Document retention

Internal Auditor, Dec, 1996 by Robert M. Barker, Julia N. Karcher, Nancy L. Meade

In addition, most rules for civil procedures require that the requesting party pay a reasonable fee for the copying of paper documents. However, in Bills v. Kennecott Corp. (1985), a federal judge refused to make a requesting party pay the $5,400 required to search a computer system and reduce the output to paper. The court disallowed the argument that the requesting party would have had to pay for the cost of copying had the documents been on paper. This decision implies that those parties choosing to store documents in electronic form must bear the cost of reducing them to paper if the information is subpoenaed.

Documents that do not exist cannot be produced, thereby preventing both their potential damage in court and costs of production. Organizations with substantial investments in electronic office automation technology must act to protect themselves by addressing the issue of electronic document retention and creating or revising their document retention plans.

* Document Retention Plans

An internal audit plan that includes tests of the document retention policy will support an organization's case in the event of a lawsuit. Any document retention plan should address three basic areas: the categorization of documents, the retention period for those various classes, and document destruction and control procedures.

An organization should retain only those documents that add significant value to the firm. If the value of the information contained in the document is less than the cost of storing it, the document should not be voluntarily retained.

Unfortunately, value is relative. An organization should instruct employees to examine carefully the records and correspondence they normally encounter and make appropriate decisions. Local, state, and federal agencies require firms to retain some classes of documents for tax or regulatory purposes. Retention of these classes of documents is mandatory and can vary across jurisdictions and over time.

Document retention requirements apply only to the formal records of the organization. Informal records such as drafts, handwritten notes, calendars, planners, telephone logs, and historical files maintained by employees for their own use should be destroyed as soon as possible. Whether these materials can be subpoenaed is unclear and crosses into privacy issues not germane to this discussion. Organizations should, however, stress to their employees that a "save everything" attitude may not be appropriate. Organizations should establish that not all documents are valuable.

Once the organization determines the categories of documents that should be retained, it must establish retention periods. Ensuring that employees follow mandated time periods is essential. Organizations may wish to issue periodic reminders or institute a more formal plan to ensure compliance. Such a policy must include all governmental mandates for the retention of certain documents as well as the organization's own requirements.

Any retention policy also must address document destruction. Paper records should be shredded or incinerated. Papers that are thrown away are available to anyone willing to sift through the trash. In the case of electronic documents, destruction means deleting the unnecessary documents from the media on which they are stored and then purging the medium itself. Erasing a file does not physically remove the file from a tape or disk; sophisticated software can "unerase" such media to recover those files mistakenly erased and can do the same with records intentionally destroyed.