Records losses for a non-profit organization could prove catastrophic. In addition to potentially crippling operations, losses could be a violation of federal and state document retention policies, such as the Sarbanes-Oxley Act. Because records-related incidents could have implications that a non-profit might not expect, it is wise to create a document retention policy with retention schedules, as well as a disaster preparedness plan that includes document drying and restoration.
Document Losses are More than Paper Loses
When documents are damaged, non-profit organizations may lose vital data that could hinder business continuity after a disaster. This data may include information regarding:
- Donor records
- Fundraising activities
- Licenses and permits, such as business licenses, permits to hold events (e.g., raffles and fairs), and licenses to solicit contributions
- State-issued tax-exempt certificates
- Insurance policies
- Banking and investment records
- Sensitive client or patient records
- Programs and activities
- Grants
- Employee and volunteer records
- Leases
- Vendor contracts
- Bookkeeping records
- Titles and deeds for assets
Many of the records listed are important for budgeting goals and tax purposes. The information is also crucial if an organization must provide reports to government agencies to receive funding. However, the greatest loss a non-profit will suffer if its documents are compromised is the trust that donors and other stakeholders place in the organization.
Managing Retention Schedules
It is not enough for a non-profit to simply file away its important documents. The organization should also implement a written document retention policy to ensure staff members and volunteers are consistent regarding records management. The Internal Revenue Service states that document retention and destruction policies identify the responsibilities of board members, staff, volunteers and other stakeholders regarding the storage and destruction of records and documents, including electronic records. When creating records management policies, an organization should refer to local and federal laws, as retention laws vary by state and industry.
Document Retention Suggestions
The following recommendations come from California attorney Tom Silk. Please keep in mind that retention laws in your state may differ.
Retain Permanently
- Audit reports
- Investment records
- Checks written or received for important payments (e.g., taxes, contracts, property purchases)
- Active contracts and leases
- Correspondences regarding important and legal matters
- Donation records of significant restricted funds and endowment funds
- Financial statements
- General ledgers
- End-of-year statements
- Insurance policies and records
- Meeting minutes
- Bylaws and articles of incorporation
- Tax returns and tax-related documents
- Corporate resolutions
- Bills of sale
Retain for 10 Years
- Accounts payable and receivable ledgers and schedules
- Bank statements
- Cash books
- Canceled checks that were not written or received for important payments
- Expired contracts and leases
- Depreciation schedules
- Deposit slip duplications
- Expense analyses and distribution schedules
- Inventories
- Invoices sent to customers
- Invoices received from vendors
- Journals
- Payroll records
- Sales records
- Salvage and scrap records
- Subsidiary ledgers
- Timesheets
- Voucher registers and schedules
Retain for Seven Years
- Post-termination employee personnel records
Retain for Four Years
Retain for Three Years
- Employment applications
- Internal reports
- Purchase orders
When creating a document retention policy, keep in mind that they equally apply to physical documents and electronic documents saved on a computer, electronic device, hard drive, server and in the cloud. If your organization is paperless, policies should outline when physical documents are necessary to keep, as well as the process for saving, altering and destroying electronic records, including emails and voicemails.
A good retention also includes provisions for salvaging damaged documents. Polygon’s Code Blue® program assists non-profit organization with this essential aspect of disaster recovery and business continuity. When an agency participates in the complimentary program, a document drying and restoration specialist will help it create a document disaster recovery plan and response protocol. Because clients receive priority services, no time is wasted if there is an incident. Learn more about the benefits of Code Blue by contacting Polygon today.
