Reviewing File Management Procedures – Will Plan

File Management Procedures

Effective file management procedures are integral to the smooth operation and success of planned giving and trust services offices. These offices play a critical role in managing and administering various philanthropic endeavors, be it legacy gifts, charitable trusts, or estate planning. The meticulous organization and maintenance of files are essential not only for regulatory compliance but also for fostering trust and confidence among donors and beneficiaries. In this dynamic environment, where confidentiality, accuracy and accessibility are paramount, and robust file management procedures serve as the backbone, ensuring the integrity and efficiency of operations.

Standard 20 – Logging Out Documents

Documents held in a fiduciary capacity, and other related materials, are properly logged out when taken from the files. [PGP, PGTS]

There is a problem with this standard. What it should say is, “Documents held in a custodial capacity.” Just because your organization chooses to hold or store documents for donors does not in and of itself create a fiduciary responsibility. It all depends on the laws of your state of domicile. If your state laws specify that the storage of documents creates a fiduciary duty for the organization to the donor, then all stored files should be treated in a fiduciary capacity. In any case, standard #20 covers all files held in a custodial capacity.

So rightly understood, Standard #20 requires all files that your organization stores for donors are to be appropriately logged out when taken from the fire-resistant vault or file cabinet. This can be done by replacing the removed file with a placeholder file of a distinct color different from the color of your normal file folders. This placeholder takes the place of the removed file being worked on.

When the work on the file is complete, the file is immediately replaced in the fire-resistant vault or file cabinet, and the placeholder file is removed. Standard #20 does not address the maximum time frame that a placeholder file could be left holding the place of the original file. Still, if all files are replaced on the vault shelf or in the file cabinet drawer by the end of each business day, that is considered a best practice. All files must be protected overnight in a fire-resistant storage location and when not being worked on by PGTS office personnel.

Some offices have a placeholder file that allows for placing initials and dates when the original file is removed and then replaced. This certainly complies with the standard, but if all files are replaced by the end of business each day, a placeholder file with a name on it will serve the same purpose.

Standard 21 – Organizing Files

All files held in a fiduciary capacity, including Charitable Gift Annuities, are properly organized and subdivided. [PGP, PGTS]

All files your organization holds in a custodial capacity must comply with standard #21. If you look at the Appendix of the NAD PGTS Manual, you will find the recommendations for file organization and how to subdivide the fills.

The key to good file organization is that all persons in your organization create files and add documents to files in a consistent way. The organization guidelines will need to be communicated clearly by the person in charge of the files for the office.

Please see the commentary on standard #23 that gives guidance for what and how documents should be stored for all NAD PGTS organizations. This standard’s intent is to reduce the amount of paper documents that must be stored in the organization’s fire-resistant vault or file cabinets.

Standard 22 – Removing Original Documents

Original documents are never removed from the office except when an original document is required. [PGP, PGTS]

There have been questions asked about what constitutes the office. The most liberal interpretation would be your organization’s office building. If a file enters a parking lot, then it is out of the office and not in compliance with standard #22.

Let’s follow a file needed for Planned Giving & Trust Services purposes. According to Standard #20, it would be logged out from the shelf or file drawer, and a placeholder file would replace the removed file. This process is for files to be worked on inside the office, or GCAS could need files during a trust review, and they may be working in another nearby office inside the building. It also could be that a donor comes to your office building, and the file is needed for review by the donor in a nearby meeting room inside the office building. In all the cases above, the file never leaves the office building.

Now, if a bank, court, or other organization needs the original document to initiate business on behalf of the donor, then the original document must be taken outside of the office building. A copy should always be made and left in the file at the office. As soon as the business is completed and the Trust officer returns to the office, the original document should be immediately returned to the file.

If the organization is acting as an attorney-in-fact for a donor, another option is when the Power of Attorney document is created; two originals could be made and signed. One for use outside of the office building and one to always stay in the file in the office. This option is open even if a family member is the attorney-in-fact. This option is recommended, especially if the organization is the successor attorney-in-fact.

Standard 23 – Storing Files

a. All physical files with current or potential fiduciary duties and all current legal documents are kept in properly secured fire-resistant files/vaults. All other fiduciary files and non-current legal documents are kept in safe and secure files.

b. Electronic files held in a fiduciary capacity and other legal documents are properly backed up and secured per organizational policy approved by the governing board or committee and legal counsel. [PGP, PGTS]

Fire-resistant storage of files is the primary focus of standard #23.

The first part of Standard #23a specifically refers to active files stored in a file cabinet or vault. This includes all active files, whether or not they contain fiduciary responsibilities. Donor informational files that do not contain original legal documents are not covered by standard #23.

To be considered fire resistant, a file storage area must resist fire for one hour or more. The best is rated at four hours of resistinga standard fire. On file cabinets there should be a label that states the number of hours it is rated. If you have a vault, the vault door should have a similar label that states the rating. This rating is what signifies compliance with standard #23a for this first part.

Standard #23a also refers to all files that have been canceled, terminated, or matured. After these files become inactive through a proper vote by the appropriate committees and reviewed by GCAS during the periodic trusted reviewthey may be archived in a safe, secure and confidential storage area that is not required to be fire-resistant.

Standard #23b is the standard for electronic storage of documents. All documents may be stored electronically, with the exception that all legal documents must also be stored in their original form in a fire-resistant area in a physical file. See NAD Working Policy BA 70 10 6 for more details.

NAD Working Policy BA 70 10 6. “Planned Giving & Trust Services programs trusts, wills, charitable gift annuities, and other estate planning documents shall be retained permanently in their original form. Other documents including information worksheets, accounting reports, tax returns, correspondence, email messages and other routine materials may be retained in a secure and accessible electronic form. These guidelines shall be reviewed periodically, e.g., every three to five years.”

Each organization will work with its Information Technology department and attorney to develop the guidelines or data storage policy for how these electronic files are managed. This policy should become a part of the PGTS department’s attorney opinion that is reviewed every five years or whenever the organization changes legal counsel.