SECTION: COMMUNICATIONS

40511201225 Developing an Annual Report

Published: 05.11.2012 |
Last Updated: 06.01.2014
carmichael
carmichael
Evelyn Fitzpatrick

Evelyn Fitzpatrick is an Accountant who runs her own consultancy company, specialising in Strategic planning, Governance and Organisation Development in the Charity sector. She provides training in Financial Reporting, Budgeting and Risk Management. She assisted in the...

An annual report is an important milestone in a charity’s life.  It is a chance to take stock of how the year compared to the plans and aspirations set. It is a time to celebrate successes and achievements and to reflect on difficulties and challenges. It is an opportunity to highlight the benefits to the public of the charities activities.  Even though in Ireland charities are not required to produce an Annual Report, most recognise the value of producing one. Public companies must file an Annual Report that shows its financial statements. All the promotional stuff is extra and not required.

For a charity an AR (Annual Report) is a year-end summary of its Activities and a record of its grants, funding and expenditure. It is a charity’s most important public relations tool and part of its marketing plan. It may be the only publication that   the charity produces, so it is important that it is attractive and inviting and commands the reader’s attention. The front cover should be eye-catching and have a theme that relates to that year. It is advisable to have a page at the front that highlights the year at a glance.  It is an opportunity to explain the purpose behind the work that the charity does every day and the benefits that work brings to the community. The impact of best practice reporting is achieved when the Directors/ Trustees report and full financial statements are included in the AR.

Irish reporting
In Ireland we have the Charities Act 2009, which sets out what should be in an Annual Report. The legislation is not yet implemented so it is not mandatory. Its requirements broadly follow English Charity Law as set out in their Statement of Recommended Practice (SORP) and most large Irish Charities comply with SORP, which is considered best practice. The requirements of the Activity Report can be shown within the Directors/ Trustees report.  The award winning Annual Reports in recent years were SORP compliant

Where to Start
Writing an AR can feel overwhelming especially for the first time. With a little thought and preparation, even a small charity with few in-house resources can produce an appealing, compliant document.  A good start is to think who the readers are and what the actions you want them to take are. The AR should encourage them to take these actions. The AR comprises of two parts. The first part covers information about the company and focused primarily on the aims and objectives set by the charity and the strategies and activities undertaken to achieve them. The second part contains the annual financial statements (accounts) and auditor's report.

 

Contents
Part one
 

  • Open with a page highlighting the key message and top achievements at a glance.
  •  State Mission Vision and Values
  • Give a brief note on Origins and Purpose of the Charity and how it grew  to its current size and structure
  • List Board/ Trustees members and Sub committees of Board
  •  List Auditors/ Bankers and other Professionals
  •  Show legal status and Registration Numbers both Legal and Charity

Reports from the Chairman and CEO

Make the tone friendly, open, informative and, most importantly, confident.  These letters need to be passionate, exciting and without repetition.   Fill them with heartfelt testimonials in warm personal writing. They need to tell the reader what the Charity did during the year and the difference its work made. Remember to connect the activities to the Mission Statement. Honesty is extremely important. Present the facts clearly and directly. Name any bad news and explain what was done to address it. Show that the charity is dealing with issues openly and with an intelligent plan of action. Project a positive image of the organisation.

Charity’s Objectives and Activities
 Give a clear description of the purpose of the charity and how it relates to the Mission. Describe what the charity does through programmes and services delivered. State the objectives set at the beginning of the year. Give a clear account of what went well and what was not achieved and why. Give case study examples of the work with pictures. Give examples of challenges faced and show how they were overcome

Achievements and Performance
Give a review of the activities undertaken in the year that explains the performance achieved against the objectives set at the beginning of the year. If qualitative or quantitative information is used to assess the outcome of activities, it would be helpful to name what benchmarks or indicators were used. Tell stories with pictures. Donors will be impressed with real stories about real people. Highlight how the charity’s work helped a specific individual. Share a volunteer’s story of how they made a positive difference. Support the   stories with measurable outcomes of the charities work.  Remember to thank the Funders and the Volunteers

