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To Keep or Not to Keep … That is the Question

Has this ever happened to you?  You are sitting in a sea of files and wondering if it is the right time to send them to the shredder.  Or someone from your team says, “I just uncovered a bunch of files from 2005.  Can I delete them?”

If your organization has a comprehensive and clear document retention and destruction policy, ensuring you are doing the right thing should not be a problem.  However, if your organization does not have a policy, it is probably time to put one in place.

Having an established policy will not only provide guidance on what to keep and for how long, but will provide instruction on document destruction.  Furthermore, when asked on the Internal Revenue Service (IRS) Form 990, Return of Organization Exempt From Income Tax, Part VI, “Governance, Management, and Disclosure” (Question 14) about having a policy, your non-profit organization can confidently answer “yes!”

If you already have a policy in place you are on the right track.  However, it may be a good time to revisit it and ask the following questions:

  • When was the last time the policy was reviewed and updated?
  • Is it compliant with federal and all relevant state requirements?
  • Have all employees been made aware of and trained on the policies?
  • How closely are policies being followed?

As we approach the summer and fall months, many organizations take advantage of this slower time of year to purge old and unneeded documents.  Before you start your “house cleaning”, it is wise to review your document retention and destruction policy to make sure that your organization is fully compliant with federal and state requirements and that your employees are well versed in the policies.

Unfortunately, there is no uniform regulation that covers all non-profit organizations, however if you do operate in more than one state, your policy should reflect the requirements stipulated by each state.  And, a good best-practice approach is to always adopt the more stringent state policy (specifically for employment/payroll documents).

When creating or reviewing your policy, the following information should be considered:

  • Identification of retention responsibilities by role — employee, volunteer or Board position
  • What types of documents are covered by the policy:
  • Paper documents
  • Electronic documents
  • Emails
  • Historical documents
  • Documents germane to ongoing or anticipated government investigation or proceeding (as instructed by legal counsel)
  • Documents subject to government auditing standards
  • Identification of types of documents and minimum retention requirements

While there is no one size fits all policy, there are some documents that should be maintained permanently, including:

  • Articles of Incorporation
  • IRS determination letter and all related correspondence from the IRS
  • Corporate resolutions
  • Audit reports, from independent audits
  • Insurance policies
  • Board meeting minutes
  • Real estate deeds and mortgages

Document retention polices should also contemplate all types of media, not just what is sitting in your filing cabinets.  If your uses digital storage, such as a server or “the cloud,” you should make sure that you have a plan for “back-up” that meets your needs and can handle the volume of generated documents.

By embracing the approach and concepts outlined above, you should be well on your way to developing a sound document retention and destruction policy for your non-profit organization.  If you have questions or need further guidance, please contact info@calibrecpa.com for assistance in drafting a policy.

Written by Mary Margaret Prange, CPA | Partner

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