If asked to contribute to your charity’s annual report, which of these thoughts would first occur to you?
- An imposition of onerous compliance best avoided.
- A communications opportunity for exploitation.
Most will probably think the first - this article aims to convert you to the second. With a little thought and preparation, even a small charity with few in-house resources can produce an appealing, compliant document that achieves the following purposes:
- Explains performance to stakeholders.
- Justifies charitable status - especially with the introduction of public benefit reporting.
- Retains existing donors and draws in new donors.
- Motivates staff and volunteers.
- Gives a focus for potential beneficiaries - better grant applications etc.
- Track record inspires confidence in ability to deliver.
Charity Commission’s Expectation‘Annual Report’ means the document that has to be filed with the Charity Commission and comprises two parts: the trustees’ annual report (narrative) and the annual financial statements (accounts). The rationale behind the Charity Commission’s reporting regulations (SORP 2005) is that:
- Numbers are not enough - the words and numbers must support each other.
- Users deserve explanations on activities, achievements and performance.
- Charities are publicly accountable - so the annual report should be open and transparent.
The expectation is thus a joined-up annual report. A grant-making charity, for example, may choose to report its grant spend in the accounts by functional categories - such as Social Exclusion and Health Promotion. The narrative would explain the aim of these categories and illustrate the impact of the grants.
Who are your readers?
Be clear who the annual report is aimed at, and the actions you want them to take. The annual report should encourage them to take this action; this encouragement should thus drive the annual report. Key readers are likely to include:
- Funders - a key reference document for the application scrutiny process.
- Donors - reinforcing initial interest raised by a fundraising campaign.
- Potential volunteers - back-up to recruitment literature.
The annual report will probably have to appeal to a variety of important readers - there is plenty of flexibility in the format.
Options for the Annual Report
A common approach is that an effective annual report goes beyond compliance. Not necessarily so, as there are many options within SORP 2005; these include:
- Headings/layout of the narrative.
- Headline reporting of income and spend: e.g. voluntary income could be shown by region, donor type (charities, corporate, individuals etc) or method (fundraising events, legacies etc).
- Choice of performance indicators.
- Reduced reporting for charities below the audit threshold (generally annual income of £500,000).
Charities below the audit threshold have a clear choice to go beyond compliance and ‘cherry-pick’ exempted ‘disclosures’ - perhaps plans for future periods. This approach may convey credibility and professionalism to funders.
Scope of Content
The depth of material given is likely to significantly depend on circumstances - such as:
- Certainty of income: a well-endowed charity with secure investment income may opt for descriptive charitable activity titles such as ‘grant-making’ and a minimal narrative; a grant-making charity that relies heavily on fundraising might chose impact-stating activity titles such as ‘Building Community Cohesion’ and include moving photos with the narrative.
- Planning ahead: you may be imminently making a funding bid for which the application form has insufficient space. The annual report can show both your compatibility with the funder’s aims and your track record with similar projects.
- Beneficiary information source: especially for smaller charities, the annual report can convey aims and examples to grant applicants, and also explain future plans to current beneficiaries.
Presentation
There is a wide spectrum of presentation styles for your annual report; perhaps two ends of this spectrum are:
Style is not necessarily correlated with size - Plan UK has annual income of £38m and uses the plain text style. Furthermore, today’s IT and printing capabilities mean that a near-professional document is within the capabilities of smaller charities; see Best Beginnings example.
These examples were taken from the CAF/ICAEW 2008 Charities Accounts Award winners list: http://www.cafonline.org/Default.aspx?page=15469.
Covering the Basics
The focus on target readers, format and style etc may be wasted if the annual report contains basic or fundamental mistakes. Being at arms-length from the compilation, communications staff are well-placed to be part of the checking process.
You should be able to rely on the finance staff to get the accounts correct. However, is your auditor or independent examiner a charity expert? For example, a mistake on trading activity classification could significantly misrepresent your benchmark effectiveness ratios.
The auditors may look at just a few points in the narrative. Aspects you can check are:
- Compliance: see this user-friendly Charity Commission check list (go to Section H).
- Accuracy: is what you have said correct?
- Consistency: both within the narrative, and between the narrative and the accounts. For example, are the charitable activities described in the narrative the same as shown in the accounts?
Charity Commission and Guidestar Websites
The annual report drives the information given to the public about your charity on these websites.
- The 2008 overhaul of the Charity Commission website now gives a prominent graphical display on the front page - see Water Aid example.
- Guidestar takes information from your annual report and presents it in a standardised way - see Water Aid example. A major supermarket has used Guidestar to select appropriate charities for local campaigns. Use Guidestar’s update facility to put back any aspects of your message lost in the standardisation.
Other aspects for Communications Staff Charity communications staff may well be the first contact for queries on the annual report. They should therefore both understand the main themes of the annual report and have a say in its design. Suggestions:
- Talk to the finance staff - you all belong to the same team.
- Does the annual report fit with your communications strategy?
- Are the main points apparent from a 5-minute glance?
What’s your Charity’s Approach?
Does your charity recognise the potential of the annual report? The smaller the charity, then generally the greater the significance of the annual report. The goal should be knowing who you want to reach, and then applying the format and message that works for you. Ideally the annual report will facilitate an offer of further support from readers who appreciate your achievements and recognise the unmet need. This article gives you some pointers towards that goal.
© Greengage Associates
Frank Learner is a published writer and the Principal of Greengage Associates - offering Financial Management, Governance and Writing Services, plus Independent Examinations for Charities.
www.greengageassociates.co.uk