Practice 9G: Recordkeeping

Creating and managing records and files is central to land trust work. Land trusts need accurate and easily retrievable records to meet legal and contractual obligations, track and evaluate activities and be prepared to defend their property interests through enforcement and litigation. In the event of litigation, land trust records and the land trust’s ability to locate supportive records and document their authenticity could be paramount. A well-designed and well-implemented records management system can help.

When information is fresh in mind, it is hard to think about methodically recording it for the future. A wise land trust, however, will plan for its future by adopting appropriate board policies, creating detailed procedures to implement those policies and assigning personnel to make sure the policies and procedures are followed.

Keeping orderly and complete records is good, common sense. The amount of information a land trust must manage and recollect grows larger each year, and land trust work requires solid recordkeeping. For example, appropriate stewardship and management of conservation properties rely on good recordkeeping to demonstrate property conditions over the course of time. In addition, contractual agreements and grant programs may require land trusts to keep certain records and reports to demonstrate their compliance and substantiate grant awards. Recordkeeping also helps with program evaluation, especially in the face of changing personnel and as an organization’s activity increases. Finally, there are three legal reasons a land trust must keep good records:

• Sarbanes-Oxley Act of 2002. In 2002, Congress passed the Sarbanes-Oxley Act in response to scandals and economic catastrophes caused by certain organizations’ financial misdoings and accounting inaccuracies.

  The regulations in Sarbanes-Oxley focus on corporate accountability, integrity of corporate financial records and transparency of corporate financial matters. Most of its provisions do not directly apply to nonprofit organizations. Nonprofits, however, are subject to the Act’s expanded criminal obstruction of justice penalties for:

  • The intentional destruction of records related to federal investigations, and

  • Retaliation against those who discover document destruction. The law also suggests that intentional document destruction should be a process that the land trust monitors, justifies and carefully administers. A records management policy can be critical to providing credibility for a land trust should its destruction of documents ever be questioned.

• IRS public disclosure requirements. All public charities are required to make information available for public inspection and to provide copies on site or by mail upon request. This information includes:

  • A copy of the application for tax exemption (Form 1023/1023-EZ)

  • A copy of any supporting materials and IRS response to the tax-exempt application

  • Copies of the three most recent annual federal tax information returns (Form 990/990-EZ/990-N)

  • Names and addresses of contributors to the organization provided within the return may be omitted from disclosed materials.

  Many land trusts meet the IRS disclosure requirements by posting their Form 990/990-EZ/990-N on a public website such as GuideStar, a national database of nonprofit organizations, or on their own websites. IRS publication 4221, Compliance Guide for 501(c)(3) Public Charitiesprovides an excellent overview of the variety of recordkeeping requirements applicable to these organizations.

• Protection of an organization’s interests in the event of litigation. Records provide evidence of property interests, property conditions and demonstrate encroachment and violations. Legal defense and litigation are highly fact-driven, and the protection of conservation interests will depend on the documentary evidence available to support a claim. Be aware that the method and regularity of recordkeeping are critical to documents’ admissibility and credibility as evidence, as further discussed below.

  In addition to protecting conservation properties, records also protect a land trust in the event of disagreements over contracts. State law (statute of frauds) typically requires certain agreements to be in writing if they are to be enforceable in a court of law. Most contracts or agreements involving land or ones that cannot be completed within one year must be in writing to be enforceable.

A records policy and related procedures can assist a land trust in a number of ways:

• Organizational consistency and continuity. A records policy will provide consistency for the land trust over time, no matter who is working with the data and records. This issue becomes increasingly important as a land trust grows and adds or changes personnel, whether volunteers or paid staff.

• Efficiency. Hours, if not days, can be wasted looking for information kept but not organized. A well-designed and implemented recordkeeping system can change that.

• Admissibility of evidence in judicial proceedings. Evidentiary law is built upon personal knowledge of a person testifying to a fact. Courts consider personal testimony the most credible because it gives all parties to any litigation an opportunity to ask appropriate questions. However, those with personal knowledge are not always available to testify when needed or may simply not remember critical facts. For example, a land trust representative who initially negotiates and completes a conservation easement no doubt personally knows the condition of the protected land and the reasons the land trust accepted the easement. But as time goes on, that person may no longer work at the land trust or even live in the area. If that easement is violated years later, how then will the land trust prove the original condition of the property?

