Recently I was assisting a client in getting their Annual Report ticked off against the ACFID Code requirements before it went off to the printers. I was reminded of the many hours that I have spent preparing annual report financial statements, graphs, explanations… and then reading and rereading the copy till I could almost recite it!
Charity annual reports usually have a wealth of information in them: program descriptions, photos of good works done, financial statements, and these days, a lot of useful infographics. Sometimes when we get in the midst of this big production, and are hard up against deadlines, we can just focus on getting the task off our list as quickly as possible. We can forget some important things that will save time later. Here are my top tips to remember when preparing the finance sections in an Annual Report, gained from my years reviewing hundreds of reports across the sector when I was on ACFID’s Code of Conduct Committee, and from preparing reports myself:
1. Don’t just copy last year’s format: it’s so tempting to do this as you’re often very time pressured. Did your Annual Report get a clean bill of health from ACFID last year? If so, great! Often though, ACFID has some recommendations in last year’s letter to you about how to improve your report next year. These are important to implement! ACFID will also change the required format of the report from time to time. The new ACFID Code is in effect for 30 June 2013 Annual Reports, including extra requirements around the financial narrative. Have a look at them here (pages 20-21).
2. The Table of Cash Movements is not the same as your Cash Flow Statement: it’s a separate statement to help members of the public see how efficiently charities are spending significant project funds (more than 10% of annual income). The beginning and ending cash balances in the table need to tie back to your bank balance in your Balance Sheet. If they don’t (for example if you have some of your cash tied up in short term investments or you have a bank overdraft), include a small note reconciling your Balance Sheet cash to Table of Cash Movements cash.
3. The ACFID requirements are a minimum: you must include all the line items in the Balance Sheet and Income Statement (or else a footnote saying that you don’t have transactions in those categories). This also means that if you find the ACFID categories aren’t quite right for your agency, you can add more. Do you do a lot of retail work? You can add some separate lines to disclose that. Did you have an unusually large exchange rate movement this year that makes your results look strange? You can split that out onto an extra line also. There’s nothing to stop you from adding more footnotes to your accounts to explain things (ok, sometimes there are printer restrictions!). That’s where the new plain language summary of your agency’s income and expenditure (a requirement of the new Code) can also come in handy.
4. Don’t forget who your report is for: members, donors, suppliers, members of the public will all be interested in your report. If you’re unsure of how to explain things or present things, ask yourself how it might appear to one of these people. Plain language is important. I can still remember preparing an annual report one year and having the Communications team asking me to explain what impairment meant, in a way that non accountants could understand…!
5. Try (!) to have your section ready early: okay, this might be asking for a miracle but… Depending on the size of your organisation, it might be a Marketing team pulling together the Annual Report, with Finance contributing a section. It can be tempting for Finance people to deprioritise the Annual Report in favour of its more formal cousin, the statutory accounts. The Annual Report is important too, and often has a broader readership. Where possible, it’s best to try and build in some extra time for any last minute issues, particularly if you are handing over your section to someone else to incorporate into the overall report. It can be a great opportunity to create goodwill!
6. Ask for help! The ACFID Code has been written by people in the international development sector for people in the sector to use. That’s a big sector, and the Code won’t cover every detail of every agency. If you’re unsure about something, call the people in ACFID’s Code Management team and ask for assistance. They are happy to explain how the Code applies to your agency. Remember that the Code is for people in the sector, so the team at ACFID are interested to hear how easy or difficult it is to implement for a range of agencies. At Social Business Consulting, we also provide an ACFID Annual Report Compliance Review service. See more details of this on our Products & Services page in the Finance section, or get in touch on our Contact Us page and we’ll explain how this works.
Happy Annual Reporting!