A nonprofit must keep clear and complete records to ensure that it complies with tax rules. Good recordkeeping systems allow organizations to better evaluate their programs, monitor their budget, and prepare financial statements and returns. As a best practice, organizations should have a Document Retention Policy that describes what records should be kept on file and for how long.
Topics Covered:
Financial records
The law does not require a certain kind of record system because it will vary by organizational size. The system, however, should include these items:
- Receipts: Amount received from all sources
- Purchases: Items bought, including any items resold to customers
- Expenses: Other costs to run programs
- Employment taxes (for staffed organizations)
- Assets: Property that an organization owns and uses in its activities
- Bank statements
Board minutes
Board minutes are the written record of the actions and decisions taken at a board meeting. Once written and approved by the board, the minutes are accepted as a true representation of the meeting they record and can be used as legal evidence.
Usually, the Secretary is in charge of board minutes. A nonprofit keeps the minutes electronically or in a binder. The board minutes should be kept forever.
Other records
Other key documents related to the organization should be kept for at least 7 years. A Document Retention Policy is considered best practice.
If your organization does not have a document retention policy, use this sample as a starting place to create one.
Document Retention Policy
Document Retention Policy from resources from National Council of Nonprofits
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