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Nonprofits generate a significant volume of records in the course of their operations, including governance documents, financial records, employment files, grant materials, and routine correspondence. Without a clear framework for how long those records are retained and when they are destroyed, organizations often default to informal or inconsistent practices that create unnecessary risk.

A records-retention and document-destruction policy provides structure. It establishes predictable rules for managing information throughout its lifecycle, supporting compliance while reducing exposure that can arise from disorganized or ad hoc recordkeeping.

What a Records-Retention Policy Is Designed to Do

At its core, a records-retention policy answers three questions:

• What records must be kept?
• How long should they be retained?
• When may they be destroyed? 

The goal is consistency. When retention decisions are made case by case or left to individual staff members, nonprofits risk treating similar records differently, which can create problems during audits, disputes, or regulatory reviews.

A well-designed policy also assigns responsibility. Without clarity about who manages records and enforces retention timelines, even well-intentioned policies can fail in practice.

Legal and Regulatory Reasons Retention Policies Matter

Nonprofits operate under overlapping legal and regulatory requirements that affect how long certain records must be retained. Federal tax rules, employment laws, and grant agreements all impose documentation obligations, many of which are enforced or reviewed by tax authorities, labor agencies, courts, or grantmakers, depending on the context.

Importantly, compliance does not require retaining every document indefinitely. In some circumstances, keeping records longer than necessary can increase exposure by expanding the universe of materials subject to review or production. A retention policy helps nonprofits strike a balance between preservation and disposal that reflects legal requirements rather than institutional habit.

Document Destruction as a Compliance Practice

Document destruction, when done pursuant to a written policy, is a standard and appropriate part of records management. Structured destruction helps ensure that records are eliminated consistently, rather than selectively or reactively.

Problems arise not from destruction itself, but from destruction that occurs without a policy, without documentation, or at the wrong time. A clear policy provides a defensible framework showing that records were destroyed according to established rules, not in response to a particular event or inquiry.

Legal Holds and When Destruction Must Stop

One of the most important features of a records-retention policy is its interaction with legal holds. A legal hold requires an organization to suspend routine destruction when litigation, an audit, or a government inquiry is pending or reasonably anticipated. Legal holds can arise during:

• Financial or programmatic audits
• Grant compliance reviews
• Employment disputes
• Government investigations

A policy should make clear when destruction must be paused and who is responsible for implementing the hold. Continuing routine destruction after a legal hold is issued can create significant legal exposure, even if the underlying records are unrelated to the event that led to the hold and would otherwise have been eligible for disposal.

Audit and Investigation Protection

Clear retention policies can be particularly valuable during audits or investigations. When records are missing, organizations may be asked to explain why. Being able to point to a consistently applied policy can demonstrate good-faith compliance and reduce suspicion around gaps in documentation.

There is a meaningful difference between records that were never created, records that were improperly destroyed, and records that were disposed of pursuant to an established retention schedule. A policy helps clarify that distinction.

Managing Digital Records and Electronic Storage

Digital records present unique challenges for nonprofits. Email inboxes, cloud storage, shared drives, and collaboration platforms often accumulate documents far faster than paper files, and these digital troves are less likely to be managed systematically.

A records-retention policy should apply equally to digital and physical records. Without guidance, electronic records are often retained indefinitely by default, increasing storage costs and legal exposure while undermining the purpose of having a retention framework at all.

How Outside Counsel Can Help Establish or Review a Records Policy

Nonprofit general counsel can assist with developing or reviewing records-retention and document-destruction policies that reflect the organization’s size, operations, and regulatory obligations.

The Law Office of Cameron Hawkins can help Atlanta nonprofits tailor retention schedules, advise on legal hold procedures, and ensure policies align with tax, employment, and governance requirements without becoming overly complex.

Call (678) 921-4225 to schedule an appointment.