Applying Records Retention to Electronic Records.

As reliance on electronic records increases, organizations face growing legal and operational risks by not implementing a records retention program to systematically destroy electronic records in a manner similar to programs traditionally developed for paper records. Electronic document management systems and electronic imaging systems typically fail to provide the functions necessary to systematically obliterate records under a records retention program. This article reviews the special retention problems of electronic records; describes how the functional, relational retention methodology works; and identifies specifications for successfully applying this methodology in electronic recordkeeping systems.

Organizations create and maintain an increasing volume of electronic information. Computer users are empowered to create e-mail, letters, spreadsheets, databases, and a variety of other potential records. Instead of maintaining traditional paper files as the official record, more information is being created and maintained by users exclusively in electronic form.

While this evolution enables workers to produce more in less time, it has also created major information management and legal challenges. For example:

* Records are organized inconsistently throughout the organization.

* Records related to the same or similar matters are not linked together and are often stored on different computers or different areas of a file server.

* Records needed in litigation to support certain actions are difficult to find and assemble.

* Records subpoenaed in litigation are hard to find, with failure to comply often resulting in adverse consequences.

* Individuals selectively destroy records, without following a records retention program.

After years of neglect, identifying records that correspond to discovery requests is difficult and sometimes impossible. With the growing use of e-mail and electronic records created on user desktops, the problem becomes more troublesome. In many large organizations, discovery costs millions of dollars annually. Corporate counsel is well aware that failure to respond adequately in discovery or to explain the destruction of certain records could cost the organization even more.

Legal departments recognize the litigation problems caused by ineffective records retention programs and top management may now be more willing to fund new programs. Today, a records retention program must address the retention and destruction of electronic records, not just paper records. By decreasing the volume of records and by eliminating valueless records, especially electronic records, system implementation costs can also be reduced and systems become operational sooner.

Problems with Electronic Recordkeeping Tools

For larger enterprise functions and applications, such as accounting and human resources, the information systems group manages the computer files in mainframe or centralized computers. Individuals typically create and manage files on standalone computers and local area networks, using operating system tools such as Windows Explorer to establish a file structure to classify and organize information. But these file structures are generally too personalized and free form to serve as an organization's recordkeeping system. Some of the problems created include the following:

* Individuals can manipulate files -- create, store, modify, delete -- in almost any way, without rules or discipline.

* Individuals have difficulty sharing information since all participants must understand the file structure and voluntarily' adhere to consistent interaction.

* Individuals can destroy records at any time without compliance with records retention requirements.

Professional Electronic Recordkeeping Systems

Vendors now offer professional electronic recordkeeping systems to provide the functionality needed to manage records properly. These recordkeeping systems fall into three main categories:

* electronic document management systems (EDMS), which generally manage electronic records produced by individuals using their desktop computers (e.g., word processing, spreadsheets, presentations, projects, e-mail)

* electronic imaging systems (EIS), which manage electronically scanned documents

* records management software (RMS), which typically manages paper files or storage boxes maintained in offices or record centers

These systems differ in orientation and purpose as well as operation. The records management software only tracks information about records and the location where they are physically stored. It also enables the systematic implementation of a records retention program; the other products do not. EDMS and EIS store information about the records and store the actual physical records.

Electronic Document Management Systems

EDMS provides only primitive records retention capabilities. Some systems permit individuals to assign a future date for reviewing the records. The systems provide notification on the user-defined review dates and users determine whether to destroy the records.

No EDMS product by itself provides a systematic records retention component. But most EDMS systems can be modified, through supplemental programming, to provide records retention capabilities or to respond to commands from another product.

Electronic Imaging Systems

EIS do not provide appropriate records retention capabilities. In systems using non-erasable optical disk or CD-ROM, the non-erasable media hampers record destruction; the media prevents destruction of individual records on the disk. Even when erasable media is used, records cannot be systematically destroyed because the systems lack the features necessary for systematic records retention (such as those found in the records management software).

Systems with non-erasable media could be designed to facilitate destruction of records according to a records retention program. By applying the retention periods and calculating destruction, records whose retention periods have not yet expired can be copied to new media. The old media can be destroyed (non-erasable media) or reformatted and reused (erasable media). However, customers would probably find the cost prohibitive for additional readers, writers, and media, and find the process disruptive of current operations as well.

A few vendors have configured systems to physically store records with the same retention period on the same disk, so that the entire disk can be destroyed when the retention period expires. This solution may work for some limited applications but not most others for the following reasons:

* Most organizations have a wide spectrum of different retention periods.

* Some records must selectively be placed on hold for litigation, government investigation, or audits, in effect placing the same holds on all other records on the disk.

