Your annual accounts report is not complete without a report of the board. The annual accounts report must contain more than just numbers or short explanations of these numbers as you share in the notes. The report needs to include a narrative that provides more insight and context to the numbers.
An annual accounts report aims to be accountable and transparent about the current state of your organization and its future perspectives. The information you provide must therefore be fair and understandable. Readers should be able to draw their own conclusions on the basis of the data and information you share.
The report of the board should help the reader better understand or value the numbers presented. For instance by sketching the environment in which the organization was operating during the year. Or by highlighting relevant decisions by the board, or mentioning important developments with impact on the future. As you know, much relevant information is not immediately clear from the numbers. The board report is meant to share information that is relevant to understanding the current and future financial position of the organization.
What to disclose?
The board report should summarize the following:
- Founding information: when was the organization founded, in what legal form, and under what jurisdiction does it operate? What is its registered name and registration number?
- Vision, mission, objectives of the organization: why was the organization created, what does it aim to achieve?
- Governance: what is the organizational structure, but who are key persons, such as board members, the director and the finance manager?
- Main objectives, targets and activities for the reporting year: what did the organization set out to do and what was in effect done in the reporting year?
- Financial position and results in the reporting year: highlight in words the annual accounts as presented in numbers.
- Main risks and uncertainties during the year and expected for the next year(s)
- Expectations, perspectives and continuity for following year(s)
- Summary budget for the following year
Many organizations nowadays also write about
- Communication with key stakeholders or stakeholder groups: how the organization engages with the key stakeholders and stakeholder groups
- Impact on people and planet: environmental and social impact of the work, including side effects
Who should write it?
The report of the board is the responsibility of the governing board or of the board of directors and the advisory board.
If your organization is small and has a governing board plus a work organization headed by a director, the report is usually written on behalf of the governing board by the director and the finance manager.
If your organization has a board of directors and an advisory board, the board of directors provides an extensive narrative whereas the advisory board reflects on the year in a one-pager.
Narrative annual report
Many organizations produce an extensive narrative report covering their activities during the reporting year. This can include the annual accounts report and if applicable the auditor’s report. The information that needs to be included in the annual accounts report is then usually part of the overall narrative report and not presented separately.
If your organization has an annual audit done, the auditors will also check the narrative that is published in the same booklet or file as the annual accounts’ numbers. That means you will need to provide some documentation for the information shared in the report of the board of the annual narrative report. This is logical, because the narrative report intends to shed light on the numbers. The auditor signs off on the numbers, including their understanding of your clarifications. The clarifications in the narrative part of the report cannot be completely contrary to what you have shared with the auditor, and therefore they must check that they are in line with what they know and were able to verify.
Looking for some inspiration? There is lots out there, if you google for annual report and the name of a not-for-profit you know. I collected some examples for you. To learn from for your own board report. Or to be inspired by. Or to help you find new partners…