Think of a document retention policy simply as a document management policy. It is unwieldy and unrealistic, as well as unnecessary to think that a nonprofit will keep every document it generates. Normally it is fine to clean up your desk by tossing out papers here and there, but when one staff person presses delete on a key document, and that document is needed later -- or if the subject matter of the document is under legal investigation and it appears that the nonprofit deleted it as a cover-up – trouble can follow. Adopting a written document retention policy ensures that staff and volunteers follow consistent guidance about document destruction and that document destruction/deletion practices become a regular business practice of the nonprofit.
Developing a document retention policy may seem overwhelming at first, but think of it as simply a record of what types of documents the nonprofit must retain and for how long. The policy should specify that the nonprofit will also adhere to a regular business practice of document destruction according to the schedule referred to in the policy or adopted by the nonprofit from time to time.
Document retention policies are one of several good governance policies that the IRS highlights on the IRS Form 990 by asking whether the filing nonprofit has adopted a written record retention policy.
A document retention and destruction policy identifies the record retention responsibilities of staff, volunteers, board members, and outsiders for maintaining and documenting the storage and destruction of the organization’s documents and records.
Source: Instructions to the Form 990 page 23
What should be retained?
Unfortunately there is no regulation or guideline for document retention that covers all nonprofits, and we hesitate to provide a template because each nonprofit needs to investigate and learn what its own state law requires as well as retain only those documents that are relevant to activities of that particular nonprofit. Not only do state laws differ as to what must be retained, but nonprofits vary in the types of documents they generate. However, it is possible to identify a handful of documents that every charitable nonprofit should save permanently, as well as others that should be saved for a certain length of time by most nonprofits.
- In some cases the length of time to retain a document should be governed by the time period that a potential claimant has to bring a claim in that state (statute of limitations differ from state to state).
- If using a template document retention policy prepared by another nonprofit we recommend that you take a close look at the template and customize it before adopting it for your nonprofit.
Keep these records permanently
- Articles of Incorporation
- Audit reports, from independent audits
- Corporate resolutions
- Determination Letter from the IRS, and correspondence relating to it
- Financial statements (year-end)
- Insurance policies
- Minutes of board meetings and annual meetings of members
- Real estate deeds, mortgages, bills of sale
- Tax returns
These categories can serve as starting point for checking state-specific regulations that address document retention or destruction rules.
→ Corporate governance, credit card transactions, donor records, employment matters, fundraising activities, licenses (for such things as raffles), insurance, investments and banking, serving/treating patients, programs and activities, real estate sales, leases and other contracts with vendors, tax-exempt certificates issued by the state.
Your local state association of nonprofits may offer a state-specific sample document retention policy as a member-only resource.
- Document retention policies apply equally to documents saved in the cloud, on a server, or in a filing cabinet. If your nonprofit is using digital storage, make sure you have a back-up plan!
- While having a document retention policy gives staff the green light to toss certain documents (on a schedule, preferably), as you are creating a policy specifically for your nonprofit, think about whether there are certain types of documents or specific documents that for the sake of history, or institutional memory, should be maintained permanently.
- State laws relating to employment (such as those governing employment/payroll) vary state to state and often have implications for document retention policies.
- Nonprofits serving minor children may need to retain records relating to minor children at least until the child reaches majority age, plus the time allowed by the state statute of limitations for the child-now-adult to bring a claim against the nonprofit.
- Check with the professional advisor/accounting firm that prepares your nonprofit's annual returns to the IRS and ask what documents may be needed in the event of an IRS audit, and how long to retain them.
- Your nonprofit may want to include a preamble to its policy, emphasizing the connection between a document retention policy and the fiduciary duty of the board of directors. This language is from the Minnesota Council of Nonprofits, Principles and Practices for Nonprofit Excellence.
..the adoption of a document retention policy sets guidelines and facilitates directors’ fulfillment of the duty of care, establishes transparency and ensures compliance.
- While it may not be obvious, email records are "documents" that should also be addressed in the nonprofit's document retention policy.
The Sarbanes-Oxley Act (SOX) is directed at improving corporate transparency and accountability. For nonprofits, key among the SOX provisions are document retention practices — yet the law doesn't provide explicit document retention schedules. Still, you're not left to figure it out on your own.
Here's a quick summary of common recommendations from the Charities Review Council and other nonprofit-focused organizations. In some cases, state-specific sample document retention policies are available through the local state association of nonprofits.
Keep in mind, however, these are simply guidelines. Your organization may choose to keep certain documents permanently — or on a schedule recommended by your finance or legal advisers.
Annual reports to the secretary of state or attorney general
Articles of incorporation
Board meeting and board committee minutes
Board policies and resolutions
Fixed asset records
IRS application for tax-exempt status (Form 1023)
IRS determination letter
State sales tax exemption letter
7 years after termination
Accounting and corporate tax records
|Annual audits and year-end financial statements||Permanent|
|IRS Form 990 tax returns||Permanent|
|General ledgers||7 years|
|Business expense records||7 years|
|IRS Form 1099||7 years|
|Journal entries||7 years|
|Sales records (books)||5 years|
|Petty cash vouchers||3 years|
|Cash receipts||3 years|
|Credit card receipts||3 years|
Bank deposit slips
Bank statement and reconciliation
Electronic fund transfer documents
Payroll and employment tax records
|State unemployment tax records||Permanent|
|Garnishment records||7 years|
|Payroll tax returns||7 years|
|W-2 statements||7 years|
|Employment tax records||At least 4 years after filing the year's 4th quarter taxes (or longer, if required by state law)|
Human resource records
|Employment and termination agreements||Permanent|
|Retirement and pension plan documents||Permanent|
|Records relating to promotion, demotion or discharge||7 years after termination|
|Accident reports and workers' compensation records||5 years|
|Background checks, drug test results, driving records and employment verifications||5 years|
|Resumes, employment applications and related materials (including interview notes) for employees||4 years after termination|
|Resumes, employment applications and related materials (including interview notes) for applicants not hired||3 years|
|Timesheets, compensation history and job history||4 years after termination|
|Performance appraisal and disciplinary action records||4 years after termination|
|I-9 forms||3 years after hire date or 1 year after employment ends (whichever is later)|
Donor and grant records
|Donor records and acknowledgment letters||7 years|
|Grant applications and contracts||7 years after expiration|
Legal, insurance and safety records
|Real estate documents||Permanent|
|Stock and bond records||Permanent|
|Leases||7 years after expiration|
|OSHA documents||5 years|
|General contracts||3 years after expiration|
When the retention period for any particular document has ended, be careful to erase, shred or otherwise destroy the document so that any confidential information can't be read or reconstructed.
This article draws on the expertise of Grace Davies, a Minneapolis-based attorney with special interest in product liability, medical malpractice and employment discrimination.