* Some retention periods are event oriented -- the numerical portion of the retention period begins once an event occurs. For example, contracts may be kept while active plus six years. Since different contracts will have different active periods, the event dates may not be known at the time of scanning.

* Some records change their character over time (e.g., an investigation file may later become part of a litigation file) and thus change their retention period.

Records Management Software

Records management software products have traditionally managed information about paper records. RMS vendors understand records retention issues and provide features to identify and destroy records based on rules established in a records retention schedule database.

Most RMS packages use a records retention module that operates similarly to the functional, relational records retention methodology described below. Users enter rules of retention from their records retention schedules and apply them to records or boxes of records within the organization. Most RMS products then assign retention periods to records from the retention module; list records whose retention period has expired; place holds on records subject to litigation, government investigations, and audit; and document which records have been destroyed.

Since the RMS serves only as the index or pointer to the physical location where the records are stored, users must find and destroy records identified by the destruction lists and note the destruction in the RMS system.

Several RMS vendors now work with EDMS and EIS vendors to integrate their respective software products. The electronic records continue to be stored in the EDMS or EIS and the RMS systems continue the management of the paper and microfilm records; link the RMS system to the EDMS or EIS systems for electronic records stored in those systems; and coordinate the indexing, assignment of record series, and application of records retention consistently to all records, including the electronic records.

The integration of RMS with EDMS and EIS may offer the best opportunity to apply records retention to electronic records. RMS can link to and direct much of the operation of the EDMS and EIS, including scanning, indexing, storage, retrieval, and retention. Plus RMS vendors already understand and implement records retention methodology, while EDMS and EIS vendors do not generally include basic retention functionality in their products. RMS retention modules can be programmed for use with the EDMS and EIS to promote retention consistency. The software can identify all records, regardless of location or media -- paper, microfilm, electronic -- and determine the appropriate destruction dates as well as control the destruction of appropriate records in the EDMS and EIS (when destruction capabilities are provided), and prepare listings of other records for destruction -- including paper records -- when technology cannot control the actual destruction.

Applying Records Retention to Electronic Recordkeeping Systems

Linking records management software to electronic document management systems and electronic imaging systems may soon be the best way to apply records retention to electronic records. Perhaps future releases of EDMS and EIS products will include appropriate records retention functionality. Regardless, the records retention program can now be developed to enable consistent implementation today and in the future. The functional, relational records retention methodology may offer the best chance for success.

The Traditional Records Retention Schedule

Traditional records retention schedules normally consist of word processed reports that list records found in each department (sometimes thousands of entries overall) and the assigned retention periods. This approach has the following inherent disadvantages:

* Precise record titles must be listed to find the correct records retention periods.

* Similar records found in different departments may be identified by different names -- though they may be essentially the same.

* Correctly or incorrectly, similar records may have different retention periods.

* The schedule must often be modified whenever the organization restructures.

* Program development and maintenance is extremely time consuming due to the large number of record titles.

* Legal research is time consuming and cannot accurately be linked to the multitude of relevant different records.

This approach does not work well for paper-based retention programs and will not work at all for electronic recordkeeping systems.

The Functional, Relational Records Retention Schedule

The functional, relational records retention methodology is a systematic approach to records retention that incorporates legal research, legal analysis, retention rules, and record series through a series of interrelated data tables, based on the functional organization of information. It was introduced in the mid-1980s and has become one common approach to records retention available to all organizations (Skupsky 1988, 1991).

The functional, relational records retention schedule gets its name from two main features of the methodology:

* The information on which retention is based is organized primarily by business functions found in most organizations.

* The legal research and retention information cannot be presented in a single report or computer table, but consists of a series of related reports or tables.

The descriptions of records and rules of retention are organized by business function rather than by department or any other method. A business function represents an area of standard business activity such as accounting, marketing, public relations, legal, and human resources.

While business functions may seem synonymous with departmental titles (particularly because departments specialize in specific business functions), they are often different. Departments reorganize periodically and sometimes perform unrelated functions for internal political reasons. Business functions, however, always remain the same. In fact, two companies in the same industry might have radically different organizational structures and department names (and markedly different retention schedules), but each will have the same or very similar business functions.

Under each business function will be sub-functional areas for retention purposes. For example, the accounting function creates and maintains a large number of different records: ledgers, journals, invoices, statements, vouchers, canceled checks, bank statements, bills, payroll, etc. All these records serve the same function: to ensure that the organization's income and expenses are handled and accounted for appropriately, and to support the tax return in case of a tax or accounting audit.

In traditional records retention schedules, each record title related to the accounting function would be listed separately, probably under the accounting department. If copies of these accounting records are created or maintained in another department, they may also be listed under that department heading. Separate retention periods -- sometimes the same and sometimes different -- would be assigned to all occurrences of the record titles.