Part Two
Financial Statements
In complying with SORP, charity companies   require a Statement of Financial Activity (SOFA) rather than an Income & Expenditure Statement. The SOFA is laid out in columnar form to distinguish between Restricted and Unrestricted Income. Expenditure is also split between what is attributed to Restricted and Unrestricted Income. Detail of the nature of Expenditure is not required, but it is helpful to add a page at the end which shows a 5 year trend of the Income and Expenditure.
In the Balance Sheet the Reserves should be split out between what is restricted by board and Unrestricted Reserves. Prepare a Cash Flow statement. Provide notes to clearly explain the figures in the Financial Statements. It helps to provide Pie Charts, Graphs or other visuals that help the reader see the big picture and understand the financial trends

Directors Report
In addition to what is required by Company law, this report should include some requirements of the Activity Report especially how the board is governing the organisation and overseeing its strategic direction. The Charities Act 2009 states that all charities regardless of size will be required to submit an Activity Report each year. The purpose of the activity report is to demonstrate to funders how the money received was spent and the outcomes it has achieved.  The requirements of the Activity Report are as follows: 

• Objectives and Activities. Show details of the activities that had been planned in advance for the year. Outline the achievements and performance and name any challenges encountered and how they were managed. This is about stewardship i.e.  How well did the charity use its funds to effectively achieve its objectives? Show how the activities  relate to the mission and purpose of the charity
• Structure, Governance and Management. Show how its board is appointed and trained.  Evidence how the charity is properly governed, well managed with clear organisational structures and is worthy of support. Show that directors/ trustees understand their responsibilities of setting strategy and monitoring tight internal controls within the organisation.
 Achievements and Performance Outline the main programmes, projects and services provided during the year. Support with performance measures and standards of service delivered.
•  Financial Review. Provide a narrative in plain English and make sure the words and numbers support each other, highlighting the key results for the year. Explain where the money came from, how it was spent and state the future plans of the board for any surpluses. Be open about fundraising efforts, their effectiveness and the cost of raising funds. Explain any cost saving measures that were implemented during the year. Demonstrate how the charity gives value for money. Explain why it is important to have services that support the charity's work (e.g. support office costs) and what these contribute. State the principal financial management policies  in force during the year,
• Statement of Risk management. Name any major risks identified to which the charity is exposed and state the procedures that have been put in place by the Board to monitor and manage those risks.
 Reserve Policy.  State the board’s approach to managing its reserves and give details of its policy on Restricted and Unrestricted reserves. Give details of the Board’s future plans for reserves held.
• Plans for Future Periods. State what still needs to be done; what are the strategies and plans set by the Board for the coming year and state any key targets.

Conclusion
When the AR is completed, proof read it very carefully.  Make sure that the narratives tie back with the figures. The cover should be attractive and inviting to read. Launch it and invite the media and stakeholders.  Announce its release on your website. Don’t expect that your target audience will download it from the Website.  Distribute it to Donors, Funders, Media, Journalists, Politicians and Corporates that you would wish to partner with under corporate social responsibility.

12 point check-list for a good Annual Report:

  • Did your report tell what your cause is with passion?
  • Did it evidence how you effectively served that cause, with stories and case studies?
  • Did you thank your Funders and Volunteers sincerely and tell them the difference their support made?
  • Did you show the impact of your work and how it connects to your Mission?
  • Have you evidenced that the charity is being organised and managed properly and is worthy of support?
  • Did you include the financial reports, Directors and Auditor’s report?
  • Does the report give evidence of good governance and leadership by the Board?
  • Have you reported on problems or challenges - especially ones you have overcome?
  •  Have you shown how the board manages Risk and uncertainty?
  • Have you outlined your future strategic plans?
  •  Did the Board outline their policy on the future use of Reserves?
  •  Have you told Donors and Volunteers how they can help?

 

My Top Tips
Top Tips
1
Every charity can produce an AR; it can be as little as a few punchy pages that can capture the public’s imagination.
2
Clearly tell what the charity does, who it helped and give measurable achievements, so that readers can understand the impact of its work.
3
Demonstrate that the charity is effectively governed with examples of how the board carries out their responsibilities.
4
Explain the importance of support services (avoid the word administration) and show the benefit they contribute to the charity
5
Humanise the financial statements with a narrative in plain English telling where the money came from and how it was spent
6
Once you have inspired the readers with what you do, close by telling them what still needs to be done and how they can help with money or time.
SECTION 3: COMMUNICATIONS

40511201225 Developing an Annual Report

Published: 05.11.2012 |
Last Updated: 06.01.2014
carmichael
carmichael
Evelyn Fitzpatrick

Evelyn Fitzpatrick is an Accountant who runs her own consultancy company, specialising in Strategic planning, Governance and Organisation Development in the Charity sector. She provides training in Financial Reporting, Budgeting and Risk Management. She assisted in the...

