If annual reports dance through Patrick Johnston’s dreams, it would be understandable. He’s probably read hundreds during his time as the former chief executive of a private foundation and board member with Philanthropic Foundations Canada and the United Way/Centraide Canada.
But his highest piles of annual reports came from two years on the judges’ panel of the Voluntary Sector Reporting Awards. The judges’ observations, he believes, can be useful to charities all over Canada as they strive to communicate their missions in our message-saturated world.
Size doesn’t matter
Let’s begin with their least predictable conclusion. Johnston reveals that he and the other judges of the VSRA noted no correlation between the size of a charity (and presumably, of its communication budget) and the effectiveness of its annual report. If anything, he comments, there might even be an inverse correlation.
“Some of the best [annual reports] came from small organizations,” he recalls. “A small charity with a small budget can still do a fabulous annual report. We had to ask ourselves what was going on.” (“Small” by the VSRA definition means having a total budget under $1 million).
Being small might actually be an advantage. In many large organizations, Johnston suspects, no single person drives the annual report. Multiple perspectives creep in, expressed in different styles by a variety of voices, leading to “a patchwork of reports prepared by different people.”
His conclusion? “There’s no reason for a charity of any size to think it can’t do a good annual report.”
What makes an annual report “great”?
The annual report as merely an accountability tool is much too small a vision, Johnston believes. “Properly crafted, it’s a big part of your communications, fundraising and marketing plan.”
So use it to tell the story of your mission. When you report on the numbers, explain why they matter, what difference donors’ gifts are making, and what differences you’ve made to individuals, to your community and to your cause. In short, help readers understand how the dollars you receive turn into services that make a difference in human lives.
Don’t ever fool yourself that no-one reads your annual report, Johnston warns. “The real question is not ‘How many will read it?’ but ‘Who will read it?’” Potential funders turn to your annual report as one of the first background pieces when they’re considering a grant. So do sophisticated donors.
Where do I start?
Perhaps your annual report now consists of messages from your chair and ED, a few generic stories and the financial statements just as they come from the auditors. The gulf between that and a high-impact report can seem enormous. But you can take some simple steps right now to improve your next report, and the one after that, until it fulfills its potential.
The VSRA has gathered its own observations and tips into a handbook, webinar and slide deck, all available online at no cost. Some tips are easily achievable, while others will take more time. Looking at award-winning reports can inspire you too. Lists of VSRA winners from the past five years are available here. To prove to your board that a small budget is not an excuse for an ineffective report, pay attention especially to the small charity winners.
Getting from good to great
If you already have a good annual report and want to make it even better, some of the trends that Johnston has noticed during his times on the VSRA may help you.
First of all, put a single person in charge to create consistency. Then think about what you’ll actually report. “There’s more frank discussion on the costs of fundraising,” he observes. “Some charities do a really good job of explaining why there are costs and how those costs support their mission.”
There’s more about salaries and compensation too, Johnston’s noticed. Some charities actually report individual compensation, but he think it’s more important to show how you come up with your salaries. Explain your process for establishing appropriate compensation relative to your peer organizations.
To print or not to print
Technology has changed the annual report, Johnston notes. Charities are printing fewer copies, or not doing a print copy at all. They’re moving to a hotlinked PDF or html version that integrates portions of their website. That means you don’t have to repeat information that you’ve created and reported elsewhere.
Those charities announce their online annual reports either by email or mailed postcards. Johnston predicts a growing movement towards online annual reports and away from hard copy. Print on demand, he says, can meet those circumstances where a hard copy may still be needed.
Download the VSRA’s resources on annual reports here.
Janet Gadeski, President of Hilborn and Editor of Hilborn Charity eNEWS, brings two decades of experience in fundraising and nonprofit management to her work of providing information and ideas to the leaders of Canada’s nonprofit sector.