LANSING ECONOMIC AREA PARTNERSHIP INC.Non-Profit

Finding Type: Immaterial Noncompliance / Significant Deficiency in Internal Control over Compliance (Subrecipient Monitoring). Program: Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, Small Business Support Hubs Program passed through the Michigan Strategic Fund. Auditor Description of Condition and Effect: Although there were improvements in the monitoring process from the prior year, during testing in the current year of seven subrecipients, it was determined: 1) The Assistance Listing Number (ALN) for the grant was not included in the subgrant agreement. All other applicable program information was noted, 2) Searches at www.sam.gov performed by management were not timely reviewed and no certification of eligibility was present in the subgrant agreements. As a result of this condition, the Organization did not fully comply with the requirements of the Uniform Guidance. Questioned Costs: No costs were required to be questioned as a result of this finding inasmuch as our testing did not identify any unallowed costs. Auditor Recommendation: We recommend that management become familiar with the subrecipient monitoring requirements and draft policy and procedures that provide reasonable assurance that future subrecipient arrangements will be in compliance with the Uniform Guidance. Management's Acknowledgment Management acknowledges that the recurrence of this finding — albeit at a reduced severity level compared to the FY2024 material weakness designation — reflects incomplete implementation rather than absence of policy. The ALN omission in subgrant agreement templates is a straightforward technical correction that should have been applied uniformly once identified. The corrective actions below are procedural in nature and largely already embedded in the updated SOP; the remaining work is one of consistent execution and documentation. Corrective Action Plan (See CAP for Table)

2024-001

Finding Type: Immaterial Noncompliance / Significant Deficiency in Internal Control over Compliance (Reporting). Program: Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, Small Business Support Hubs Program passed through the Michigan Strategic Fund. Auditor Description of Condition and Effect: Reporting did not agree to the audited general ledger or to the schedule of expenditures of federal awards (SEFA) due to: 1) Management recording in the general ledger and reporting to the pass-through agency, amounts that were transfers to an internal program, the actual costs of which were being reported under a separate cost center. Because transfers to an internal program do not qualify as grant expenditures or, for that matter expenses in general, the amounts reported as cumulative expenditures of grant funds were reported inaccurately, and 2) Audit adjustments were necessary to adjust subrecipient expenses per the general ledger to actual costs per the subrecipient reporting and back up files. In the initial general ledger, the balance of advances from the prior year, plus advances paid to subrecipients during the year, were incorrectly recorded as grant expenses. In addition, we noted that the reports did not appear to be reviewed for accuracy or completeness. As a result of this condition, the Organization reported inaccurate amounts to the grant pass-through agency. Questioned Costs: No costs were required to be questioned as a result of this finding inasmuch as our testing did not identify any unallowed costs. Auditor Recommendation: We recommend that management continue reviewing all transfers to an internal program, refundable advances associated with revenues, and those made to subrecipients, particularly around year-end, to identify amounts that should be recorded as refundable advances and what amounts should be recorded as grant expenses. This is important because the general ledger can then be used as a base for all grant financial reporting. We further recommend that the reporting be reconciled to the schedule of expenditures of federal awards at year-end. In addition, all reports should be reviewed and approved by appropriate personnel prior to submission. Management's Acknowledgment Management acknowledges that the root cause — the general ledger not serving as a clean, reliable basis for grant financial reporting without manual correction — reflects a structural accounting setup issue compounded by insufficient oversight of the reporting workflow. The core distinction between internal transfers, subrecipient advances, and actual incurred costs must be consistently reflected in GL coding from the point of transaction entry. The SOP's reporting and reconciliation provisions are only effective if the underlying GL data is structured correctly. Corrective Action Plan (see table)