Land trusts, like all businesses today, rely upon their records rather than personal knowledge or memories to manage important information. Courts have created a number of exceptions to the requirement of personal knowledge. They allow into evidence those records that are likely to be accurate and trustworthy while still allowing litigants to challenge the veracity of those records.

Business Records Exception. The business records rule allows a record to be included in evidence in a judicial proceeding under the following conditions:

• The record was created at or near the time (rather than later in anticipation of litigation)

• The record was created by someone with direct knowledge — or who was given the information by someone knowledgeable

• The record was created and kept in the course of regularly conducted business

• It is the regular practice of the organization to create or maintain such records

Establishing and following formal records policies and procedures will enhance a land trust’s ability to rely on the business records rule.

The principles discussed above relate primarily to the admissibility of documents and records into evidence, not to the credibility or reliability of those documents or records. Credibility, like admissibility, can be influenced by a land trust’s recordkeeping policies and practices. Records created, managed and stored in a manner that is routine and protects against accidental or intentional alteration or loss are typically viewed as more credible.

The first step in setting up a records policy is determining what constitutes a record. Land trust records may include information or data in any storable, retrievable format, such as:

• Documents, letters, memoranda, reports and handwritten notes, whether the original documents or copies, final versions of materials or interim drafts

• Photographs, including prints, negatives or digital files

• GIS data

• E-mails, both sent and received

• Voicemail and other audio recordings

• Compilations of data stored in databases, spreadsheets and software programs

Although all of these are records, they should not all be treated the same way. Those records most critical to a land trust’s business should be handled with the greatest care.

Land trust policies and procedures on recordkeeping take a variety of forms. The size of each land trust and the scope of its activities dictate how it approaches recordkeeping, including whether the process is managed by the board or staff, the complexity of its records management system and the level of detail needed.

• Not all land trusts are the same. A land trust’s records policy will be influenced by the:

  • Nature and complexity of the land trust’s mission, finances and programs

  • Age and maturity of the organization

  • Size of the staff and budget

• Not all records are the same. Different types of records require different policies and procedures:

  • Human resource and donor records require increased confidentiality protection

  • Financial records require specific attention to detail and accuracy

  • Land and conservation easement project files need to be maintained with an eye toward perpetuity

Regardless of its size or program, however, every land trust’s record management system and its recordkeeping policies and procedures should include at least the following elements:

• Purpose or philosophy of recordkeeping

• Document and data creation

• Document maintenance and storage

• Document retention periods and destruction

Before addressing details, a land trust should examine and clarify its own philosophy or approach to recordkeeping. That approach will then govern specific procedures. For example, one land trust may choose to focus on potential litigation and state that one of the purposes of its records policy is to “create and maintain records in anticipation of litigation.” A land trust with this approach may focus on the formalities of complying with the business records rule.

Another land trust may identify its purpose is to “collect and keep the minimum amount of information necessary to prepare required reports and meet internal problem-solving needs.” This land trust may rely more on electronic databases than extensive paper files. It may be willing to accept the consequences of not having as complete a file as another land trust might maintain.

The philosophy or recordkeeping approach identified in a land trust’s records policy determines what material to keep and how. Not only will different land trusts have different approaches to recordkeeping, different philosophies or approaches may apply to different types of land trust records. For example, property records may require a different process or system of recordkeeping than programmatic records.

A land trust records policy should address generally what information a land trust will collect and keep. The policy may include protocols of document creation.

• Paper document protocols might address details such as:

• How to handle copies versus originals

• Naming files and documents

• Identifying author and dates of creation and revision

Computer protocols might address:

• Naming and labeling files and folders

• Consistency of organization with paper files

• Identifying author and versions of documents

• Eliminating the visibility of “changes” or “comments” tracked during drafting

See Practices 9G2 and 9G3 below for additional discussion of protocols for paper and digital files.