My Top Tips
My Top Tips
My Top Tips
1
Every charity can produce an AR; it can be as little as a few punchy pages that can capture the public’s imagination.
2
Clearly tell what the charity does, who it helped and give measurable achievements, so that readers can understand the impact of its work.
3
Demonstrate that the charity is effectively governed with examples of how the board carries out their responsibilities.
4
Explain the importance of support services (avoid the word administration) and show the benefit they contribute to the charity
5
Humanise the financial statements with a narrative in plain English telling where the money came from and how it was spent
6
Once you have inspired the readers with what you do, close by telling them what still needs to be done and how they can help with money or time.

An annual report is an important milestone in a charity’s life.  It is a chance to take stock of how the year compared to the plans and aspirations set. It is a time to celebrate successes and achievements and to reflect on difficulties and challenges. It is an opportunity to highlight the benefits to the public of the charities activities.  Even though in Ireland charities are not required to produce an Annual Report, most recognise the value of producing one. Public companies must file an Annual Report that shows its financial statements. All the promotional stuff is extra and not required.

For a charity an AR (Annual Report) is a year-end summary of its Activities and a record of its grants, funding and expenditure. It is a charity’s most important public relations tool and part of its marketing plan. It may be the only publication that   the charity produces, so it is important that it is attractive and inviting and commands the reader’s attention. The front cover should be eye-catching and have a theme that relates to that year. It is advisable to have a page at the front that highlights the year at a glance.  It is an opportunity to explain the purpose behind the work that the charity does every day and the benefits that work brings to the community. The impact of best practice reporting is achieved when the Directors/ Trustees report and full financial statements are included in the AR.

Irish reporting
In Ireland we have the Charities Act 2009, which sets out what should be in an Annual Report. The legislation is not yet implemented so it is not mandatory. Its requirements broadly follow English Charity Law as set out in their Statement of Recommended Practice (SORP) and most large Irish Charities comply with SORP, which is considered best practice. The requirements of the Activity Report can be shown within the Directors/ Trustees report.  The award winning Annual Reports in recent years were SORP compliant

Where to Start
Writing an AR can feel overwhelming especially for the first time. With a little thought and preparation, even a small charity with few in-house resources can produce an appealing, compliant document.  A good start is to think who the readers are and what the actions you want them to take are. The AR should encourage them to take these actions. The AR comprises of two parts. The first part covers information about the company and focused primarily on the aims and objectives set by the charity and the strategies and activities undertaken to achieve them. The second part contains the annual financial statements (accounts) and auditor's report.

 

Contents
Part one
 

  • Open with a page highlighting the key message and top achievements at a glance.
  •  State Mission Vision and Values
  • Give a brief note on Origins and Purpose of the Charity and how it grew  to its current size and structure
  • List Board/ Trustees members and Sub committees of Board
  •  List Auditors/ Bankers and other Professionals
  •  Show legal status and Registration Numbers both Legal and Charity

Reports from the Chairman and CEO

Make the tone friendly, open, informative and, most importantly, confident.  These letters need to be passionate, exciting and without repetition.   Fill them with heartfelt testimonials in warm personal writing. They need to tell the reader what the Charity did during the year and the difference its work made. Remember to connect the activities to the Mission Statement. Honesty is extremely important. Present the facts clearly and directly. Name any bad news and explain what was done to address it. Show that the charity is dealing with issues openly and with an intelligent plan of action. Project a positive image of the organisation.

