When assessing a request for funding, in addition to your submission funders will also be looking at other publicly available information, in order to get a clearer and more comprehensive pictures of your charity, CIC or community group’s work. This includes things like your social media presence and website, but also your published accounts, trustees annual report (if you’re a charity) or CIC 34.

Yet, even though we regularly attach these to our funding applications, very few of us make the most out of this document. Not only do we want to make sure our accounts tell a story which is well aligned with our fundraising, but for funding applications with very limited word or character count they provide an invaluable opportunity for extra information and rich qualitative data like participant stories and quotes. And where we can’t include images on application forms, they also provide the space to present your work more visually, including with photographs and infographics.

So what should you include in your Annual Report?

Your annual report provides important accompanying information to the accounts, it helps people understand what your charity does and should tell the charity’s story in a balanced manner, acknowledging both significant successes and failures.

TAR’s should follow a specific structure, and the Charity Commission provides guidance on what they should include – in particular for charities with a turnover above £500,000, who should follow the guidelines set out by SORP.

But Trustees can present the contents of their report in any order and under any headings that they choose. And although reporting requirements are lighter for small charities, a great, thorough report can have even more value when you’re less well-known

Things you might want to include, to help you make the most of this document:

• acknowledgements and thanks to current funders. This shows prospective funders others have already trusted you with their support
  
• information about your future plans. Vision is always great to galvanise fundraising. This can also be a great opportunity to include your theory of change.
  
• case studies and quotes from beneficiaries. This report provides the space for you to get your impact across through the voices and lived experiences of the people you support. 
  
• images and design elements will make reading your report a much more pleasant experience, and help you get your point across. Photos and infographics can also all be repurposed, and be used in your comms all year round.
  
• make sure your financials tell a compelling, clear story, which marries well with your figures and your fundraising strategy. Liz Pepler, of Embrace Finance, runs some really great sessions on Charity Finance to help you achieve this.
  
• keep your audience in mind – This document is a brilliant opportunity for you to be more transparent with your stakeholders and reassure your donors and funders that you’re investing their money wisely and running an efficient organisation which delivers what you set out to do.
  
• Think about accessibility – you should write your report in a way which is clear and easy to understand for a range of stakeholders. Depending on the people you work with you might want to provide easy read, plain text options, translation or a video summary in BSL.
  
  

Resources

Charity Digital, Six impact reports to inspire you https://charitydigital.org.uk/topics/six-impact-reports-to-inspire-you-9941

Image credit: Poole Communities Trust Annual Report, 2022-23

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Definitions

Overheads are the costs which are necessary for the organisation to operate, but do not relate specifically to one project. They typically include administration and management staff costs, premises, IT, governance costs

In order to run projects and programs (both of which grantmakers are generally more happy to fund), community groups need to cover their core costs. The term ‘full cost recovery’ means securing funding for all your organisation’s costs, including the direct project costs and a proportionate share of your organisation’s overheads.

The full costs of your project are all the costs directly relating to the project plus the project’s share of the overheads.

How to calculate your project’s share of overheads

You need to find a method which effectively reflects your organisation’s situation

• Based on the number of direct project staff

When? f the number of direct project staff fairly reflects the relative sizes of your projects. If there are many volunteers working on projects it may be appropriate to include volunteer time in the calculations.

How? Identify the staff working on all your projects / programmes (excluding non-project staff). Add together all project staff hours. Divide each projects staff hours by the total number of staff hours for all your projects to come up with a percentage.

For example:
Your organisation runs 2 projects

Project 1: 4 staff, each work 30 hrs per week = 120
Project 2: 2 staff, each work 15 hrs per week = 30

Project 1 share of overheads: 120 / 150 = 80%

• Based on the number of beneficiaries

When? if beneficiaries across all your projects incur a similar level of costs. This method won’t work if you run a mixture of resource intensive projects (for example a mentoring programme) and much less costly projects (an open access youth club)

How? Add the number of beneficiaries across all your projects / programmes. Divide each projects beneficiaries by the total number of beneficiaries for all your projects to come up with a percentage.

For example:
Your organisation runs 2 projects

Project 1: 60 beneficiaries
Project 2: 30 beneficiaries

Project 1 share of overheads: 60 / 90 = 67%

• Based on premises usage

When? for venue-based organisations, where premises costs represent a substantial part of your overheads

How? Identify all the projects that use your space. Work out each project’s level of usage by multiplying the number of hours they use your space by the square meterage of the space. Divide it by the level of usage of all your projects.

If the projects used the rooms for different numbers of weeks in the year the percentages would be based on: floor area x hours occupied per week x weeks occupied per year.

For example:
Your organisation runs 2 projects

Project 1: uses your main hall (50 m2) for 2 hrs/week = 50 x 2 = 100
Project 2: uses your small hall (25 m2) for 5 hrs/week = 25 x 5 = 125

Project 1 share of overheads: 100 / 225 = 44%

Resources

The National Lottery has produced a spreadsheet to help you calculate the direct and overhead costs for your project and estimate your projects’ share of overheads

The Centre for Social Value, Philanthropy Australia and SVA conducted research on the impact of insufficient funding of charities indirect costs here

This article on the Stanford Social Innovation Review highlights “the nonprofit starvation cycle”

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