Records policies should address how and where information is kept and organized. Issues to consider include:

• Who needs access to records - board, staff, volunteers, the public? Which records? How quickly? How often? When should access be limited? How should access be limited? The need for access can often be contradictory to the need for confidentiality or security. Internal computer networks and external websites can make access easier but require additional attention to security and confidentiality.

• How will files or records be organized? A well-crafted system for organizing files and records will save time in filing and in retrieving information.

• Where will records be stored, and what is the location’s security? What are the land trust’s options for storage: onsite, offsite, fireproof safe, safe deposit box and so forth? What are the risks of loss, destruction or unauthorized access, and what are the consequences? If the land trust does not have an office, who will keep its documents? How can the land trust be assured of the integrity and safety of its documents?

• What will it cost to keep information (time, dollars and space)? Every filing and recordkeeping option has a cost. Costs of various options must be balanced against their benefits. Land trusts should carefully evaluate how much to invest in recordkeeping so as not to shortchange their programmatic activities.

• Contingency planning. When should computer files be backed up? Where should backups be stored? As noted above, electronic files require different handling than paper files.

For more information on storage considerations, see Practices 9G2 and 9G3 below.

A records policy should address how long to keep records, and when and how to destroy them. Issues to consider include:

• How long should information be kept? For how long is a land trust required to keep certain records? For how long might the records be useful? Even in its early stages, a land trust will not want to keep every piece of data collected or every piece of paper created. For example, every day a land trust receives email and regular mail that it immediately deletes or tosses as unneeded for its programs.

Retention periods will differ for different documents, as illustrated by the following examples:

• The IRS requires tax-exempt public charities to keep and make available to the public (at a minimum) the three most recent IRS Form 990s

• A multiyear grant agreement should be kept for at least the length of the grant

• Certain documents concerning properties conserved in perpetuity, such as conservation easement monitoring and enforcement records, should be kept permanently

As noted above, relevant statutes of limitations may mandate retention periods for certain documents. For example, in many states, a lawsuit regarding the breach or violation of a contract must be brought within six years of the breach or violation’s occurrence. Therefore, a land trust may choose to keep records on contracts for only six years following completion or cancelation of the contract on the theory that its records will no longer be necessary after that time. Most organizations are conservative in their document destruction practices, keeping documents a year or so longer than legal or utility requirements dictate.

• What are the costs of keeping documents versus the risks of destroying them? It costs time and money to keep documents forever. They take up space — somewhere. However, once destroyed a document may be lost forever. Does it matter? How much?

• Are the documents also kept by others? How easy would it be to get those documents? A deed or conservation easement agreement may be the most important document in a property file. However, it may also be the most easily replaced by obtaining a copy from the official land records. In contrast, a letter sent to a landowner noting an easement violation may be impossible to reproduce if the land trust has not kept a copy in its file.

A records policy may set forth guidelines for keeping records within a records retention schedule. An example of such a schedule can be found in Sample 2 below. A land trust should consult with its own attorney, accountant, auditor or other advisor in creating its retention schedule.

• How should records be destroyed? Shredding, recycling, the garbage?How do confidentiality and privacy concerns affect this decision? For digital files including email, simply deleting the file from the program may not completely destroy or eliminate the file.

Land trusts should prepare and maintain complete written documentation of all real property transactions. Because land trusts are in the business of perpetuity, they need to keep originals of key documents essential to the defense of each transaction safe from damage, tampering or inadvertent destruction. At a minimum, land trusts need to have two sets of documents:

1. Documents that are safely stored in a way that ensures that they will last and be acceptable evidence in the event of a court proceeding (permanent files).

2. Copies of all documents essential to the defense of each real property transaction. See Practice 9G3 for more information about duplicate documents, including working files.

The permanent file includes those documents and records that constitute the essential and irreplaceable record of a transaction and any subsequent activity related to that project. This includes easement monitoring, approval and enforcement data, as well as data related to the initial transaction.

In its permanent files, the land trust should have the following irreplaceable documents essential to the defense of each conservation easement and fee property still owned by the organization, including:

• Legal documents and agreements, including deeds, conservation easements, amendments and leases.

