Document Retention Policies for Nonprofits

Document retention policies help nonprofits comply with state and federal laws, improve organizational efficiency, and have some protection in the event of a lawsuit.  These policies include a schedule to designate how long the organization will retain certain categories of documents.  They also specify the procedures for destroying documents and who is responsible for implementing and enforcing the policy.

These policies vary based on the organization’s size.  For instance, for a small nonprofit, the responsibility may be distributed among the volunteers and employees.  A large organization requires more formal procedures and the designation of a particular job position(s) that is responsible for overseeing the policy’s implementation and enforcement. 

An organization’s funding model often determines the types of document categories to keep.  A nonprofit with contributed income must set retention periods for donor gifts, which can vary depending on whether the donor put restrictions on the gift.  Government funding requires tracking all documentation for public funds.

The first step is to identify the categories of documents that the organization generates or receives.  Different categories must be retained for different periods of time.  For instance, basic organizational documents such as articles of organization or bylaws (including any revisions) should be retained perpetually.  Documents such as contracts should be retained for the life of the contract plus a certain number of years (usually four).  These time periods are recorded in a document retention schedule.

Another important step is to specify the procedures for reviewing, labeling, storing, and purging documents.  A common practice is to label boxes containing paper documents with a table that describes the documents, the retention period, and the planned destruction date.  Electronic documents can be stored in files and folders with names that match the categories on the document retention schedule.

A document retention policy can promote efficiency by forcing an organization to be thoughtful about how it categorizes and files documents.  It can also free up physical or electronic space by purging records that are no longer relevant.

The federal Sarbanes-Oxley Act requires nonprofits to have a document retention policy.  If an organization is involved in litigation, this policy also can speed up the discovery process.  The organization also shows good faith when it has purged documents in accordance with the policy.

The N.C. Center for Nonprofits and the National Council of Nonprofits provide several samples of document retention policies.

Francisco J. Benzoni is an associate at Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP in Raleigh.

 

 

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I'm having difficulty accessing the samples; the link appears to be broken.

 

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