Not-For-Profit and Nonprofit Record Retention Best Practices

The system will show, among other things, receipts, purchases, expenses, any employment taxes, and assets. The size https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ of your nonprofit may dictate what type of recordkeeping systems you employ, but all organizations need to keep all documentation that supports their claims. An exempt organization must make available for public inspection its annual information return (e.g., Form 990, Form 990-EZ). Returns must be available for a three-year period beginning with the due date of the return (including any extension of time for filing) or, if later, the date it is actually filed. For this purpose, the return includes any schedules and attachments that are filed with the form. Note, however, that an exempt organization, other than a private foundation, need not disclose the name and address of any contributor.

Nonprofit Compliance Legal Checklist: Annual Meeting, Donor Acknowledgements, 990s, Grant Reports, State Reports

This question is often a concern that is mistakenly placed on the back burner by nonprofits. However, keeping documents for the proper length of time is crucial when it comes to maintaining regulatory compliance. A very good overview of the Act including the provision for the retention of documents is “Nonprofits and Sarbanes-Oxley”.

Document Retention Requirements

Nonprofits are allowed to save their files on Cloud services like Google Drive or Dropbox.However, files must be kept in a format that can be accessed easily. For example, directors, auditors, members, and creditors all have rights to access records to varying degrees. And their access to these records cannot be blocked by a technological barrier.

Overview of Record Keeping Obligations for Non-Profit Organizations and Registered Charities

• There are generic templates available, though policies should be customized to fit each not-for-profit’s (NFP) unique needs.
• When the record keeping requirements imposed by CRA differ from the requirements imposed by an organization’s governing legislation, the organization should always adhere to the more onerous requirement.
• This could involve creating separate folders for income statements, expense reports, donor information, and grant applications.
• That makes it prudent for nonprofits to keep scrupulous financial records and enables them to continue to make a much-needed difference in this world.
• Memo for guidance on document retention and destruction and a sample document retention policy (Florida Association of Counties).
• Records will include statements, canceled checks, cash register receipts, credit card sales slips, invoices, and petty cash slips.

Moreover, financial records play a crucial role in strategic planning and decision-making. By analyzing past financial performance through these records, nonprofit leaders can identify trends, allocate resources more effectively, and set realistic goals for future growth. A policy that spells out what to do with all the files helps management and the Board run the organization smoother. Document retention policies are a necessary part of nonprofit management, but not everyone knows what to include or how to go about file storage. If changes are made in a nonprofit organization, then make sure to include all documentation of this.

• Be sure to maintain records showing what assets your nonprofit owns, such as buildings, furniture, or investments.
• An organization is not required to provide a copy of its Form 990 if the organization has made that form publicly available (e.g., through Internet posting), but must nevertheless make the form available for in-person inspection.
• The books must show, among other things, gross receipts, purchases, other expenses, employment taxes, and assets.
• When creating an annual budget, your nonprofit should be realistic; if not, it could result in overspending during the year.
• Otherwise there may be tax problems that stem from a lack of due diligence.

A document retention policy generally establishes the length of time certain documents and electronic records should be retained by the organization. Failure to keep proper financial records can result in legal and financial consequences for nonprofits. This may include penalties from regulatory agencies, loss of tax-exempt status, and damage to the organization’s reputation. Additionally, it can hinder the organization’s ability to make informed financial decisions and fulfill reporting requirements. This could involve using locked filing cabinets or safes for sensitive paperwork such as tax returns or donor information. It is also advisable to create backup copies of important files—both digital and physical—to safeguard against loss due to unforeseen circumstances such as natural disasters or technical failures.

• Nonprofits with employees must keep records in accordance with employment laws.
• This includes annually publishing a racial non-discrimination policy through the newspaper or via broadcast media to the community it serves.
• However, when minutes are used as evidence, courts usually value minutes that are approved soon after the original meeting, and approved by the board members who were present at the meeting.
• Any signs of irregularity or financial mismanagement can cause a nonprofit to lose its monetary backing.
• Returns must be available for a three-year period beginning with the due date of the return (including any extension of time for filing) or, if later, the date it is actually filed.
• All staff should be familiar with these policies so they can keep appropriate records and not destroy any unwittingly.

For each document, add its location or where it is stored.

While our clinics are supported by the above organizations, the Queen’s Law Clinics is solely responsible for all accounting services for nonprofit organizations content. The United States Internal Revenue Service has a guide, Publication 4221-PC, to help walk you through compliance for public charities. Fund your mission and transform your impact by reading The Ultimate Guide to Nonprofit Fundraising. If they were originally created in a different language, a translated version must be available.