Records Retention – 3 Problem Areas You need to Avoid

When it comes to record retention within your nonprofit did you know that there are three ways you can run into problems?

1.       If records are not kept long enough, there is a problem.

2.       If records are kept too long, there is a problem.

3.       If there is no documented policy and you are not managing record retention to that policy, there is a problem.

It was the lack of compliance with the records retention policies that caused serious difficulties for the firm involved with the Enron collapse several years ago.   The reality is that your Records Retention policy is not something that just sits on the shelf.   It really is a living/breathing document that needs attention – not just relative to an annual review of the document, but also to the execution on what those policies actually say.

Clearly, either paper or electronic files must be kept as long as they serve a useful purpose for the organization, or as long as required by legal and regulatory compliance authorities.     For a nonprofit organization where funding is provided by federal and state grants, the retention requirements are typically stated within the grant award documents, or by the funding department.

Finding an appropriate records retention guideline is as simple as a Google search.   Of course, it’s important to consider the source, but the following is a link to the American Bar Association list of resources for appropriate guidelines based on the type of organization, or simply to find an overall legal view of the issues with document retention:  http://www.abanet.org/tech/ltrc/fyidocs/rm.html.

Many organizations think of document retention as only paper documents.    But – the reality is that your policy should cover not just paper documents, but also electronic files.   And, the commonly accepted theory is that you need to destroy the documents as soon as they meet the destruction timeframe as listed in your formal records retention policies.

So, how does a policy of this nature play out in the day-to-day world we all live in?    A practical approach is that you create a file listing with each type of document that is important to your business, and the creation dates are noted.    At the same time, you note the destruction date.   For instance if your AP Invoice retention guideline is 7 years, you would now be handling the destruction of AP Invoices for 2003.

The policy needs to define the time period under which the policy is executed, on an annual basis at a minimum.   Our firm policy indicates that in July each year, our office manager is tasked with reviewing the policy and listing each file that currently meets the destruction deadline for this year.    She then pulls the appropriate documents, and makes the appointment for the shredding company we have engaged to come to the office, and shred.     It is definitely a big job, but a terrifically important one.

 

Freeing nonprofit, government and for-profit organizations to focus on mission and strategy, Huckstep & Associates is proud to have customers throughout the central United States including Arkansas, Colorado, Michigan, Minnesota, Missouri, Kansas, Nebraska, Oklahoma, Texas and Wisconsin.

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