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Nonprofit annual reports: 7 frequently asked questions

December 03, 2021
A team of five people gathers in front of a monitor to prepare a nonprofit annual report.

Nonprofit organizations aren’t required by law to publish annual reports, but most nonprofit leaders recognize the value they provide. A well-written nonprofit annual report helps you demonstrate your accomplishments to current and future donors, cultivate new partnerships, and recognize important supporters. 

Not sure how to get started creating your annual report? We’ll answer seven of the most frequently asked questions about annual reports so you can build a solid foundation before you begin creating your own.

1. What is a nonprofit annual report?

An annual report is a physical or virtual document that nonprofit organizations create to provide donors with an account of their activities and spending for the year. 

These reports are not official tax documents. Rather, nonprofit annual reports are donor-centered information packets designed to showcase a nonprofit’s accomplishments and thank readers for their continued support.

2. Do nonprofits really need annual reports?

Yes, nonprofits need annual reports. While you don’t necessarily need a beautiful, full-color 40-page production, some sort of accounting of your organization’s work over the past year can go a long way towards maintaining positive relationships with donors. 

Even if you only create a two-page flyer, you should get in the habit of producing an annual report to maintain transparency with your existing donors and potential new donors.

3. What should be included in a nonprofit annual report?

Annual reports are highly customizable to support various nonprofits’ needs. As a baseline, however, most nonprofits prioritize including:

  • Financial reports 
  • Major achievements
  • Lists recognizing donors, board members, volunteers, and staff
  • Information about your organization’s purpose

Organize your annual report in any way that makes sense for your organization and include additional information that benefits your supporters. Just remember to thank supporters at the end of the document for making your year successful.

4. What’s the most important part of an annual report for nonprofits?

The most important part of a nonprofit annual report is the description of your accomplishments. Your supporters want to know what you did, but more importantly, they want to know why you did it. 

For each initiative, fundraising campaign, or project highlighted in your annual report, address these questions:

  • How did the project further your purpose?
  • What were the results? 
  • Did you meet or exceed your goals?
  • Who contributed to make your efforts a success?
  • Why did you spend your time and funding the way you did? 
  • What tangible impact did your project or campaign make? 

Not all readers will automatically understand how your activities help you achieve your purpose. Include specific data to clearly demonstrate your impact. 

5. How should nonprofits discuss financial information in an annual report?

Include a financial section in your nonprofit annual report that clearly explains where your organization’s revenue came from and how you spent your funds. 

To make your financial information more accessible for readers, try:

  • Including visuals. Pie charts, bar graphs, and other visuals can help readers quickly see the big picture and understand trends in your data. Plus, visuals make your annual report more dynamic and engaging for readers.
  • Using straightforward language. Short narrative descriptions are essential for helping donors understand how you used their donations and why. Explain the meaning behind every number in plain, direct language that your supporters can read easily. Avoid complex accounting terms and industry jargon.

Remember, your annual reports are written for your donors, aiming to build trust and promote transparency. Tailor your writing, formatting, and visuals so they can quickly comprehend your important information. 

6. How should nonprofit annual reports present donor lists?

Organize your annual report’s list of donors in a way that makes the most sense for your nonprofit organization. Most nonprofits organize donors by contribution level and then alphabetize each of those lists. You can also alphabetize the full list without regard to donation level.

Make sure to check with your donors ahead of time to verify that they want their name to be listed in your annual report. Some donors may wish to remain anonymous. 

7. Where can I find nonprofit annual report examples?

If you aren’t sure how your annual report should look, spend some time browsing other annual reports to discover what works well. Start with the best nonprofit annual report samples, then research to see how other organizations in your field or geographic area design their reports.  

Sharing your nonprofit annual report

Once you craft a thoughtful, well-designed annual report, share it with your entire community of supporters. In addition to sending the report directly to donors, publish it on your website and post it across marketing channels. Your annual report is a celebration of success, so distribute it far and wide.

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