In this post, I’ll look at some things UK funders of Non Profit Organisations, charities or NGOs in the UK in particular look for in your annual report and how to write a report that is useful in fundraising.
I should preface this by saying that as a trustee and volunteer for several small local charities over many years in different roles, trustee, senior staff and a public fundraiser, plus with a background in accounting, I’ve read many an annual report. Some of them have been crackers and I wish I had thought of them, some tell a great story about their organisation and have almost certainly been effective in attracting support and funding and some are as dry as dishwater and I wouldn’t be surprised if they have actually turned off potential funders.
I think a lot of charities and voluntary organisations misunderstand the role of their annual report. They see it as a statutory obligation produced each year for the Charity Commission, a sop to bureaucracy as part of the regulator’s hobby horse. But I think it is probably your most important tool in fundraising. It is the formal statement of your organisation and it is one of the first things that a potential funder or collaborator is going to look at.
In fact, if you have been at all in funding meetings with trustees and grant officers of the various charities that fund or support your work, you will have seen them with your annual report spread across the table, and it is the first thing they will want to talk about. They will not just be looking for the bare bones of what is a legal requirement from the Charity Commission. They will be wanting to know more about your organisation and your impact, your plans and your ambitions.
On a similar note, I don’t want to underplay the importance of legal requirements. I am not for one moment suggesting you should get cavalier about meeting the legal requirements for annual reports in the UK. The requirements in the latest guidance from the Charity Commission aren’t suggestions, they are legally required elements of your annual report that, unless you qualify for some specific exemption, must be present in your annual report. You must have the trustees’ report, the financial statements, all of the statutory information that the regulators expect to see and have it in an annual report format that is accessible to those who want to read it.
I did some work with a small mental health charity in south London a few years back. The first draft of their annual report was the bare minimum in terms of content and presented in much the same way as a standard company’s annual accounts would be presented. It was factual, unemotional, dry and had a desperately small number of words and sentences that were not in one of the financial statements or the trustees report. It did, however, have some cracking stories of people using the service and their achievements and changes in their life in it, some excellent work going on and some excellent people at the heart of the organisation. But they were embedded in financial pages and this diluted their impact. Once we took all of the statutory stuff and presented it in a more accessible way, with the outcomes of what the charity did up front in an engaging and readable way but with all of the information required present, they saw a marked increase in successful funding applications.
The simple fact of the matter is, there are far more charities, social enterprises and voluntary organisations seeking funding than there are grants and philanthropists able and willing to fund them.
So your annual report needs to stand out from the crowd, needs to be not just compliant but accessible and informative and needs to make the reader care about your organisation and your work.
Show the effective impact your organisation has
The impact of your work is absolutely key for funders. Your annual report is the first, and probably the last, time they will want to know about the real changes your organisation is making and they are not going to be impressed by a vague, unsubstantiated assertion that ‘lots of people use our service and it makes their lives better.’
Look, I know impact measurement is hard. Particularly if you are a small charity working on complex issues in the real world. But don’t be afraid to use your annual report to talk about it and demonstrate how you are measuring and, more importantly, improving your impact.
Start with your outcomes, not your outputs. Outputs are fine, of course they are, but they are a pretty blunt instrument when it comes to demonstrating the real value and success of your work. Saying that you served 500 meals to rough sleepers or provided 200 hours of training is all well and good, but what do you want a funder to know about those things? That you provided the meals, of course, but did they help to keep those rough sleepers in stable accommodation? Did the training result in people gaining jobs? Did your work reduce hospital admissions or school exclusions or improve family relationships.
I worked with a Birmingham youth charity that were initially reporting their impact in very basic terms. Great they were working with young people, but no one needed to be convinced of that, in fact, by some of the slightly patronising and clearly qualitative, not evidence-based outcomes they were presenting, it could actually leave a reader thinking it was a nice idea, but it did not sound that effective. When we went back to the data to look for better outcomes, we found that over 78% of their service users went on to employment or further education within six months of the intervention. That was a proper headline statistic for their impact that had been lost in the swamp of their outputs data.