• Critical correspondence, including correspondence with the landowner related to project goals, tax and legal matters, notifications, approvals, enforcement and other key matters the land trust determines essential to the defense of the transaction.

• Baseline documentation reports for conservation easements.

• Title insurance policies or evidence of title investigation.

• Surveys, if any.

• Full appraisals (or summary appraisals if full appraisals are not available) used to substantiate the purchase price or used by the landowner to substantiate the tax deduction.

• Forms 8283 for projects where the landowner claimed a federal tax deduction. The land trust’s “original” can be a copy of the landowner’s signed original.

• Conservation easement monitoring reports.

• Fee property inspection records essential to the stewardship and defense of the property.

• Contracts and leases relative to long-term land management activities. The original may be retained only for as long as it and the applicable statute of limitations are in effect.

Original documents must be protected from daily use and reasonably secure from fire, flood and tampering by individuals. When determining where to store original files, land trusts need to ask themselves a number of key questions. What are the risks of loss, destruction or unauthorized access, and what are the consequences? Fire? Theft? Flood? Malicious mischief? Other? What can we do to limit the likelihood of loss? What will happen if we lose certain data? The list of threats may seem endless, but for each land trust, some will be more likely than others. For example, a land trust using a storage facility with lots of sprinklers may be more concerned about water damage than fire. An urban office may have a greater risk of unauthorized entry, and additional physical security may be necessary.

A land trust’s records policy (see Practice 9G1 above) will guide overall records retention and storage, including which documents a land trust considers part of the permanent record for a transaction. Land trusts use several approaches for safe storage of records, including:

• Fireproof file cabinet or safe in another location. Some land trusts keep their permanent files in a fireproof cabinet or safe in a separate location, such as an attorney’s office or town hall. If originals are stored in another location, the land trust must have control over the retention of these documents. If they are stored in a private home (such as of a board member of a small, all-volunteer land trust) the land trust should secure a written agreement with the homeowner that guarantees that other representatives of the organization (such as officers or key employees) can access the records.

• Safe deposit box. Other land trusts choose to keep their files in a bank safe deposit box.

• Formal archive facility. Several land trusts choose the convenience and safety of a formal archival facility.

• Registry of deeds. Originals of property deeds, conservation easements, surveys and sometimes baseline documentation, may be kept at the county or municipal register.

• Digital systems. Land trusts increasingly digitize information and documents. They also use a variety of systems to protect that data, including off-site storage of discs or backup data and online backup systems.

At a minimum, these locations must protect the originals from daily use and be reasonably secure from fire, floods or other foreseeable hazards.

Many land trusts now use both paper files and electronic systems to manage and maintain project data; each has its own advantages and disadvantages.

Computer-based systems provide for relatively easy access (even from remote locations) and can easily accommodate changing or updating files and data. They also require consistent, rigid protocols for greatest efficiencies and credibility. What is easily created can also be easily lost. While creating an entire system can seem overwhelming and expensive, there are relatively inexpensive off-the-shelf products available. Keep in mind that if the land trust stores its originals in an electronic format, the originals must meet the requirements of applicable federal and state law with respect to rules of evidence regarding electronic originals. They must also be replicas of signed originals and include all exhibits and attachments in a format that cannot be altered. Some land trusts maintain their electronic originals in a PDF format that is more difficult to alter than those stored as word processing documents. Safeguards for ensuring the originals do not get erased or written over include using non-rewritable discs and limiting access to cloud-based original records as read only or only to those with permission. The approach a land trust uses should be based on managing the risk of the land trust not having the documentation needed to steward and enforce its conservation easements and properties. If electronic originals are stored on portable devices (discs or external hard drives), they should be maintained separate from duplicates, protected from daily use and reasonably secure from fire, flood and tampering by individuals.

Tips for Cloud-Based Storage

Thanks to CommunityIT Innovators for providing guidance on cloud-based storage.

Choosing a vendor to work with to store documents in the cloud is not unlike choosing a vendor to store paper documents. Considerations such as security controls, access and contracting all carry through into the virtual world. Storing documents in the cloud does present some additional benefits, such as ease of access, protection against physical damage and integration into online or searchable database systems. While storing documents in the cloud carries many benefits, it does add some additional concerns and complexity.

