Three Reasons Why You Need a Document Retention Policy
To effectively manage the volumes of digital and hard copy documents the typical association produces and collects, boards should consider having a document retention/destruction policy. The policy’s purpose is to identify the responsibilities of staff, volunteers, board members, and even independent contractors or consultants to either maintain or delete documents at the appropriate time, explained Jennifer Chandler, vice president of the National Council of Nonprofits. Chandler provided three reasons why boards should consider one.
  1. It’s a best practice. The Internal Revenue Service’s Form 990, which nonprofits are required to file on an annual basis with the necessary financial information, asks whether the organization has adopted a written document retention and destruction policy. A written policy is a best practice and good governance for associations, said Chandler.
  2. It's practical. Keeping copies of everything indefinitely could overload an organization’s storage capacity and actually make it harder to find specific documents in the archives. Also, stated Chandler, it could subject important documents to accidental or innocent destruction. A policy will help reduce the risk of such loss by providing clear guidance about when documents may or may not be destroyed. This empowers people to take the initiative and ask questions about a document that they don’t see noted in the policy.
  3. The organization could face legal liability. Certain federal and state laws prohibit the destruction of various documents. If your organization doesn’t have a policy and destroys or deletes a document, the act of deleting the document could — in the context of an investigation of wrongdoing — result in an accusation of intentionally hiding or destroying evidence, said Chandler. On the other hand, having a policy and a business practice to follow the policy regularly offers protection from such claims.
When developing a policy, a board should establish rules for different types of documents. For example, for records such as board meetings minutes or documentation of the association’s tax status, the policy might call for the organization to retain them permanently. Other documents, like bank statements, invoices, asset inventories, or receipts, might only need to be retained for a set period – perhaps three to seven years, said Chandler. Further, for organizations that are eligible to accept tax deductible donations, records need to be kept of donations for a certain period because donors may need to produce a record of a gift if they are audited by the Internal Revenue Service.

The specific types of documents to retain, and for how long, should be determined in consultation with association legal counsel so that both state and federal laws are considered. For each association, the list of documents and parameters will be different. Many state associations of nonprofits offer templates that are state-specific that associations can use as a guide to determine how long to retain which documents, said Chandler. Once the policy is drafted, it should be shared with all board members, volunteers, staff, and contractors so that everyone is aware of the policy and can follow it in the context of their roles.
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