Case studies are a great way of demonstrating your outcomes and impact, but please for god’s sake make them good. As I said earlier, I have seen far too many that read like ‘Sarah was struggling. We helped Sarah. Sarah is now better.’ Don’t be like that case study. Be more like: ‘Sarah first came to us having been out of work for eighteen months following a mental health crisis. Our twelve-week programme that combined cognitive behavioural therapy techniques with practical job-search support helped Sarah not only to find a new job, but also to develop resilience skills that have enabled her to maintain her wellbeing at work. Sarah has now been at her new job for six months and has just been promoted and is also volunteering as a peer mentor for other participants in our service.’
Trust me, the second example says so much more than the first and a funder can read your expertise, your evidence-based practice, your understanding of the problem and the clear and measurable outcomes you are having in there, but also that you are focused on longer-term impact and building in sustainability to your work.
Don’t be afraid to talk about failures and challenges. As I’ve said already, funders are not stupid. They know your work is not easy. They know not everyone who uses your service will have a great outcome. They know you may make mistakes, but what they do want to see is that you know it is hard, that you take it seriously, that you are learning and developing and that you are doing something about it. So if you have a case study that is not a success story, tell it. If you have lessons from your annual review or internal reflection of what is not working or could be improved, put it in your annual report. Funders will be impressed by that kind of self-awareness and commitment to doing things better.
Be transparent with your financials
Right, it’s time for me to sound like a bloody accountant. I know, it’s coming. Financial information in annual reports is one of those areas where I think many trustees and executive staff of small and medium charities become disingenuous. It is part of the job, but for some reason that means it is not as important as other work. That is a mistake.
Look, I get it. Financial statements, balance sheets, they can be hard. They can be a bit intimidating. Many of us who work in charities are not accountants and dealing with cash, VAT, accruals and everything else can feel impenetrable at times. But financial transparency is a key plank of your trust with funders. If your trustee and executive team are not comfortable and confident talking about and being open about the finances of your organisation, then I would strongly suggest you are looking at that carefully.
First of all, your statutory accounts are not, or should not be, the full story on your finances. Yes, they are the complete and true picture of your organisation’s financial position, but they are just the start of what you should be talking about with funders. I have seen way too many annual reports where the financial information is consigned to a page or two of dense tables at the back and most people will struggle to actually make sense of it.
Funders don’t just want to know it is all there and compliant. They want to understand it. Start with a narrative. A paragraph or two at the start of the report that explains, in very simple, accessible terms, your financial position and what it means. What was your income compared to last year? What are the main sources of funding? How did you spend the money? What were the big pots of spending across the year? How much do you have in reserves and why are they at the level they are?
Pie charts! A nice big pie chart at the front of your report that shows, again in simple, accessible terms, how you spend your money. Break it out into meaningful buckets – direct charitable work, fundraising, governance and admin – whatever is relevant for your work. And don’t try and hide your overheads either. Every funder I have ever worked with knows that for an effective charity overheads are a necessary evil and there are lots of charitable, social and voluntary organisations that are inefficient in how they use their money. If you are spending on a board of trustees, skilled staff and robust systems, then that is not a cost, that is an investment and a funder will expect you to have it and want to know what you are doing to use it wisely.
Especially be clear about your restricted and unrestricted funds. A lot of small charities have significant issues with this and need to get their heads around it in order to be clear with funders and their own stakeholders about why it matters. The difference between restricted and unrestricted is crucial to funding and some charities, particularly smaller local charities have large amounts of restricted money and a paucity of unrestricted. Be transparent about it and where you can be clear why it is the case and what you are doing to shift that.
Cost per beneficiary
Cost per beneficiary is another thing some funders look at and it can be helpful, but you need to be clear with this. It is not always a great metric, particularly if you are working with particularly vulnerable groups or providing a high-intensity service. If you know that the cost per head for your organisation is relatively high, be ready to explain why. What does it include? What are the support and services you provide? Long-term it may not actually be as much of a bad thing to have a higher cost per beneficiary if you can show that means that a particular service is more intensive and more effective.
I did some work with a homelessness charity who were a bit ashamed of their relatively high cost per head for their housing service. But when we unpicked what that cost was and included things like intensive support, mental health and addiction services and longer-term follow up it became clear that, although more expensive in the short term, it was saving money by not having people ending up in crisis much more often. Explaining that to a funder made it a much more effective piece of information.
