October 16, 2011 | Read Time: 3 minutes
Sheffield Hale, the American Cancer Society’s top lawyer, believes nonprofits should always strive to provide potential donors and watchdogs with a well-rounded picture of their successes and failures.
But when Mr. Hale looks at the typical nonprofit annual report, he doesn’t see anything resembling objective reporting. Instead, he sees a lot of fluff.
“If people read an annual report and all they see is that everything is rosy and there are just pictures of seals or little girls picking daisies, then it’s not going to be a very credible document, and you won’t accomplish what you want,” says Mr. Hale. “The more sophisticated your document, the more compelling it will be that your organization is worthwhile.”
Mr. Hale and his colleagues have just spent the past two years overhauling the Cancer Society’s annual report, financial statements, and other public disclosures into a new document designed to better accomplish that goal. The document, which the charity calls a stewardship report, resembles a company’s report to shareholders. Some experts and charity officials are now holding it up as a model of how other nonprofits should report, including a group of accountants who this month recommended how organizations can strengthen their financial statements (The Chronicle, October 6.)
To spread the approach and get the word out about its work, the Cancer Society sent the report to members of Congress, state attorneys general, and other policy makers it usually doesn’t reach through its annual report.
Like a Business Report
Mr. Hale said the American Cancer Society borrowed from the business world as it developed the 61-page report, most notably in a section that provides a detailed narrative description of the nonprofit’s financial performance and goals.
He said that section is very similar to how public companies report their performance to the Securities and Exchange Commission.
In addition, the report includes detailed explanations of some key financial information that in the past was shown mostly in numbers and not described in ways that provided context. For example, while it lists the society’s total revenue at $956-million, the report adds that 2010 marked the second consecutive year that the group did not surpass $1-billion in total revenue. This was due partly to the poor economy and an erosion in total revenue as “more cancer organizations have entered the fund-raising space,” the report said.
The report also describes how the organization determines executive compensation and how it cut costs and sought greater efficiencies as the economy soured.
Progress on Strategic Plan
Another section of the report analyzes how well the organization has done in meeting the goals of its strategic plan, a feature that is uncommon in nonprofit annual reports, says Bennett Weiner, chief operating officer of the BBB Wise Giving Alliance, a watchdog group in Arlington, Va.
“It’s going above and beyond what you would typically see an organization produce,” Mr. Weiner says. “It’s presented in ways that other charities might consider also.”
The Cancer Society’s report also explores how the charity is fulfilling its mission by examining the progress of cancer research it supports, as well as its work to help in early detection of cancer.
As the group’s officials considered what to present in the report, the overriding goal was to focus on what information people would need to decide whether to support the organization, says Catherine Mickle, the group’s chief financial officer.
“It lets them make an educated decision that isn’t based on pages from a 990 or a financial statement that no one will wade through,” Ms. Mickle says.
A copy of the American Cancer Society’s Stewardship Report can be viewed below.
