All about annual reports for associations: Complete guide

Annual report for Associations

Annual report for Associations

Table of Contents

• Introduction
• What is an annual report?
• Legal requirements and regulations
• The process of preparing an annual report
• Practical examples and scenarios
• Key figures and financial analysis
• Audit and the auditor's role
• Termination

Introduction

Annual report is a necessary document that provides an overview of an association's financial position and results for a financial year. For associations, both economic and non-profit, the annual report plays a decisive role for transparency and accountability towards members, authorities and other stakeholders. In this article we will go through everything you need to know about association annual reports, including legal requirements, practice and practical examples.

What is an annual report?

An annual report is a compilation of an association's current accounting at the end of the financial year. It consists of several parts:

• Management report: A written account of important events during the year, the development of the business and expectations for the future.
• Income statement: A compilation of the association's income and expenses during the financial year.
• Balance sheet: A statement of the association's assets, liabilities and equity at the end of the financial year.
• Notes: Additional information that explains and specifies the items in the income statement and balance sheet.
• Audit report: If the association has an auditor, the auditor's statement about the annual report and the association's administration is also included.

Legal requirements and regulations

According to the Accounting Act and the Annual Accounts Act, all associations are obliged to keep books and prepare an annual report. The requirements may vary depending on the size and type of association.

Non-profit organizations

For non-profit associations, there are no direct requirements to prepare an annual report according to law, but it is a good practice and often written into the association's statutes. Many non-profit associations choose to make an annual report to meet the requirements of donors and to show transparency towards their members.

Economic associations

Economic associations are obliged by law to draw up an annual report. These associations are covered by the Accounting Act and the Annual Accounts Act, which means that they must follow specific rules for how the accounts must be designed and published.

The process of preparing an annual report

Financial close

The financial statements are a compilation of the current accounting and are the basis for the annual report. To draw up a financial statement, the association needs:

• Compile all business events during the year.
• Ensure that all income and expenses are properly recorded.
• Adjust for accruals and depreciation.

The parts of the annual report

• The management report: Describes the association's activities, important events during the year, and gives an overview of the finances. Plans and forecasts for the future should also be included here.
• Income statement: Reports the association's financial results by summarizing income and expenses.
• The balance sheet: Shows the association's financial position by reporting assets, liabilities and equity.
• Notes: Provides in-depth information about various items and how these have been valued.
• The auditor's report: If there is one, it contains the auditor's assessment of the association's accounting and annual report as well as recommendations for discharge of liability for the board.

Practical examples and scenarios

To illustrate how an annual report can look like, let's take two examples: a non-profit association and a housing association (BRF).

Non-profit association

A non-profit sports association that organizes local sporting events and activities. The association has a turnover of approximately SEK 500,000 per year and is mainly run by membership fees and contributions from the municipality. Their annual report would include a management report detailing the year's activities and achievements, an income statement showing income from membership fees and contributions, as well as costs of organizing events. The balance sheet would show the association's liquid assets and any liabilities.

Housing cooperative

A BRF with 50 apartments in a city. The BRF has rents and fees as its main source of income. Their annual report would include a management report detailing maintenance work and renovations during the year, an income statement showing income from fees and costs for maintenance and repairs, and a balance sheet showing the property's value, loans and equity.

Key figures and financial analysis

For BRFs, key figures are an important tool for assessing the association's financial position. Common KPIs include:

• Indebtedness per square meter: Measure of the association's total loans in relation to the total living space.
• Interest rate sensitivity: The association's sensitivity to interest rate changes.
• Savings per square meter: How much the association saves annually per square meter of living space.

These key figures can be used to compare the association's finances with other associations and assess its long-term sustainability.

Audit and the auditor's role

An auditor reviews the association's accounting and annual report to ensure that everything is correct and complies with applicable laws and regulations. The auditor writes an audit report in which they give their view on the association's accounting and administration, and recommend whether the board should be granted discharge. For non-profit associations it is often optional to have an auditor, while for financial associations it is mandatory if they meet certain criteria.

Termination

Drawing up an annual report is an important part of an association's activities. It ensures transparency, meets legal requirements and gives members and other stakeholders a clear picture of the association's financial health. By following good accounting practice and using relevant key figures, associations can improve their financial management and planning for the future.

By understanding and following these guidelines, associations can ensure that their annual reports are both accurate and informative, which in turn strengthens the trust of members, authorities and potential donors.