Include discussion of any financial risks or uncertainties in your annual report. Particularly anything that will have changed since the last year or where you have a particular concern. If you have a lot of funding coming from a single source, say so. If that is a risk to your longer-term stability, acknowledge it and talk about how you are diversifying your income. If you have a particular challenge this year, whether that is economic or a consequence of government policy, be transparent about it and what you are doing to deal with it.
Show Gratitude
Okay, duh, right? Well, believe it or not, it’s a massive pet peeve of mine to receive an annual report that makes no mention whatsoever of supporters and funders. This is your chance to show your funders that you appreciate the relationships you’ve built with them and that you’re good stewards of the trust and resources they have given you.
Of course, appreciation is more than simply thanking your funders (though you should do that; and yes, I know some funders do request that you do not name them, so you can’t always do that).
You can also show funders that you see them as partners and that you want to continue working with them for many years to come.
One of the best ways to do this is to provide examples of the difference particular sources of support have made to your work.
Perhaps core funding from your major funder enabled you to take on a new member of staff, which in turn has tripled your capacity. Or perhaps a corporate partner has provided not just funding but also a great example of skills-based volunteering. Or you might have had a particular campaign or response to an urgent need that has been made possible by donations from individuals.
Don’t forget volunteers. It’s great to hear that you have had support from volunteers (make sure you include their numbers, too). But why not also talk about how your work benefits from volunteers and what you do to make sure you have skilled and supported volunteers?
A literacy charity I worked with in the past included a very short paragraph about their volunteers in their annual report. They were all office-based and very low skilled, and so it was seen as the bare minimum. However, when we calculated that the volunteers provided the equivalent of three full-time staff and also provided specialised expertise that would have cost the charity tens of thousands of pounds per year to buy in, it became clear that this was an area of real organisational strength that should have had a much more prominent place in the annual report.
Quotes from funders, volunteers and beneficiaries are also a nice touch. In an era of fake news and manufactured politicians, real people with real voices and real opinions are a good thing. A supporter who has given over many years telling you why they keep giving to you is a great way to demonstrate your track record and relationships.
Look to the Future
This is the bit where you get to get back on your soapbox and share your big ideas. Remember, funders are not just interested in what you’ve done, they want to know what you are going to do with their support in the future.
The future is of course not set in stone, and you need to be realistic about what you can achieve and how. In my experience, annual reports either get this bit completely wrong by either not having a vision at all or promising to save the world.
Look at your strategic priorities. What are you looking to achieve over the next year or two? What are your plans for growing or expanding your service offer, and what specific targets do you have to help you know whether you are successful? What challenges are you planning to tackle?
Be realistic, but also be bold. This is the place in the annual report where you want to get funders excited and get them ready to apply the orange stick to you next time!
If you are looking to grow your offer, be clear about the need for that growth, the impact it will have and how you will manage the quality of what you provide. If you are building new partnerships, tell the reader why and what they can help you to achieve that you couldn’t do alone. Are you looking to improve your organisational development—for example, new systems, training or governance improvements? Tell the reader how you will be more effective as a result.
If relevant, you should also consider the wider context. This could be wider government policy, the local or national economy or more specialist factors like the demographics of your beneficiaries. This can help funders see how you are aware of, and adapting to, the bigger picture around you and can also help you position your organisation for opportunities that are on the horizon.
An environmental charity I worked with was initially very reluctant to share their plans to scale up their work because they were worried that it would look unrealistic and they might be rejected when they asked for funding.
When we looked at the scale of the environmental problems facing their region, their well-established track record of effective intervention and the quite frankly absurdly low scale of the funding they were currently operating at, it became clear that scaling up was not a pipe dream, it was essential. Reframing the narrative in that way was key in helping the charity to secure major multi-year funding from a large foundation.
Equally, I always encourage my clients to be honest about the challenges they face. Do you struggle to find staff with the right skills? Can you reach certain communities? Is long-term sustainability of a particular programme an issue? It’s fine to name challenges and even to admit things aren’t going well in certain areas. Funders want you to be honest and proactive in the face of problems rather than hoping they go away or waiting for someone to throw money at you to solve them.
You might also want to talk about organisational development plans. Are you looking to improve your governance? Digital capability? Fundraising capacity? Again, it’s easy to see these things as separate from your charitable mission, but in the long term, they are vital to your organisational effectiveness and sustainability.
Tell a Story
I’ve been banging on a bit in this article about what your annual report needs to do, but in the end, it’s a story that you’re telling. It’s the story of your organisation and its impact.