The functional retention approach treats all records related to the accounting function in the same or similar way. No distinctions are made between records within the business function unless a compelling reason exists (e.g., different legal or user requirements) for creating a different period.

For example, the accounting function may consist of only four categories for distinguishing the records retention periods:

* General Accounting: accounts payable, accounts receivable, payroll, etc.; retention -- 6 years

* General Ledger: summary accounting information also needed for future reference purposes; retention -- 10 years or indefinite 

* Capital Property: purchase price, sale price, depreciation/ depletion, improvements, etc.; retention -- active + 6 years (e.g., "active" = while you own the property)

* Accounting Management Information: budget reports, monthly profit/loss statements, etc.; retention -- maximum of 3 years

(The first three categories are subject to tax audit.)

The functional, relational retention schedule offers the following advantages:

* It is relatively easy to develop.

* It can be developed with a minimal records inventory.

* It is shorter than most traditional approaches.

* It is more consistent than traditional approaches.

* It operates independently of the organizational structure and does not have to be revised when the organization is restructured.

* The schedule and related legal research can be systematically updated.

* The retention periods are the same for the same or similar records.

Record Series Used in the Functional Retention Methodology

Most organizations prefer to identify more detailed descriptions of records, commonly referred to as record series or record classes. For example, the general accounting function can be divided into accounts receivable, accounts payable, and payroll -- although each record series will still have the same retention period. Accounts payable can also be divided into invoices, vendor packets, employee expense reimbursements, moving expense reimbursements, etc. These detailed record series correspond to sub-functions performed in the organization or perhaps filing categories. Record series reflect the records used throughout the organization and are readily understood by users. Fewer than 500 record series typically are needed to describe all the records in even the largest organizations.

In the functional, relational records retention methodology, record series are linked to items or rules in the records retention schedules. When so linked, the corresponding retention period applies to the linked record series. For example, the record series "leases" is linked to a retention code for "contracts" and receives the same retention period as other contracts. Similarly, all contract-related record series (e.g., leases, employment contracts, purchase orders, vendor contracts) would be linked to the same retention code and receive the same retention period. If the retention period for "contracts" changes, the retention periods for all related record series automatically change.

Linking record series to records -- regardless of media -- provides the best opportunity to link retention to electronic records for the following reasons:

* Record series reflect the types or classes of records found throughout the entire organization.

* Record series reflect terms and concepts with which users are already familiar.

* Record series systematically classify and describe the record titles to which they are assigned.

* To assign retention to record titles, users merely assign the record series that best describes the records -- the records retention period then attaches to the record titles automatically.

* Users do not have to understand records retention concepts to assign record series.

* Record series may offer the best approach to assigning retention to electronic records.

Applying Records Retention Periods to Electronic Records

Most electronic records are not records or files as these terms are used in the traditional paper world. Instead, they may be documents, tables, or databases that may be viewed together to form units of information similar to the traditional concept of records.

The functional, relational retention methodology can be used effectively to assign records retention periods to electronic records. When electronic records are indexed in an EDMS, EIS, or RMS system, they are also assigned a record series code. Only one additional index field is needed for this purpose. Once the record series code is assigned, the electronic recordkeeping system calculates the destruction date based on the retention period or formula associated with the record series (i.e., the retention period taken from the records retention schedule). By linking the electronic records to the record series, the destruction dates for the electronic records can be recalculated dynamically if the retention periods change.

Knowledge about how to apply records retention to electronic records is still evolving. We already face some difficult challenges related to implementation.

How can employees comply with the retention program? Mandatory use of the EDMS, EIS, or RMS program is essential to enable the organization to reap the information management benefits of the systems and to ensure compliance with the records retention program. Personal recordkeeping systems may be permitted for drafts and work in progress, but official records must be created and managed Within the organization's electronic recordkeeping system

How can different people classify information consistently? This is a problem with any classification environment involving more than one person. Thus, the process must be kept simple. Some tools or services that might help staff make more accurate and consistent assignments include:

* Providing a reduced listing of record series. Rather than displaying the entire list of record series, provide users a listing with only those record series that are related to their work. Users can still access the full listing if needed.

* The use of artificial intelligence to match documents to potential record series and rank probable matches. Some vendors are already working on smart systems that would read the documents and match them to the most likely record series. The hits would be ranked with the most likely first.

* The use of trained indexing specialists to correct or audit the user assignments. Trained indexing specialists might initially be used to promote consistency by reviewing the assignments to records series and providing technical support.

