Written by charity auditors, Sayer Vincent’s Fleur Holden and Vivien Ma
At the Charity Accountants Conference in September Sayer Vincent’s Fleur Holden and Vivien Ma presented a session on how to create an excellent annual report.
The annual report is an opportunity for a charity to tell its story through its financial reporting and the narrative around it and, bringing accounts to life for those who are not financial experts is a vital part of producing a great report.
The session began with a look at what SORP says. The Charities SORP (FRS 102) document sets out how charities are expected to apply international accounting standards to their particular activities and transactions, and explains how charities should present and disclose their activities and funds within their accounts.
The purpose of the annual report is to be publicly accountable to stakeholders, to demonstrate stewardship and management of funds and to consider the information needs of primary users. These include funders, donors, financial supports, service users and other beneficiaries.
A recommended order for the annual report is set out within the SORP, and starts with the objectives and activities, and what has been achieved throughout the year. This really focusses the reader on the impact the organisation is having, leaving some of the more compliance driven narrative such as on the structure, governance and management of the organisation towards the end of the report.
The session highlighted that the level of financial and technical detail needed varies depending on the audience. For example, the public, beneficiaries, funders/donors and staff need top line performance and a summary, whereas the Trustees, Management and Charity Commission will need much more of a technical/compliance focus. This should be reflected in how the financials and narrative are presented and some examples were given for the different audiences.
The session suggested there are eight key questions charity finance professionals should ask themselves before putting together the annual report, which will help them when thinking about what needs to be included and the story they are telling. These are:
- What is our annual report for? Is it just a compliance document, or is it used for fundraising, too?
- Who is our target audience? A pure compliance document may not be suitable if you plan to attract funders/donors and supporters to support your charity.
- What do we want our audience to do? Donate to us? Fund us? Do we want them to better understand the problem we are addressing and our achievements?
- What other publications do you produce? Annual accounts and report, impact report, or a combination?
- How will readers access the report? (Hard copy, web, mobile)
- How do we demonstrate outcomes and impact?
- Who do we involve? Some charities rely on the management team to write the annual report and the board checks and approves, and some charities involve the trustees throughout the process.
- What’s our timetable? If you produce designed annual report and accounts, you will need to build in additional time for your comms team to design the document. Involving them too early in the process could lead to time-consuming revision; too late and the approval and submission deadlines could be missed.
Finally, the session ended by highlighting that good narrative reporting answers five key questions:
- What are the benefits we are providing to the public?
- What do we do to achieve them?
- What are we achieving?
- How do we know what we are achieving?
- What are we learning, and how can we improve?
The key is to give a balanced view – celebrate your achievements, but also reflect the lessons learned along the way.
