know that when
giving the gift. However, if there is any question about whether a particular donor
would want to be acknowledged in the Annual Report, always get their permission
before printing their name. This is true especially of major donors.
How You Can Help
Always include an invitation for people to get involved. Encourage readers to not
only donate, but also participate. Once they’ve read through the entire report, they
are sure to be excited about your organization, so let them know how they can help
be good stewards too. We recommend being clear and specific about what people
can do. Simply stating “Contact us to get involved” is not attractive enough. Invite
them into your family and explain the different levels of involvement.
Publishing the Annual Report:
In the past many organizations got around publishing an Annual Report by citing the
expense involved with printing and distributing hundreds or thousands of copies.
Nowadays, Annual Reports can be published on your website for virtually no cost
beyond your normal web maintenance fees. If you can afford to print our hard copies for
major donors, it is still very impressive to hold a fine printed piece, but plan to send the
bulk of them by email. The links below are good examples of nonprofit Annual Reports
online.
• Meta House http://www.metahouse.org/2008AnnualReport.pdf
• Volunteers of America http://www.voa.org/2008_Annual_Report_PDF
• Arthritis Foundation http://www.arthritis.org/2008-annual-report.php
Conclusion
A thorough and professional Annual Report will give your organization much more
credibility. This is an opportunity to inform the public that your organization
demonstrates good stewardship, strength, stability and longevity. Cathedral Consultants
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are able to assist with the entire process, making it easier and less time consuming. Do
not rush through this report or overlook the value of it. If your organization is looking to
establish a positive, long-lasting reputation, an Annual Report is a necessity.
Peter Giersch is a Managing Director and Melissa Mason a former Associate at Cathedral
Consulting Group LLC.
For more information, please visit Cathedral Consulting Group LLC online at
www.cathedralconsulting.com or contact us at info@cathedralconsulting.com.
March e-fundraising Tip
Monthly Newsletters are a great way to keep donors updated and encourage them to give throughout the
year. The old way of sending monthly newsletters involved the hassle and high costs of printing, binding,
folding, stuffing, addressing and sending. For many organizations, e-newsletters provide an easier and
cost-effective alternative.
Start by compiling a list of your readers e-mail addresses. Next, there are great programs such as Constant
Contact (www.constantcontact.com) which will walk you through the process step-by-step. These programs
often use best-practice procedures in distribution of your newsletter, including options for people to
unsubscribe and compliance with anti-span guidelines. E-Newsletters should provide an opportunity for the
reader to take action or participate. Drive readers and donors to your website through the newsletter, by
including direct links. The cost is low and benefit is high. Keep in mind that increasing your organization’s
online presence is a good idea, as long as the majority of supporters are online. What works for you and
your donors is most important.
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