A nonprofit record retention policy helps organizations manage documents efficiently while ensuring compliance with legal and regulatory requirements. Organizations need to develop a policy that addresses different document types, retention periods, document storage and document destruction. Here are some key guidelines to consider:
Permanent Records – These documents should be kept indefinitely:
- Governing Documents: Articles of Incorporation, Bylaws, Board policies and resolutions.
- Financial Records: Audit reports, year-end financial statements, depreciation schedules.
- Legal & Compliance: IRS determination letter, tax-exempt status application (Form 1023), patents, trademarks, copyrights.
- Board & Committee Records: Meeting minutes, annual reports.
- Property Records: Real estate deeds, mortgages, bills of sale.
7-Year Retention:
- Financial Documents: Accounts payable ledgers, expense reports, invoices, payroll records.
- Personnel Records: Employee files (for terminated employees), timesheets, withholding tax statements.
- Contracts & Agreements: Leases, vendor agreements, grant documentation.
- Tax Returns
3-Year Retention:
- Banking Records: Bank statements, reconciliations, duplicate deposit slips.
- General Correspondence: Communications with vendors, donors, and customers.
- Insurance Policies: Expired policies and related documents.
Note – Electronic records should be retained as if they were paper documents.
Once the organization has decided on the retention periods of the different types of documents, document storage and destruction should be addressed:
Document storage & security:
- Maintain both physical and electronic records securely.
- Implement access controls to protect sensitive information.
- Regularly back up electronic records.
Document destruction:
- Establish a routine schedule for document disposal.
- Use secure methods such as shredding or digital deletion.
- Ensure destruction aligns with legal requirements.
To ensure clarity and compliance, the record retention policy should be reviewed regularly with employees, reinforcing its importance and application. Additionally, management should conduct an annual assessment of the policy to identify any necessary updates or improvements.
Note that this is a “guide” and that various regulations and statutory requirements, as well as specific needs, should be considered before a records retention program is put into effect.
Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.