The really great annual reports tell a story that weaves between hard data and human stories, facts and feelings. It’s not an easy thing to do, but when you see it done well, you will know it.
The reports I know work well often start with the impact, provide the whammy that makes the reader keep reading, then move on to cover the operational detail. Don’t forget to acknowledge those that have supported you along the way, and finish by giving the reader a picture of the exciting future that funders can be part of.
There’s still a lot of scope within that, of course. Your report should reflect who you are as an organisation. If you’re a grassroots community organisation, then your authenticity should shine through. If you’re a long-established and more formal charity, then of course professionalism is a must, but that doesn’t mean your report can’t still be engaging.
Also, please don’t forget the importance of the visual design of your report. Don’t make the reader have to work hard to find what they are looking for, and if you have great photos and charts and can include those, even better. Just remember that it’s all there to support the substance, not the other way around.
How a Non Profit CRM Can Help Your Annual Report
Ok, I know what you’re thinking. More tech to make you feel like you’re spinning plates while trying to achieve the impossible. I get it, but hear me out. I’ve seen charities put their annual reports together using spreadsheets on different computers (if they’re lucky), excel files emailed around half a dozen inboxes, and the two trustees who insist on everything coming out of a filing cabinet and into Word documents (who am I kidding, some of you have three filing cabinets and insist on printing everything).
The difference between those and organisations that have put proper systems in place (whether inbuilt or a bespoke solution) is astonishing. I’ve worked with charities that have taken weeks of soul searching and lost weekends to pull data together for their annual report, only to realise they’ve been missing half the information needed two days before they go to print. And on the flipside, I’ve sat on the other side of the desk from funders who have asked for outcome data or funder reports within seconds of an email going through, courtesy of a really well-set-up charity CRM.
Your CRM system should be your one and only go-to for all those stories and information that make your annual report worth reading (or asking for further information about). When you used to search your old emails to try and find that client or beneficiary who wrote the best case study, you now have it all beautifully stored in your beneficiary management module – from the initial referral and assessment, to intervention records, to outcomes measures, to follow up and successional data. So, when the funder that was looking at your annual report data at the last AGM calls to ask you how your success rate or long term impact is looking, you don’t have to wrack your brains or search through paper files or actually know which member of staff was working with which client.
Those donor stewardship bits are especially powerful for that ‘thanks for your support’ list I mentioned earlier. Your CRM should be set up to collect not just money given, but volunteer hours, in-kind support, skills based assistance, and data on corporate partners. This way your annual report is far more likely to have that critical information showing how different types of support have had an impact on your work, rather than a generic ‘thank you’ list.
But even more importantly, a good non profit CRM system will enable you to track and measure your impact all year round, not just when annual report season rolls around. You can set up automated outcome tracking tools, regular beneficiary follow up visits and activities, and reports that you can generate instantly to show trends and patterns of your work over time. This also means your annual report becomes a distillation of ongoing work and impact evaluation, not a mad dash at the end of the year to somehow try and make sense of a year’s worth of disparate data.
I used to work with a mental health charity in Manchester who completely transformed their annual report approach by setting up a CRM system. What used to take their tiny team nearly a month of frantic, back breaking work became a process that took just a few days (and their annual report was far better in the end!). They could now track client journeys from beginning to end (initial contact all the way through to long term outcomes) and show funders exactly what their support was going towards, the effectiveness of different types of interventions, and who the team were actually working with.
The trick is to choose a system that works for the charity sector and is built with your needs in mind, and making sure your team is properly set up and trained to use it effectively.
When you do, your CRM becomes the backbone of not just your annual report, but the rest of your impact demonstration and funder relationship building too.
Final Thoughts
Your annual report is more than just a set of boxes to be ticked. It’s an opportunity to tell your story of impact and show your funders why they should want to support you. Show funders that you are effective at doing what you say you will do by demonstrating your impact. Prove that you are financially stable and responsible by being open about your finances. Show appreciation for support and funder relationships. Tell the reader where you are going and how you plan to get there.
In other words, prove that you are the kind of organisation that funders are desperate to give money to. Funders want you to succeed. They are not looking for reasons to reject your applications, they are looking for organisations they can have confidence in supporting.
Your annual report should be one of the ways you do that.
