Nonprofit organizations are not required to produce an annual report, but I believe your organization will benefit by having one.
When I mention an annual report, are you picturing a long, boring document filled with wordy text and statistics? It doesn’t have to be like that.
The key is to create an annual report that will engage your supporters and not bore them. Here are a few ways you can do that.
Tell a story
Share a success story about a person you have helped. Let’s say you run a tutoring program. Instead of rattling off a bunch of statistics about young people doing poorly in school, tell a story about Jason, a young man who was struggling academically, but started doing better in school after weekly tutoring sessions with Rob, a volunteer tutor.
Make it visual
Find some engaging photos to include in your annual report. Photos can tell a story in an instant. Choose photos of people participating in an activity, such as Jason and Rob in a tutoring session.
Use colorful charts or graphs to highlight your financials. Sprinkle in quotes and short testimonials to help break up the text.
Keep it short
Your supporters are busy people and are not going to have a lot of time to read your annual report, no matter how great is. The trend now is a four to six page document. If you are a small organization, producing a glossy 20-page annual report would not be a good use of your resources.
Keeping all this in mind, what should you include in your annual report?
Introduction
Start with a brief, friendly introduction by your Executive Director or Board Chair. Make sure it doesn’t contain jargon and it’s filled with gratitude towards your donors for their support in helping you reach your goals.
Accomplishments
The main purpose of an annual report is to highlight your accomplishments. These accomplishments need to focus on how you are making a difference for the people you serve. Examples would be kids receiving higher grades in school or low-income families finding affordable housing.
Be sure to list accomplishments, not activities, and show results.
Your financials.
Include your revenue and expenses, and break them down by department (program, administration, etc.). Keep it simple and use a pie chart or bar graph, so it’s easy to understand.
A donor list
You may want to just include donors at a certain level in your annual report and include a list of all your donors on your website. Whatever you decide, be sure to thank all your donors in this section.
Some final words about annual reports
You should also include a list of your staff and board, and your mailing address.
Here is a helpful resource created by Kivi Leroux Miller. It’s an annual report wiki that includes many great examples.
You don’t need to mail your annual report to all your supporters. You may want to mail only to your major donors. Put your annual report on your website, and let your supporters know it’s there. You could send out a special email announcement or include something about your annual report in your newsletter. Of course, you should make a hard copy available to anyone who wants one. You should also have hard copies available for potential funders and other interested parties.
If you choose not to produce an annual report, you should still have a list of accomplishments readily available. You often need these for grant proposals, anyway. I recommend keeping a running list, so you are not scrambling to put something together when it’s time to do your annual report or a grant proposal. This can also help you get your annual report out earlier in the New Year.
Remember your goal is to create an annual report that will capture your supporters’ attention right away and not bore them.
Ann Green's Nonprofit Blog 
An audit by an independent agency is the best procedure. It is sometimes cost-prohibitive, but can add value to the organization. Record keeping is an important function to a nonprofit organization.
what is a non profit organization
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