Some documents and business records of a nonprofit should be maintained permanently, such as:
Just as removing emails from your inbox on a regular basis is good housekeeping, and so is discarding non-essential paperwork from old file cabinets. But what if you inadvertently throw out something critical? How will your staff know what to discard and what to save? Having a document retention/destruction policy will give everyone guidance on what to save, what to archive, and what to shred – and when.
The IRS explains why it asks about document retention policies on the Form 990:
"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
The Sarbanes-Oxley Act’s prohibition of the destruction of documents that are subject to review in litigation provides an additional rationale for every nonprofit adopting a document retention policy. This will create a regular business practice of systematic document destruction in accordance with an approved schedule. Having a written policy, and regular business practice of document destruction according to a schedule, lets people know what documents to retain (and for how long). Such a policy is not only a prudent practice but also sound risk management.
The process of developing a document retention policy involves: (1) Identifying what types of paperwork (and electronic files) your nonprofit generates; (2) Determining the appropriate (and legal) length of time to retain them; and (3) Recording those retention times on a written schedule.
Q: Where can I find the most up-to-date regulations or guidelines that govern document retention for non-profits in the US?
Unfortunately there is no one regulation or guideline that governs document retention for all nonprofits. Laws relating to document retention are state-specific in many cases (such as those governing employment/payroll). 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, which can differ from state to state. Also, many nonprofits, particularly those engaged in providing health-care services or those serving minor children, are subject to retention requirements that are specific to, or prudent for, the services they provide.
For instance, for nonprofits serving minor children, it is generally wise for the nonprofit to maintain case files at least until the child reaches majority age plus the time period for a claim to be filed. So while a sample policy will not be applicable to all nonprofits, there are fairly standard categories, which you can read about in the Blue Avocado article linked to below, for what generally needs to be retained. Those categories are then your starting point for checking state-specific regulations. It is also wise to 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. While it may not be obvious, email records are "documents" that should also be addressed in the nonprofit's document retention policy.
- Read all about what a document retention/destruction policy should cover in this article from Blue Avocado that also includes a sample policy developed by a lawyer who specializes in working with tax-exempt organizations.
- Sample document retention/destruction policy (Charities Review Council).
- Memo for guidance on document retention and destruction and a sample document retention policy (Public Counsel Law Center).
- Sample document retention policy (American Institute of Certified Public Accountants).
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