Possible Breach of Fiduciary Duty at Black Box Voting?--

I. Introduction.

I was cruising the diaries of AnonymousArmy at DailyKos and came across a late June 2006 discussion of a disturbing set of documents, the IRS Form 990 and Schedule A for the 2004-2005 fiscal year for the charity, Black Box Voting, Inc. (BlackBoxVoting.org).

For those who are unaware, Black Box Voting is one of the organizations that has alleged voting irregularities in the 2004 election, especially associated with the Diebold voting machines. I know very little about the merits of these claims or about the incredibly nasty internecine warfare between BBV and other voting reform groups. Kos diarist AnonymousArmy has often been harshly critical of BBV and its most prominent officers and employees, as have many others in that movement. I have no idea who is right or wrong on these voting machine issues; my concern here is over serious questions with BBV's Form 990.

My analysis is based on BBV's IRS tax returns (Form 990 and its Schedule A), which are posted on BBV's website (and apparently have been posted there for about 6 weeks).

II. All of BBV's Financial Assets Were Held in Non-Interest Bearing Accounts.

Leaving aside some small math errors in the return noted by posters at DailyKos, the thing that really jumps out on Black Box Voting's Form 990 is something that Kos commenters notice, but don't seem to understand the full import of: Black Box Voting shows $972,304 in "Gifts, grants, and contributions received" (990 Schedule A, p.3, ln.15) and the return shows $613,309 as "Cash--non-interest-bearing" at the end of the year (990, p.4, ln.45). Despite this huge cash account, the return shows no "interest or dividends" from investments (990 Schedule A, p.3, ln.18) for the entire year!

I find it hard (but not impossible) to come up with a scenario under which this charity is operating legally with nearly a million dollars in receipts and over $600,000 in cash-on-hand at the end of the year with no interest or investment income for the year.

The duty of prudence that charities must follow generally requires that managers or trustees invest any substantial cash on hand for the benefit of the charity, if only in a money-market account. They are not required to obtain a current return (e.g., they could invest in stocks that appreciate but pay no current dividends), but they are required to invest to get a return. Because of the time value of money, not investing means that the portfolio is essentially guaranteed to depreciate in real value by the end of a year. These days, one can set up money-market accounts that the charity can write checks on, so that even if the charity had been planning to spend most of its money in a week or two, it could still have earned interest until it wrote large checks.