Functional Records Retention Requirements for Electronic Recordkeeping Systems

To successfully integrate the functional, relational retention methodology with electronic recordkeeping systems (RMS, EDMS, and EIS), the following functional specifications should be incorporated. (These specifications are based on information presented in the original specifications guide given to records management software vendors regarding integrating with RetentionManager, a retention software product that implements the functional, relational records retention methodology; Retention Manager is published by Information Requirements Clearinghouse.)

1. The electronic recordkeeping system will contain a records retention module or means to access a third-party records retention module for defining records retention requirements. The records retention module contains information about the record series or classification (e.g., subjects, description), a code to assign to records, and a records retention period or formula.

2. The electronic recordkeeping system provides a means to link electronic records to the records retention module. The simplest method to relate records to entries in the records retention module is to assign the records retention code to the records as another index entry. This also classifies the electronic records for information retrieval purposes.

3. The electronic recordkeeping system calculates the records destruction dates based on records retention periods or formulas. The system should interpret and apply the following retention periods or formulas:

* creation-driven -- retention calculated from record creation date (example: 6, 6Y, 6 years)

* event-driven -- retention calculated from an event date (example: ACT [while active], TERM [after termination])

* indefinite -- retention indefinite unless one-time or special destruction order is approved; in essence, records are not destroyed unless an authorized person approves destruction based on a special destruction order such as all records in a certain classification code created prior to 1950 (example: IND [indefinite], PERM [permanent])

* maximum -- retention calculated from record creation date but destruction can also occur any time before the retention period ends, if requested by the user (example: MAX3 [a maximum of three years], MAXACT [maximum retention is the active period])

4. The electronic recordkeeping system dynamically recomputes destruction dates when the records retention period changes. Through the code assignment or linking in specification 2, the system detects changes in the retention period before recalculating the destruction date. The new destruction date appears on the computer screen and in subsequent reports.

5. The electronic recordkeeping system permits a hold to be placed on records subject to litigation, tax, and audit so that the records cannot be destroyed, even if the retention period has expired. The system provides a hold mechanism to prevent the destruction of selected documents, files, or other grouping of information subject to litigation, government investigation, or audit.

6. The electronic recordkeeping system identifies candidate records for destruction (e.g., the retention periods have expired and there are no holds on the records). The system can produce a listing of records that can be destroyed based on their destruction dates and the absence of holds.

7. The electronic recordkeeping system marks records for destruction. After approving candidate records' for destruction, they are marked for batch destruction. Alternatively, holds may be placed on records denied approval for destruction and the others marked for destruction.

8. The electronic recordkeeping system safely and completely oversees destruction of records approved for destruction. The system administrator initiates the destruction process based on the type of media:

* paper records -- pull and destroy designated boxes or folders and note the destruction in the software

* electronic records on erasable media -- delete designated records using safe deletion procedures (e.g., procedures that do not allow recovery of deleted records) and then defragmentation and optimization of the media

* electronic records on non-erasable media -- mark the index indicating the deletion and render the records irretrievable in normal use. When the media is destroyed or current records transferred to new media, the deleted records are not transferred and the original media is removed from the system and physically destroyed. (This procedure is necessary because it is often too expensive, time-consuming, or disruptive to transfer records to new media and destroy the old, non-erasable media; this is one of the principal reasons why non-erasable media may not be an effective choice for recordkeeping systems.)

9. The electronic recordkeeping system maintains information about the records destroyed. The system maintains information to indicate that records have been destroyed under the program. No specific type or amount of information is legally required. It is unreasonable to note destruction of every document in the index. Minimally, a log should note that all records authorized for destruction have been destroyed.

10. The electronic recordkeeping system does not permit destroyed records to be recovered through backups, unerase, mirror image directories, or other mechanisms. The system destroys electronic records using a secure erasure procedure that precludes retrieving or reinstating the records.

Conclusion

As organizations develop electronic recordkeeping systems and rely more on electronic records, they also need to implement a systematic records retention -program for destroying their electronic records when no longer needed for legal, user, or other retention purposes. The functional, relational retention methodology now used by some RMS vendors provides features needed for determining the retention requirements for electronic records. By adopting the specifications described in this article, vendors and users can begin destroying electronic records under a systematic records retention program.

Donald S. Skupsky, J.D., CRM, FAL MIT, is president of Information Requirements Clearinghouse in Denver, Colo. He has 25 years' experience in records and information management, specializing in legal requirements for records and records retention. Products and publications include RetentionManager[TM] software, Legal Requirements for Business Records, Recordkeeping Requirements; Records Retention Procedures; Legal Requirements for Information Technology System[SM]; and Law, Records and Information Management: The Court Cases. The author may be reached at [e-mail].