2024-003

2024-001 – Lack of Subrecipient Monitoring Activities Finding Type. Immaterial Noncompliance/Material Weakness in Internal Control over Compliance (Subrecipient Monitoring). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, All Awards. Auditor Description of Condition and Effect. Six subrecipients were selected for testing during the audit procedures. There was no subrecipient agreement noted for one of the subrecipients selected, therefore the required federal award information was not properly communicated. Additionally, no risk assessment was performed, nor was a monitoring plan within documentation of monitoring activities noted for this subrecipient. For the remaining five subrecipients selected for testing, the required federal award information was not properly communicated within the agreements. Lastly, the Organization does not have a procedure requiring the review of subrecipient audits. As a result of this condition, the Organization did not fully comply with the requirements of the Uniform Guidance. Auditor Recommendation. We recommend that management become familiar with the subrecipient monitoring requirements and draft a policy and procedures that provide reasonable assurance that future subrecipient arrangements will be in compliance with the Uniform Guidance. Corrective Action. In an effort for LEAP to become more familiar with the subrecipient monitoring requirements and drafting policy and procedures that provide assurance that future subrecipient arrangements will be in full compliance with the Uniform Guidance federal regulations, LEAP will be modifying its Grants Management SOP to more explicitly detail expectations and procedural steps to meet the requirements of Uniform Guidance. Further, LEAP’s leadership will be holding an internal training for all management team members to discuss this revamped set of policies, go through case study exercises and question and answer session to make sure that all those managing grants or the employees that manage grants have a full understanding of what is expected of them, and their role in various management and oversight processes for the organization. Responsible Person. Tony Klisch, LEAP CFO Anticipated Completion Date. August 31, 2025

2024-002 – Documentation of Controls over Suspension and Debarment (Repeat Finding) Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance (Procurement, Suspension and Debarment, Subrecipient Monitoring). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, All Awards. Auditor Description of Condition and Effect. During our testing of suspension and debarment for three vendors and six subrecipients, it was determined that the Organization did not verify that vendors or subrecipients were not suspended, debarred or otherwise excluded when the Organization contracted with them to provide goods or services for five of the nine vendors and subrecipients. The searches at www.sam.gov were done in early 2025 by management, which was well after the date of the applicable contractual agreement and expenditure activity. The failure to monitor suspension and debarment could cause funds to be disbursed to vendors or subrecipients who are not eligible to have goods and services purchased with federal monies. Auditor Recommendation. We recommend that the Organization retain documentation of their procurement process including checking vendors for potential exclusions from federal award work. We further recommend that these checks be done prior to entering into a contractual agreement. Corrective Action. LEAP will be following the recommendation of retaining all documentation of our procurement process including the checking of vendors both at state and federal levels for any potential exclusions from federal award work, and ensuring these checks be done prior to contract execution. LEAP will be substantially modifying its procurement policy that is part of its Grants Management SOP in order to more explicitly detail expectations and procedural steps to meet the requirements of Uniform Guidance with regards to sequence of events leading up to contract execution, including the state and federal checks for exclusion. Further, LEAP’s leadership will be holding a module within the aforementioned internal training for all management team members to walk through a new check list tool that aligns with policy and Uniform Guidance, and case study exercise will also hit on this topic to ensure learning occurs around the internal controls improvements made with policy revamp. Responsible Person. Tony Klisch, LEAP CFO Anticipated Completion Date. August 31, 2025

2023-001

2024-003 – Grant Reporting Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance (Reporting). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, Small Business Support Hubs Program passed through the Michigan Strategic Fund. Auditor Description of Condition and Effect. Although we were able to review the quarterly reporting due during the fiscal year, we initially noted that the reports quarterly totals did not add up to the year-to-date totals, and total cost for the year reported, as well as quarterly totals, did not agree to the general ledger or the Schedule of Expenditures of Federal Awards. Management was able to subsequently correct these errors. Additionally, it was noted that there was no formal review and approval process over the completion and submission of the grant reports. As a result of this condition, the Organization reported inaccurate amounts to the grant pass-through agency. Auditor Recommendation. We recommend that the Organization base all grant financial reporting on general ledger detail of costs and that the reporting be reconciled to the Schedule of Expenditures of Federal Awards at year-end. In addition, all reports should be reviewed and approved by appropriate personnel prior to submission. Corrective Action. LEAP will be following the recommendation of basing all grant financial reporting on general ledger detail of costs and being more diligent in reconciling that ledger to the Schedule of Expenditures of Federal Awards at year-end. Further all reports moving forward will be reviewed and approved by CFO and COO in addition to the department head who is compiling with their team. LEAP’s modifications to its Grants Management SOP in 2025 are designed to also cover grant reporting process per Uniform Guidance requirements. This grant reporting issue too will be covered in the content of LEAP’s training for all management team members set to occur in August. Responsible Person. Tony Klisch, LEAP CFO Anticipated Completion Date. August 31, 2025