The Hammond Urban Academy, Inc.

2024 – 001: Financial Statement Preparation and Audit Adjustments Type of Finding: Choose from the following:  Significant Deficiency in Internal Control over Financial Reporting Condition: The board and management share the ultimate responsibility for the School's internal control system and financial statement reporting. While it is acceptable to outsource various accounting functions, the responsibility for internal control and financial statement reporting cannot be outsourced. A significant audit adjustment was proposed and posted through the audit process. The adjustment was a necessary step in ensuring the financial statements were fairly stated in accordance with accounting principles generally accepted in the United States of America. Criteria or specific requirement: In an ideal control setting, the School would have a comprehensive control procedure to ensure that the financial statements, including disclosures are complete and accurate. Such review procedures should be performed by an individual possessing a thorough understanding of applicable accounting principles generally accepted in the United States of America. Effect: It is possible that a misstatement of the School's financial statements could occur and not be prevented or detected by the School's internal control. Cause: The School’s controls were not able to detect the adjustments made as part of the audit. The School does not have a comprehensive review process to ensure that the financial statements, including disclosures, are complete and accurate. Repeat Finding: No. Recommendation: We recommend the board and management work with their bookkeeping company to develop a process to review and identify such items in a timely manner. Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding.

2024 – 002 Allowable Costs Federal Agency: U.S. Department Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425U, 84.425D, 84.425W Pass-Through Agency: Indiana Department of Education Pass-Through Numbers: S425U210013, S425D210013, S425W210013 Award Period: July 1, 2023 – June 30, 2024 Type of Finding:  Material Weakness in Internal Control over Compliance  Material Noncompliance Criteria or specific requirement: The Compliance Supplement requires that compensation for personal services be charged to the federal grant based upon approved actual time worked on the program and not based on an allocation or budget (2 CFR 200.430(i)). Condition: While performing audit procedures, it was noted that payroll expenses were charged to the grant program based upon an allocation from the budget and not on approved and/or certified time worked in the program. Questioned costs: $234,052 Context: During the process of obtaining an understanding of internal controls and processing of payroll expenditures, we noted payroll was not reviewed to ensure the expense charged to the grants was accurate based upon approved actual time spent in the program. Cause: Salary figures for salaried employees were charged to the federal grant based on unapproved work actually performed for the program. Effect: The organization has not fully followed compliance attributes with the allowable costs principles set forth by the Compliance Supplement related to allocation of salaries being charged based on approved time worked for a program. Personnel need to reinforce policies to ensure control procedures are in place to ensure salaries charged to a grant are appropriately based on actual approved time worked in a program. Repeat Finding: No. Recommendation: We recommend the School ensure policies and procedures for payroll expenditures for grant programs be charged to the federal grant based on approved hours worked in the program. Views of responsible officials: There is no disagreement with the audit finding.

2024 – 003 Equipment and Real Property Management Federal Agency: U.S. Department Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425U, 84.425D, 84.425W Pass-Through Agency: Indiana Department of Education Pass-Through Numbers: S425U210013, S425D210013, S425W210013 Award Period: July 1, 2023 – June 30, 2024 Type of Finding:  Significant Deficiency in Internal Control over Compliance  Other Matter Criteria or specific requirement: Per 2 CFR 200.313(d)(2), a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: The School has had a lapse of greater than two years between physical inventories. Context: During the testing of Equipment for Real Property Management, we noted that the School had an interval between physical inventories that was greater than two years. Questioned costs: None Cause: The School has gone through leadership changes over the past few years in the business office that is responsible for compliance requirements and the inventory observation has not been completed in the transition period. Effect: The equipment was not inventoried within the two-year timeframe Repeat finding: No Recommendation: The School should ensure proper policies and procedures are in place to monitor the physical inventory requirements and ensure the physical inventory is completed and documented. Views of responsible officials: There is no disagreement with the audit finding.

2023-001 REPORTING SIGNIFICANT DEFICIENCY Federal Program: Education Stabilization Fund Assistance Listing Number: 84.425D Condition: The United States Department of Education required the submission of a report covering the period of July 1, 2021 to June 30, 2022 outlining the various uses of Elementary and Secondary School Emergency Relief Funds. The School was unable to provide support for how the amounts submitted in this report were calculated. Totals reported for expenses were not in line with totals expended during the period. Criteria: 2 CFR part 200, Appendix XI, Compliance Supplement, Section 3-L-1, states “Non-federal entities may be required to submit performance reports at least annually but not more frequently than quarterly, except in unusual circumstances, using a form or format authorized by OMB (2 CFR section 200.329). They also may be required to submit special reports as required by the terms and conditions of the federal award.” Cause: The School did not report activity related to the use of Elementary and Secondary School Emergency Relief Funds in line with actual activity. The School did not have controls in place to ensure accurate reporting. Effect: Information on the use of funds from the Education Stabilization Fund were not accurately presented. Recommendation: We recommend the School develop internal controls to ensure accurate reporting in line with guidelines. Views of Responsible Officials and Planned Corrective Actions: The School’s Corrective Action Plan is included on page 24.