Document Retention Policy: Best Practices for Boards

In a perfect world, your nonprofit will never need to rely on your document retention policy. Unfortunately, that’s not a reality for many nonprofits. If your board ever has to face the distressing circumstances of dealing with allegations or litigation, having a document retention policy could save the day. By following document retention policy best practices, you’re positioning your board to defend any actions that come your way.

It’s important for nonprofit boards to remember that the purpose of your document retention policy (and all your policies) is designed to protect your organization and your board. For that reason, it’s crucial for nonprofit boards to ensure that everyone involved with the organization follows it and the board enforces the policy.

What Is a Documentation Policy?

A document retention policy outlines how the board, staff, and volunteers should manage the organization’s paper and electronic documents from the time they’re created until the time they’re destroyed.

State and federal laws govern the types of documents that corporations and nonprofits have to retain and the length of time the organization has to make them available as needed for investigations and legal purposes.

An essential part of document policy retention practices is to review the policy annually. New technologies continue to evolve that could potentially have a bearing on document retention laws and practices. By reviewing your documentation retention policy at least annually and comparing it against new laws, emerging case law, and changes in technology, your board will be able to demonstrate that it’s actively managing risks associated with document retention.

Why Does Your Nonprofit Need a Document Retention Policy?

Your nonprofit provides valuable services to your community that can’t be provided any other way. The last thing nonprofit board members need is to be distracted from their essential mission by needing to dig through mounds of paper or electronic files to defend the organization against allegations of wrongdoing.

A well-crafted documentation retention policy helps to demonstrate to a judge and any opposing parties that they’re willing and able to present any relevant documents. In the event that the nonprofit has already destroyed pertinent documents, a document retention policy forms the basis for ensuring that the nonprofit had a legitimate, neutral, and verifiable purpose for destroying them.

A term that nonprofit boards should be familiar with is the “spoilation doctrine,” which is defined as an individual or organization that intentionally destroys documents that could be potentially significant to pending litigation. You don’t want to knowingly put your board in a position where a judge requests a particular document and you’re not able to produce it because it’s been destroyed without a valid reason. Such an action could cause the ruling to go against your board and it could be detrimental to your organization.

A judge may very well rely on document retention policy best practices when ruling on whether your board has a reasonable explanation for not being able to produce evidence of documentation.

These are some of the issues judges typically consider when ruling on issues of document retention practices:

• Whether your nonprofit has a document retention policy
• The wording and requirements of your document retention policy
• Whether you consistently review, update, and enforce the policy
• Whether you train relevant individuals according to the policy
• Whether your policy is in legal compliance
• Whether you had a reasonable reason for destroying a document

As a word of caution, if you keep documents longer than your documentation policy states, it could make your nonprofit vulnerable to claims based on old documents that were created or held by people that haven’t been involved with the organization for years. This is a problem that can cause nonprofit boards great headaches. Document retention policy best practices will help you avoid this type of problem.

Document Retention Policy Best Practices

During the course of your board’s work, you have several cycles to keep track of, and document retention is one of them.

The life cycle of document retention follows this cycle:

• Creation
• Distribution
• Maintenance
• Retention
• Destruction

Document retention policy best practices are the key to ensuring responsible and reasonable procedures that hit every note of the document retention cycle.

Here are 12 important document retention best practices to share with your board:

1. Appoint a committee or individual to manage the process for developing and reviewing your document retention policy. Committees should include at least one board member, a legal consultant, and perhaps an IT expert.
2. Review all state and federal regulations for document retention policies for nonprofits. Note that state laws vary between states.
3. Your policy should specify which documents you need to retain and who has responsibility for each of them. Documents could consist of slides, discs, or tapes, in addition to paper and electronic documents. Check to see if your state has adopted the Uniform Preservation of Private Business Records Act, which defines “business record.” If so, include the term and definition in your policy wording.
4. Your document retention policy should begin with a policy statement. Follow it with a retention schedule that details every possible type of document you could retain and attach a required retention period to it. Mission Box provides a guide that provides an excellent example of how to organize your document retention list.
5. Indicate within your policy where your organization stores paper files and electronic files. Note whether electronic files are stored online, on devices, or in the cloud, and your procedures for backups.
6. Clearly indicate how long to keep documents and when to destroy them.
7. Be clear on who has access to particular documents and how you’re controlling access to those documents during board member turnover. This is especially important as it relates to confidential or sensitive information.
8. Include an explanation of your document retention policy in your board orientation process and training protocols for staff and volunteers.
9. Set a timeline for establishing a document retention policy, getting board approval, and rolling out the policy to individuals impacted by the policy.
10. Your policy should prohibit anyone involved with your nonprofit from creating or distributing documents that are misleading, fraudulent, sexually explicit, obscene, racially-motivated, inaccurate, or that would reflect poorly on your nonprofit in any way. Detail the possible consequences for any individual that violates your policy.
11. Outline the acceptable use and required security protocols of personally owned electronic devices for individuals partaking in nonprofit business including computers, mobile phones, cloud storage, and physical storage. Also be sure to address acceptable communication protocols for personal email accounts, personal internet sites, blogs, and personal social media accounts.
12. Review your document retention policy annually against best practices and note this action in your board meeting minutes.

The best tool that your board can have to address every point in the document retention cycle is your BoardEffect board portal. If a document retention matter ever comes to your attention, you’ll know that you can locate your document retention policy and any relevant documents expediently.

Furthermore, you’ll be able to demonstrate who had access to certain documents because of the granular permissions feature. You can easily show that you’ve retained the documents in question according to your document retention policy.

Finally, documents are critical in the outcome of legal proceedings. A well-established document retention policy that follows best practices may prevent litigation from becoming a reality. Poor organization is a reflection on your nonprofit’s leadership, and it can negatively affect your organization’s donations and reputation. Your board portal makes it easy to include a review of your document retention policy as part of your annual cycle.