• Choose a cloud-based storage service or provider with care. Things to look for:

  • Choose a vendor with a good service level agreement (SLA). The SLA describes the performance of the system and what you should expect as a customer. If the service is down frequently, it won’t be useful to you.

  • Choose a well-established vendor. If your vendor goes out of business or can’t invest in good cloud infrastructure, your files are at risk.

  • Understand what type or format of files the vendor uses to store files. The most common is PDF for scanned or saved documents. PDF documents should be in the PDF/A format, which includes some additional benefits for long-term archiving of digital content.

  • Decide how to organize documents. There are several different ways to store and manage data. Some systems are organized in a traditional file and folder structure. Other cloud-based storage systems may have additional features, such as tags so that a document could be assigned multiple attributes. If you need to switch vendors, it is important to understand how you can remove your data from a system. Is there a way to export all your files easily in the event you need to move your files to an alternate storage solution?

  • A service should provide encryption “at rest” (when the files are stored on the cloud service servers) and “in transit” (when you are uploading or downloading the files to your local computer). Even if documents are in the public record, ensuring the correct method of access is important.

• Limit access to your cloud-based storage files. A good storage service will provide granular security settings. Restrict access to the degree you can without compromising operations. Only give access to personnel that need it and limit that access to “read only” when that will suffice. Require complex passwords and consider setting up multifactor authentication (to login, user must provide several separate pieces of evidence that is authenticated by the system).

• Employ a third-party backup solution for your cloud-based storage. A good cloud storage service provider will perform regular backups of their customer’s data to protect their own liability, but you should have your own backups in place independent of that. That third-party backup solution could be a backup to local on-premises storage or to an alternate cloud solution. Having a separate backup repository of data is an extra layer of protection against the loss of data through a crypto attack, vendor disruption or intentional or unintentional data destruction by staff.

• Check the status of your cloud-based storage service and third-party backup service regularly. Are credit card autopayments working properly? Are there customer notifications regarding service interruptions or concerns?

Paper, however, is still a trusted and essential part of almost all land trusts’ recordkeeping systems. It is still the most common format in which to create most documents and records. In fact, paper documents are required to complete most real estate transactions. Paper files and filing systems are often easier to change or expand than computer systems and may be less expensive to create and maintain than sophisticated databases. However, paper takes up a lot of space and, if not properly selected and stored, can be damaged by water, mildew, pests and time itself.

The Library of Congress provides very detailed specifications for paper they will accept for their archive, which is summarized below.

• Fiber. The stock must be made from rag or other high alpha-cellulose content pulp, minimum of 87 percent. It must not contain any post-consumer waste-recycled pulp.

• Lignin. The stock must not contain lignin.

• Impurities. The stock must be free of metal particles, waxes, plasticizers, residual bleach, peroxide, sulfur and other components that could lead to the degradation of the paper sheet itself. Iron must not exceed 150 ppm and copper shall not exceed 6 ppm.

• Optical brighteners. The stock must be free of optical brightening agents.

• pH. The stock must have a pH value within a range of 8.0 - 9.5

• Alkaline reserve. The stock must contain an alkaline reserve with a minimum of 2 percent and a maximum of 5 percent.

If you choose not to store your photos digitally, you may want to check with a local museum as to what type of paper they use or will accept. At a minimum, print photographs on acid-free photographic paper. 

Most land trusts inevitably use a combination of recordkeeping processes. Your land trust should decide what approach best meets your informational needs.

Land trusts need to maintain and store copies of all original documents essential to the defense of a land or easement transaction in places where they can easily access them, and they will be safe from harm. For additional protection, copies and working files should be kept in one location and original documents and permanent files should be kept in a separate location. Land trusts need to prepare for the worst because it can happen. Just ask the Land Trust for the Mississippi Coastal Plain. Three sets of records in three different counties were lost or badly damaged in Hurricane Katrina, and the land trust subsequently spent hundreds of hours and thousands of dollars rebuilding their files.

For information on storage of original documents, see Practice 9G2 above. Practice 9G1 addresses recordkeeping policies.

