The Detroit Riverfront Conservancy this week announced a series of measures aimed at strengthening financial controls, audit systems, and board oversight. The nonprofit is actively pushing reforms after facing a financial scandal last year. Details were disclosed through a press release shared with CFO Dive.

The announcement of these financial and governance reforms comes about seven months after the organization's former Chief Financial Officer, William A. Smith, was sentenced to 19 years in prison for embezzling more than $40 million over approximately 11 years. Smith served as CFO of the nonprofit from 2011 to May 2024.

Although the Conservancy strengthened internal processes within weeks of the financial crisis being discovered and has already assembled new leadership, this new plan stems from a comprehensive review launched after last year's crisis. CEO Ryan Sullivan said in a statement released Monday: "Today we announce the results of this effort. These improvements usher in a new era of enhanced oversight that will protect our riverfront mission for generations to come."

The Conservancy is a 501(c)(3) organization whose mission is to advance the development of the Detroit riverfront. Its blueprint for "improvements" aimed at moving past the scandal lists multiple operational and financial enhancements.

The plan calls for segregation of financial duties, with all financial transactions requiring multi-level review and authorization involving the setup, review, and approval of payments, and an annual review of the Conservancy's banking relationships. The plan also states that an "outsourced model" of financial services provided by an independent company has been adopted to further achieve segregation of duties.

Governance updates in the reform plan include reducing the maximum board size from 55 to 30 members, setting term limits, and providing training to ensure board members "understand their fiduciary responsibilities." The plan says the Conservancy has hired an outsourced human resources firm to handle payroll, benefits, risk management, and employment law compliance.

The plan also acknowledges that safeguards previously existed but were bypassed. The press release states: "Controls were in place previously, but they were circumvented."

According to court documents cited in an April sentencing announcement from the U.S. Attorney's Office for the Eastern District of Michigan, Smith primarily used three methods to embezzle millions of dollars during his tenure.

First, between February 2013 and May 2024, he transferred approximately $24.4 million of Conservancy funds to a bank account named "The Joseph Group, Inc.," an entity that was not a vendor but was controlled by him.

Second, between November 2012 and May 2024, he used $14.9 million of his employer's funds to pay off American Express credit card bills under his control. These cards were used to purchase furniture, designer clothing, airline tickets, and other consumer goods for himself and his family.

Finally, he used Conservancy funds to purchase bank cashier's checks for personal use without the board's knowledge.

He concealed these actions through various means, including falsifying bank statements provided to the Conservancy's bookkeeper and altering or deleting unauthorized transfers from statements so they would not be recorded in the books.

According to the Detroit Free Press reported Wednesday, Smith is appealing his 19-year prison sentence and has asked the appellate court to remand the case to the lower federal court for resentencing.

A spokesperson for the Detroit Riverfront Conservancy declined to comment further beyond the press release.