I would think this is a universal gasp.

You hear that the CFO of the Detroit Riverfront Conservancy stands accused of embezzling $40 million and think, what the hell? And then, in the next millisecond, something more pointed:

How the hell?

Jeff Williams, an expert from Grand Valley State University, has some potential answers. He also has a handle on the upside, if there is such a thing in what’s alleged to be a particularly jarring case of fraud.

“I can tell you I’ve already fielded three phone calls from nonprofits in three days since the news came out,” he said. “This is absolutely reverberating around foundations and nonprofits throughout the state,” all wanting to make sure that the next blaring headline can’t possibly include them.

So donors’ money might ultimately be a little more safe, and people who need help might be a little more certain to get it. But still … How the hell?

Part of the problem is that the conservancy‘s finances seem to have been handled like an every-other-Tuesday food pantry in a church basement, even as its total assets grew from $120 million to at least $175 million in the 11-year span where William Smith, 51, stands accused of treating it like an ATM.

Another part of the problem, said Williams, the director of the Community Data and Research Lab at the Johnson Center for Philanthropy, is that “the worst frauds tend to happen in the highest-trust environments.”

The conservancy isn’t one of those sprawling operations that does a dozen quietly useful things and has a name that doesn’t identify any of them. It has done one thing, brilliantly, turning Detroit’s corroded industrial riverfront into 5.5 miles of scenic fun.

Most every step has come with news conferences and riotous applause and choruses of angels. Its board chair, Matt Cullen, has done wizardly work for General Motors and the Dan Gilbert operation. He’s so respected that his support for the QLINE left throngs of us willing to overlook that it stops at red lights.

Now comes Smith, the star of a criminal complaint that says he spent other people’s money on “airline tickets, hotels, limousines, household goods, lawn care, clothing, and jewelry,” and ran up $14.9 million on an American Express Business Platinum account also accessed by his wife and other random family members.

It’s as though he walked a Van Gogh out of the DIA on a crowded Saturday afternoon — while the museum board and the guards were brown-bagging their lunches in the gallery.

More: Red flags about ex-Detroit Conservancy CFO show up in court records

Divide, and not get conquered

Riverfront Conservancy CEO Mark Wallace resigned May 31, the same day the board fired Smith and announced plans to rain damnation and possibly a lawsuit upon him.

Wallace is a friendly, bearded, open-collar sort who always seemed five minutes from revving up a backhoe. He has not been accused of anything but inattention, though at $298,400 per year, that’s a self-firing offense.

Smith’s salary was $200,200, according to the conservancy’s 2022 IRS filing, while chief development officer Cassie Brenske (who is not implicated in the alleged embezzlement) makes a salary of $175,000.

Those salaries are not out of line for running a big-money, big-impact operation that still has a four-star rating on Charity Navigator — along with a brand-new bright orange advisory that suggests, “Proceed with caution.”

Beware, it might as well say, of giving the financial controls to one guy with expensive tastes and limited scruples.

“If you’re a five-person nonprofit,” said Grand Valley’s Williams, “it’s hard to have one person opening checks, one person paying bills and one person auditing the books.”

If you’re the darling of grant-makers and foundations with 44 heavy hitters on the board, including at least one auto dealer, a Stroh and Lt. Gov. Garlin Gilchrist II, it should be easier to divide the duties.

The conservancy has accountants and committees and safeguards, of course. These are smart, committed professionals. But somehow, someone had $40 million worth of access and jurisdiction.

From afar, Williams said, he could see how the conservancy might have grown so flush with success and back-patting that “it became easy to grow lax in controls.”

Combine that with multiple philanthropic partners and a similar number of complicated financial statements, and pretty soon your board chair is announcing the discovery of irregularities and your CFO is getting perp-walked in his sporty beige sweatsuit.

From Freep opinion: Amid $40 million embezzlement probe, Detroit Riverfront Conservancy has work to do | Editorial

Trust, but verify — frequently

Five of the first seven defendants in a Minneapolis fraud case tied to feeding children during the pandemic were found guilty Friday, and prosecutors say as much as $250 million was pilfered in multiple schemes. Compared to that, the accusations against Smith are small potatoes.

Where there are pots of money, there is the potential for larceny. Heck, someone in the Minnesota case tried to bribe a juror with $120,000 in cash, conveniently delivered in a gift bag with curly ribbon and pretty images of butterflies and flowers.

Thievery “was a risk 2,000 years ago,” Williams said, “and it’s a risk today. This is not new.”

What’s constantly updated is methodology. Smith, according to law enforcement, was basically playing three-card monte with wire transfers and bogus bank statements to help cover his high times and high-risk investments.

Maybe a switch in auditors every few years would have caught the problem millions of dollars ago. That’s one advisory in the nonprofit world. But other research, Williams said, has found that you lose more in experience and familiarity than you gain in fresh perspective.

That conversation, he said, “is going on in other boards right now.” There are surely other chats about the makeup of finance committees, though as Williams said, you don’t need to be an accountant to ask penetrating questions.

Pending more details, he said, he keeps coming back to high-trust environments.

It’s great to remember your colleagues’ birthdays and have office potlucks and toast your successes after work.

Since you’re all friends, no one will mind if there are extra sets of eyes on the accounting. It’s better to say, “Ahh, here’s how,” than how the hell.

Reach Neal Rubin at NARubin@freepress.com.

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This article originally appeared on Detroit Free Press: Nonprofit expert finds upside in $40M Riverfront Conservancy theft