The Annual Reports Library - Library FAQ

Non-profit, Charity and Other types of Annual Reports

    When most people think of Annual Reports they usually think of the corporate variety. Many non-profit organizations, foundations and charities produce annual reports. These reports can be useful for assessing the performance of an organization. These "non-corporate" reports will often consist of 4 sections:

    1. Chairman of the Board letter
    2. Description of the charity, causes, actions, accomplishments, etc. of the organization
    3. Financial statement
    4. Directors and Officers

    A useful place to start in evaluating an organization is the description section. This section should describe the activities of the organization. It should be clear what the organization has accomplished and who it supports.

    The list of directors and officers gives some idea who is associated with this organization. Are the directors respected in the community? What association do they have with other organizations and businesses in the community? The size of the board may be worth considering as anything over 15 can make board meetings difficult and unproductive.

    The financial statement is one of the most important areas to carefully evaluate. This is often broken into:

    1. CPA Opinion letter
    2. Income statement
    3. Balance sheet
    4. Footnotes

    The CPA opinion letter is especially important if there are qualifications. If there are no qualifications, the letter will be short and simply state that the organization has followed standard GAAP rules. If there are qualifications, these should be considered carefully.

    The income statement is critical. It shows what money came in and where it went. The percentage of revenues going to salaries, G&A, management services and fund-raising expenses are important to consider. The NCIB (National Charities Information Bureau) recommendations that organizations spend at least 60% of annual expenses for program activities.

    The Balance Sheet shows where funds have been placed over the years. The NCIB recommends that organizations

    • have net assets available for the following fiscal year of not more than twice the current year's expenses or the next year's budget, whichever is higher;
    • not have a persistent and/or increasing deficit in unrestricted net assets.

    Footnotes are important to read as they can alert the reader to lawsuits, litigation, IRS problems, loans to directors or officers, loans for other purposes and "extraordinary charges".

    Most reputable charitable organizations will provide copies of their annual reports for the asking. It is wise to refrain from making significant donations to organizations who are not willing to provide financial information.

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