Charity’s Objectives and Activities
 Give a clear description of the purpose of the charity and how it relates to the Mission. Describe what the charity does through programmes and services delivered. State the objectives set at the beginning of the year. Give a clear account of what went well and what was not achieved and why. Give case study examples of the work with pictures. Give examples of challenges faced and show how they were overcome

Achievements and Performance
Give a review of the activities undertaken in the year that explains the performance achieved against the objectives set at the beginning of the year. If qualitative or quantitative information is used to assess the outcome of activities, it would be helpful to name what benchmarks or indicators were used. Tell stories with pictures. Donors will be impressed with real stories about real people. Highlight how the charity’s work helped a specific individual. Share a volunteer’s story of how they made a positive difference. Support the   stories with measurable outcomes of the charities work.  Remember to thank the Funders and the Volunteers

Part Two
Financial Statements
In complying with SORP, charity companies   require a Statement of Financial Activity (SOFA) rather than an Income & Expenditure Statement. The SOFA is laid out in columnar form to distinguish between Restricted and Unrestricted Income. Expenditure is also split between what is attributed to Restricted and Unrestricted Income. Detail of the nature of Expenditure is not required, but it is helpful to add a page at the end which shows a 5 year trend of the Income and Expenditure.
In the Balance Sheet the Reserves should be split out between what is restricted by board and Unrestricted Reserves. Prepare a Cash Flow statement. Provide notes to clearly explain the figures in the Financial Statements. It helps to provide Pie Charts, Graphs or other visuals that help the reader see the big picture and understand the financial trends

Directors Report
In addition to what is required by Company law, this report should include some requirements of the Activity Report especially how the board is governing the organisation and overseeing its strategic direction. The Charities Act 2009 states that all charities regardless of size will be required to submit an Activity Report each year. The purpose of the activity report is to demonstrate to funders how the money received was spent and the outcomes it has achieved.  The requirements of the Activity Report are as follows: 

• Objectives and Activities. Show details of the activities that had been planned in advance for the year. Outline the achievements and performance and name any challenges encountered and how they were managed. This is about stewardship i.e.  How well did the charity use its funds to effectively achieve its objectives? Show how the activities  relate to the mission and purpose of the charity
• Structure, Governance and Management. Show how its board is appointed and trained.  Evidence how the charity is properly governed, well managed with clear organisational structures and is worthy of support. Show that directors/ trustees understand their responsibilities of setting strategy and monitoring tight internal controls within the organisation.
 Achievements and Performance Outline the main programmes, projects and services provided during the year. Support with performance measures and standards of service delivered.
•  Financial Review. Provide a narrative in plain English and make sure the words and numbers support each other, highlighting the key results for the year. Explain where the money came from, how it was spent and state the future plans of the board for any surpluses. Be open about fundraising efforts, their effectiveness and the cost of raising funds. Explain any cost saving measures that were implemented during the year. Demonstrate how the charity gives value for money. Explain why it is important to have services that support the charity's work (e.g. support office costs) and what these contribute. State the principal financial management policies  in force during the year,
• Statement of Risk management. Name any major risks identified to which the charity is exposed and state the procedures that have been put in place by the Board to monitor and manage those risks.
 Reserve Policy.  State the board’s approach to managing its reserves and give details of its policy on Restricted and Unrestricted reserves. Give details of the Board’s future plans for reserves held.
• Plans for Future Periods. State what still needs to be done; what are the strategies and plans set by the Board for the coming year and state any key targets.

Conclusion
When the AR is completed, proof read it very carefully.  Make sure that the narratives tie back with the figures. The cover should be attractive and inviting to read. Launch it and invite the media and stakeholders.  Announce its release on your website. Don’t expect that your target audience will download it from the Website.  Distribute it to Donors, Funders, Media, Journalists, Politicians and Corporates that you would wish to partner with under corporate social responsibility.

12 point check-list for a good Annual Report:

  • Did your report tell what your cause is with passion?
  • Did it evidence how you effectively served that cause, with stories and case studies?
  • Did you thank your Funders and Volunteers sincerely and tell them the difference their support made?
  • Did you show the impact of your work and how it connects to your Mission?
  • Have you evidenced that the charity is being organised and managed properly and is worthy of support?
  • Did you include the financial reports, Directors and Auditor’s report?
  • Does the report give evidence of good governance and leadership by the Board?
  • Have you reported on problems or challenges - especially ones you have overcome?
  •  Have you shown how the board manages Risk and uncertainty?
  • Have you outlined your future strategic plans?
  •  Did the Board outline their policy on the future use of Reserves?
  •  Have you told Donors and Volunteers how they can help?