I have included a list of resources for deciding on retention deadlines and management of records.
There are those of us who see the mission and the vision of an organization as a spiritual process seeking and expressing the values of the organization. It is outward, not inward. It is the pursuit of excellence, not necessarily perfection. It is an experience of constant renewal; there is a dimension of the human soul and an orientation of the heart. It is a way of making sense of the insensible and insensible.
Beginning and working in a nonprofit organization is a leap of faith. It is walking to the end of a cliff and taking one more step. It is a calling that is difficult to put down. It is a risk about which we are passionate. With this spiritual side of an NPO, there are the hard facts that leadership, paper work, recordkeeping, management, budgets, grant writing, fund raising, cleaning the bathroom are the outward and visible signs of that inward and spiritual belief in the mission and the vision of the organization.
And so here we go.
How long should you keep records? Some records may have to be kept 3 years, some 7 years, some permanently. Your state or the grant or contract may have minimum requirements for keeping records. It is my suggestion that you have a written policy about keeping these records and more such as business-related web sites and significant e-mail at least through the state or Federal statute of limitations for bringing a lawsuit against the organization and any subsequent appeals. The statutes of limitation are different state by state and with the federal law; they are based on the type of suit or administrative complaint.
It is important that you meet with an attorney to assist on this and other policies to be certain you are appropriately protected.
Specific people should be assigned responsibility for maintaining specific files. Once these assignments are made, everyone in the organization should know who can assist in locating needed information, as well as to whom various documents should be given for filing. When an organization has staff and an office, the staff usually maintains the files for the organization in the office. Public disclosure laws require certain information be located in all offices with three employees or more. Privacy laws may affect the way you handle personnel records and the records of applicants for employment.
In an organization without staff, generally the secretary is responsible for maintaining corporate records, correspondence, and membership files, while the treasurer is responsible for all financial records. The bylaws should clearly state that the officer, secretary and treasurer are obligated to return all records to the organization president or chairperson when relieved of duties. Make sure board members know who is responsible for what, and that nothing falls through the cracks.
Nonprofit organizations should have a written, mandatory document retention and periodic destruction policy. Policies such as this will eliminate accidental or innocent destruction. In addition, it is important for administrative personnel to know the length of time records should be retained to be in compliance with the law and with contracts.
I also suggest checking with your attorney and accountant before destroying any records.
But First: An Important Tip - Always return all material to the proper file promptly to avoid loss of important documents.
Records and Files to Be Kept
The following are samples of records you should keep permanently, even if the law or a grant permits a shorter period. Your state/province may have statutes of limitation for legal action that will influence the maintenance and destruction of records. Some of these records will be important to preparing a grant application.
- Audit reports of accountant or board committee
- General ledger
- Cash books, petty cash, client funds
- Charts of accounts
- Transfer registers
- Bank statements
- Property lists and inventory, serial numbers, date of purchase, original cost, grantor(s) who paid for it, purchase records
- Checks (canceled, and especially for taxes, purchase of property, salaries, contracts, etc.)
- As appropriate copies of staff licensing (i.e. social worker, doctor, lawyer, psychologist, nurse), staff and volunteer motor vehicle insurance if driving clients or for other work duties
- Employment contracts
- Personnel records and material filed by applicants for employment
- Hiring policy, procedure and application forms; establish a written policy for the retention of applications, resumes and employment inquiry letters, from three to six months but there is an argument that you need to keep them through the statute of limitations for any potential law suit.
- All employee withholding, transmittal, reporting, forms filed.
- Written policies, procedures, forms and recordkeeping such as Personnel Manuals, Equal Employment, Anti-Sexual Harassment Policy, Drug and Alcohol-Free Workplace Policy, Violence in the Workplace Policy and Procedure Manual, Standards of Practice, Ethics, etc.