A land trust should prepare and maintain complete written documentation of transactions. At a minimum, it needs to have two sets of documents:

1. Documents that are safely stored in a way that ensures that they will last and be acceptable evidence in the event of a court proceeding (permanent files)

2. Copies of all documents essential to the defense of each real property transaction

The permanent file includes those documents and records that constitute the essential and irreplaceable record of a transaction and any subsequent activity related to that project. This includes easement monitoring, approval and enforcement data, as well as data related to the initial transaction. For more information on original document storage and a full list of documents to keep, see Practice 9G2 above.

At a minimum, the land trust should have duplicates of the following irreplaceable documents essential to the defense of each conservation easement and fee property still owned by the organization:

• Legal documents and agreements, including deeds, conservation easements, amendments and leases

• Critical correspondence, such as correspondence with the landowner related to project goals, tax and legal matters, notifications, approvals, enforcement and other key matters the land trust determines essential to the defense of the transaction

• Baseline documentation reports for conservation easements

• Title insurance policies or evidence of title investigation

• Surveys, if any

Records policies and procedures should address how and where the land trust stores the copies of all original files. Practice 9G2 above addresses storage of originals in more detail.

When considering storage options for duplicates, land trusts should consider the following issues:

• Who needs access to records — board, staff, volunteers, the public? Which records? How quickly? How often?

• Confidentiality. When should access be limited? How should access be limited?

• Safety and security. What are the risks of loss, destruction or unauthorized access, and what are the consequences? Fire? Theft? Flood? Malicious mischief? Other? What can you do to limit the likelihood of loss? What will happen if you lose certain data?

Options abound for storage of both original records and duplicates: a storage facility, bank safe deposit box, office of the land trust’s attorney, local historical society, another location where the land trust has control over the retention of documents, electronic file storage, cloud-based electronic file storage and so forth. Duplicates may be kept in the land trust office either in fireproof filing cabinets or electronically (on a server or in the cloud). Every filing and recordkeeping option has a cost. Costs of various options must be balanced against their benefits. Land trusts should carefully evaluate different recordkeeping systems.

No matter what format your files take, the duplicates of irreplaceable documents should be stored in a separate location from the originals.

Many land trusts are increasingly using computer scanning as part of their document storage process. PDFs or other file formats that do not allow documents to be altered are created and stored offsite (or in a fireproof safe) on non-rewriteable discs or with an online archiving service. This technique saves space but requires time to scan documents.

If a land trust stores its duplicates in an electronic format, it should ensure that the copies are exact replicas of the signed originals, with all exhibits and attachments in a format that cannot be altered. Avoid draft or unsigned versions of documents.

It’s important to remember that digital technology is changing all the time. Keep abreast of new advances in the use and storage of digital documentation and records. Additionally, be aware of any changes in state law or court rulings regarding the admissibility of digital records as evidence in court proceedings. Such changes may alter the land trust’s current records policy and operational procedures. See Tips for Cloud-Based Storage in Practice 9G2 above.

Some land trusts have copies of certain documents that can be used for monitoring or as problems or issues arise (working files).

These files should be accessible to land trust personnel who are responsible for completing the transaction or conducting ongoing stewardship activities, such as annual monitoring or responding to landowner inquiries. 

Contents of the working file may include duplicates of the documents needed to implement the project’s management or monitoring plan in the field. The file may also have a document summary or checklist that serves as a transaction chronology and an index of what is in the permanent file. Many land trusts summarize key information for the working file rather than include entire documents. It is common, for example, to prepare an easement abstract that includes key information on location, restrictions and reserved rights—the kind of information needed for monitoring—and to have the easement itself on file elsewhere.

Working files typically include:

• Completed document summary or checklist

• Site evaluation data or summary

• Recorded deed or conservation easement or summary

• Active contracts (such as leases) or summaries

• Maps (parcel, GPS or topo)

• Photos

• Baseline documentation report or summary

• Updated resource data or summary

• Management/monitoring plan or summary

• Annual monitoring reports or summary of monitoring visits made

Originals of important documents, like the recorded deed or baseline documentation report, should not be kept in the working file but in a separate, secure location.