As nonprofit organizations recover from the rush of giving around the holiday season, many are left wondering how to appropriately keep accurate fundraising records. Along with maintaining the privacy of personal information and keeping fundraising data easy to access, organizations must also follow certain regulations regarding the retention of records.
Guidelines for Keeping Accurate Fundraising Records
The IRS and the State of California publishes specific regulations when it comes to fundraising records retention, and many nonprofit organizations follow nonprofit best-practices along with their agency-specific guidelines when it comes to keeping and destroying records. While it’s not realistic to suggest that all records be kept indefinitely, it’s important to maintain access to records that may be subject to review by IRS request or during the course of the audit process. As part of your 990 filing, your organization will be asked if you have a document retention and destruction policy on file. Every California nonprofit organization should have a specific document management policy ready to present upon request.
There are some records that apply to the governance and fundraising activities of nonprofits that must be retained permanently. Documents including your Articles of Incorporation, IRS Determination paperwork, insurance policies, audit reports, tax returns, deeds and corporate resolutions should be kept on file indefinitely. Other fundraising-related records can be moved or destroyed after a certain period of time.
Destruction of Documents
Scandals involving nonprofit organizations led to the creation of specific laws that govern the nature of the records that agencies are required to keep. Though some records may legally be destroyed, it may be beneficial to your organization to maintain their accessibility for accounting purposes.
Individual nonprofits should take the time to consider which documents must be retained and which can be destroyed or stored. Inactive records may be stored electronically, however, they must remain easily accessible and it is important to note that electronic records must be backed up and protected from external manipulation. As a general rule, documents relating to fundraising and business operation should be maintained for a minimum of 10 years.
Smaller nonprofits can utilize a simple document management policy, in order to comply with state and federal laws. More established nonprofit organizations should regularly review their document handling and retention policies to ensure that they remain relevant and fall within California law. Any document policy published by a nonprofit organization should be shared with employees and board members to prevent the inadvertent destruction of important documents.
Our nonprofit audit services give our clients peace of mind and help them decide how to best utilize their financial resources in the future. If you have any questions about our nonprofit services, one of our CPAs would be happy to speak with you at (925) 933-2626 or, email us at firstname.lastname@example.org.