- Employee benefits and records of accrual, employee time and travel sheets
- Policies, applications and records of volunteers
- Correspondence (legal and important letters)
- Records of all gifts received and letters of acknowledgement
- Deeds, mortgages, easements and bills of sale
- Financial statements (at least end-of-year, other months optional unless required by law or a grantor)
- End of year trial balances
- Insurance policies and other records, correspondence, claims
- Current accident reports and claims
- Journals and minutes of Board meetings and attachments
- Charter or incorporation papers with amendments, bylaws and amendments and change of registered agent, state and local approvals and reports
- Purchase of Service Agreements.
- Memoranda of Understanding (MOU)
- Copies of all Federal, State and local tax documents, e.g.: Federal Employer Identification Number (FEIN), IRS designation letters, state identification number, all correspondence with the IRS and state including annual reports, 990 and so on
- All correspondence to or from federal, state and local taxing agencies, tax returns, extensions, worksheets, reports, income tax forms etc.
- Property records (costs, depreciation, blueprints, plans, etc.)
- Trademark registrations, patents and copyrights and applications
- Material related to any threat of or actual lawsuit or administrative claim including but not limited to civil rights, ADA and other potential liabilities, subject to statute of limitations; avoid destruction of e-mail and other records that may impact litigation
- Client or customer's files; client or customer complains, contracts, a state or federal Statute or a licensing organization may set time lines for retaining these files but be conscious of the statute of limitations for legal action by a client or customer
- Copy of all matters posted on your web site
- Significant and relevant e-mail, instant messaging, and other telephonic communication systems
- Labor contracts
- Training and orientation material
- Hardware and software licenses
- User names and passwords
There are two other files that the organization and development people should create, The Dream File and The Memory File:
The Dream File – This file should contain the dreams of programs and activities that leadership, staff and others present for funding ideas. They may be somewhat far fetched. They cannot be off-mission, however. The record of a dream may be simply a few lines; it may be several pages with details started. Take the time to dream and capture the dreams for potential funding opportunities and partnerships. Add to the dream file material from what you read or what you hear, a line may make a good opening to a grant application if on mission I have used lyrics of Bruce Springsteen successfully more than once to lead off the cover letter.
The Memory Files - These files should contain information that a potential funder may request. Have them clearly available so that there will be no delay or lost opportunities for grants. There is no consistency about what funders want. These are samples of commonly requested material:
- Original verified copies of the Articles of Incorporation and any amendments, and copies of the bylaws and all amendments,
- History and mission of the organization,
- The completed IRS Form 1023, FEIN, state identification number or other papers
- The last three years of 990s, audits and management letters,
- Employee and board job descriptions,
- Leadership resumes,
- Current annual budget,
- Board minutes and fiscal reports for the most recent 12 month period,
- Evaluations and monitoring reports by any funders,
- Press coverage, Internet references
- Names and short biography of board members and staff management and leadership,
- Templates of the description and brief history of the organization, its mission, goals, objectives, activities,
- List of current funding sources,
- Business or strategic plan, needs assessment and priority studies,
- Building plans and
- Any other papers you believe may be relevant to a government, foundation or corporation.
Funders may request all material be on back-to-back paper for conservation. Others may request 20 copies of everything. Follow the instructions. Provide what they ask for. Follow instructions as to what they do not want. You are putting your best foot forward here. Show your professionalism, your passion and abilities.
The recordkeeping about recordkeeping should give guidance concerning categories of records, access to records, forms, schedule for retention or destruction, schedule for archiving if appropriate, methods for retrieval and notice of who is responsible for the action.
The board needs to develop written policies, procedures, forms and recordkeeping capability for fiscal, legal, contract, employment and other accountability. Who will maintain the corporate files for fiscal accountability? Who does not have access to certain records? How will the board know what is going on?
Where do you keep these records? What facts and documents of your organization are available to the public? If you receive public funds there may be requirements from your state law or funding source about more public accountability. If you have staff, there are certain personnel records that may not be released, such as health records. On the other hand, there are some personnel records open for inspection at least to funders. What other records should an organization retain permanently and in what format? Who may have access to the records?
