The Detroit Riverfront Conservancy this week detailed a series of steps it is taking to tighten financial controls, auditing systems and board oversight after the non-profit was rocked by a financial scandal last year, according to a release shared with CFO Dive.
The announcement of the financial and governance reforms comes about seven months after the organization’s ex-CFO William A. Smith was sentenced to 19 years in prison for embezzling more than $40 million from his former nonprofit employer over a roughly 11 -year period.
While the conservancy tightened its protocols within weeks of the discovery of the financial crisis and has put a new leadership in place, the fresh plan was the result of a comprehensive review initiated last year after the crisis. “Today we announce the results of that effort,” CEO Ryan Sullivan said in a statement in the Monday release. “These enhancements set forth a new era of increased oversight that will protect our mission along the riverfront for generations.”
The conservancy is a 501(c)(3) with a mission of developing access to the Detroit riverfront. Its blueprint of “enhancements” for turning the page on the scandal lists a number of operational and financial improvements.
It calls for a separation of financial duties whereby all financial transactions have multiple levels of review and authorization related to the set up, review and authorization of payments and an annual review of the conservancy’s banking relationships. It also states there is a new “outsourced model” of financial services provided by an independent company to further the segregation of duties.
The reform plan’s governance updates include shrinking the maximum size of the board to 30 members from 55, term limits and training to ensure board members “understand their fiduciary responsibilities.” The plan states the conservancy has already hired an outsourced HR firm that will manage payroll, benefits, risk management and compliance with employment laws.
It also acknowledges that there were previously safeguards that were overridden. “Controls were previously in place but circumvented,” the release states.
Smith, who worked as CFO for the nonprofit from 2011 through May 2024, used three main tactics to embezzle millions from his employer, according to court documents cited in an April release on his sentencing from the U.S. Attorney’s Office for the Eastern District of Michigan.
First, between February 2013 and May 2024 he moved about $24.4 million in conservancy funds to a bank account under the name of The Joseph Group, Inc., an entity that was not a vendor but which he controlled.
Second, between November 2012 and May 2024, he used $14.9 million in his employer’s money to pay off American Express credit cards that he controlled and used to buy furniture, designer clothing, airline tickets and other consumer goods for himself and his family.
Finally, he used the conservancy’s money to buy cashier’s checks from banks that he used for his own use without the knowledge of the board.
He covered it up in various ways, including by falsifying bank statements that he provided to the Conservancy’s bookkeeper and altering or deleting unauthorized transfers on the statements in order to keep them off of the books.
The ex-CFO is appealing his 19-year prison sentence and asking an appellate court to send the case back to the lower federal court for re-sentencing, the Detroit Free Press reported Wednesday.
A spokesperson for the Detroit Riverfront Conservancy declined to comment beyond the release.