What policy and procedure will you have for destruction and retention of records? What system will be used for retrieval of documents? Who has access and who has the right of access to these records?
Where do you store the old records for your organization? In a disaster, how vulnerable do you think these records will be? There are consultants to help you assess the vulnerability of your organization to disaster, but they may be more costly than you can afford. But what can you afford if you lose everything?
The best advice: Plan ahead. Keep copies of backup material off site. Store it in an electronic vault or secure web site if necessary. Double-check your insurance – does it cover floods if you are near water or other disasters? Develop a plan for protecting your business so you will be up and running as soon as possible.
If you are going to seek grants, be certain you have looked carefully at the responsibilities, recordkeeping and reporting in the application and in the contract.
I am required to tell you that I am a licensed attorney in New Jersey. It is not my intent to provide you with legal advice. I may have given you legal information but I have not given you legal advice. Reading this material is not a substitute for seeking legal assistance in these decisions.
Document Retention Limits
A limited list from Pfau Englund Nonprofit Law can be found at http://www.nonprofitlaw.com/retention.shtml
Records Retention Schedule at Delaware Association of Nonprofit Agencies’ web site - http://www.delawarenonprofit.org/toolstemplates/managefinance_faq2.php
Document Retention In The Digital Age: How Long Is Long Enough? By Philip L. Gordon of Littler Mendelson, P.C. - http://library.findlaw.com/2004/Sep/27/133589.html
The Basic Guide to Nonprofit Financial Management by Carter McNamara at http://www.mapnp.org/library/finance/np_fnce/np_fnce.htm
See the Policies for Financial Accountability at Idealist/Action Without Borders http://www.idealist.org/if/i/en/faq/56-25/50-5
Financial Management - http://www.allianceonline.org/FAQ/financial_management
Foundation Center Tutorial, Proposal Budgeting Basics - http://foundationcenter.org/getstarted/tutorials/prop_budgt/
The Sarbanes-Oxley Act and Implications for Nonprofit Organizations – http://www.independentsector.org/issues/sarbanesoxley.html
Compendium of Standards, Codes, and Principles of Nonprofit and Philanthropic Organizations - http://www.independentsector.org/issues/accountability/standards2.html
Audit Committee Toolkit - http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm
Checklist for Accountability - http://www.independentsector.org/issues/accountability/Checklist/index.html
Insurance Questions for Nonprofits – http://www.idealist.org/if/i/en/faq/144-221/50-5
Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations. http://www.nonprofitpanel.org/report/principles/Principles_Guide.pdf and http://www.nonprofitpanel.org/
What Must We, What Can We Disclose to the Public, Staff, Board and Clients? - http://www.nonprofits.org/if/idealist/en/FAQ/QuestionViewer/default?category-id=1&item=1505&sid=40057025-157-xBkAU
Standards for Charity Accountability - http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=4dd040fd-08af-4dd2-aaa0-dcd66c1a17fc
Nonprofit Governance and Accountability - http://www.jhu.edu/listeningpost/news/pdf/comm04.pdf
Evangelical Council for Financial Accountability Standards and Best Practices - http://www.ecfa.org/Content.aspx?PageName=ECFABestPractices
Maryland Nonprofits: Standards for Excellence - An Ethics and Accountability Code for the Nonprofit Sector - http://www.marylandnonprofits.org/html/standards/04_02.asp
Grant Writing Tools Web Sites - http://www.idealist.org/npofaq/19/64.html
IKnow is Interactive Knowledge for Nonprofit Organizations Worldwide - http://www.iknow.org/Main.cfm?Main=14
Is a Grant Right for Your Agency? A helpful one page check list from U.S. Department of Agriculture - http://www.nal.usda.gov/wicworks/Topics/grant_checklist.pdf