NORTH LAKES ACADEMYNon-Profit

Type of Finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: UG ?200.318 - ?200.32 note requirements for an entities procurement policy covering such things as; procurement methods, open competition, contracting with small and minority business, and labor surplus area firms. Condition: The entity does not have an adopted procurement policy that complies with the procurement standards described in the Uniform Guidance. Context: Reviewed the schools only procurement policy and noted that the school?s current policy does not meet all of the requirements described by Uniform Guidance. Cause: The school did not go through the steps to adopt a compliant procurement policy during FY22. Effect: The school was not in compliance with Uniform Guidance related to procurement policies. Repeat Finding: This is a repeat finding Recommendation: We recommend that Management review the Uniform Guidance and ensure the procurement policy is updated to be compliant then officially approved by the board as soon as reasonably possible. Views of responsible officials: There is no disagreement with the audit finding. Management will work to adopt a compliant procurement policy.

FINDING: 2021-002 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER EDUCATION STABILIZATION FUND CASH MANAGEMENT Federal agency: U.S. Department of Education Federal program title: Education Stabilization Fund Assistance Listing Number: 84.425C and 84.425D Pass-Through Agency: Minnesota Department of Education Award Period: Year ended June 30, 2021 Type of Finding: - Material Weakness in Internal Control over Compliance Finding Condition: It was noted during the audit that there were no review procedures in place during the year over the draws on the Education Stabilization Fund. Criteria: The School should have internal controls over compliance in place and documented. Effect: The school was not in compliance with requirements to maintain and document internal controls over direct and material compliance areas for the grant. Cause: The School was not aware they needed to be having someone review and approve the draws to have proper controls over the cash management compliance requirement. Context: For all eight draws made during the year none were reviewed by someone other than the preparer. This was a statistically valid sample. Recommendation: We recommend that going forward all draws are reviewed in detail to ensure the expenditures being claimed and drawn are valid expenditures and sufficient to cover the draw amount. This review should then be documented. The individual reviewing the information should be a different individual than the person calculating and inputting the draw information. Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Going forward they will have draws reviewed and the review properly documented prior to making the actual draw.

FINDING: 2021-003 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER CHARTER SCHOOL PROGRAM (CSP) GRANT PROCUREMENT Federal agency: U.S. Department of Education Federal program title: Charter School Program (CSP) Grant Assistance Listing Number: 84.282 Pass-Through Agency: Minnesota Department of Education Award Period: Year ended June 30, 2021 Type of Finding: - Material Weakness in Internal Control over Compliance and Compliance Finding Condition: The School does not have the proper language included in their conflict-of-Interest policy and does not have a procurement policy in place. Criteria: The School is required to have a conflict-of-interest policy that includes verbiage that to the extent permitted by state or local laws and regulations provide for penalties, sanctions, or other disciplinary actions for violations of such conflict-of-interest standards by the grantee?s and subgrantee?s officers, employee, or agents, or by contractors or their agents. The School is also required to have a procurement policy that complies with the Uniform Guidance requirements. Effect: The School was not in compliance with the requirement to have written policies in place over procurement and conflicts of interest. Cause: The School was not aware of the requirements to adopt written policies related to conflict-of-interest policies or procurement policies. Context: The School did not have a written policy for either conflicts-of-interest or procurement procedures. Recommendation: We recommend the entity adopt a conflict-of-interest policy in line with UG 200.318 that includes the required language. We also recommend the entity review the instructions provided to them by the State of Minnesota?s Department of Education and develop and adopt their own compliant procurement policy. Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Management will work to adopt both policies and implement required procedures.

FINDING: 2021-004 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER CHARTER SCHOOL PROGRAM (CSP) GRANT PROCUREMENT Federal agency: U.S. Department of Education Federal program title: Charter School Program (CSP) Grant CFDA Number: 84.282 Pass-Through Agency: Minnesota Department of Education Award Period: Year ended June 30, 2021 Type of Finding: - Material Weakness in Internal Control over Compliance and Compliance Finding Condition: The School did not perform and document appropriate procedures for federal procurements which exceeded the micro-purchase threshold. Criteria: Uniform Guidance states that if a federal procurement exceeds the micropurchase threshold, the School must ensure they are utilizing an allowable procurement method as outlined in the Uniform Guidance. These procurements should be in line with the School?s adopted procurement policy and all procurements should be sufficiently documented. Effect: The School was not in compliance with the procurement requirements of the federal program. Cause: The School was not aware of the procurement requirements in the Uniform Guidance as they have not had a single audit in the past. Context: For 5 of the 5 items tested there were no procurement processes performed or documented. This was a statistically valid sample. Recommendation: We recommend that the School ensure its personnel have a good understanding of the procurement requirements as well as the School?s procurement policies and ensure the proper documentation is maintained to document that process. Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Management will plan to implement procurement procedures going forward and properly document those procedures to comply with the procurement standard.

FINDING: 2021-005 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER CHARTER SCHOOL PROGRAM (CSP) GRANT SUSPENSION AND DEBARMENT Federal agency: U.S. Department of Education Federal program title: Charter School Program (CSP) Grant Assistance Listing Number: 84.282 Pass-Through Agency: Minnesota Department of Education Award Period: Year ended June 30, 2021 Type of Finding: - Material Weakness in Internal Control over Compliance Finding Condition: The School did not verify that entities were not suspended or debarred before entering into covered transactions with them under the federal program. Criteria: The Uniform Guidance states that a non-federal entity, before entering into a covered transaction with another entity, should adopt policies to ensure the vendor is not suspended or debarred or otherwise excluded from participating in the transaction. Effect: The School was not in compliance with the suspension and debarment requirements of the federal program. Cause: The School was not aware they needed to be performing this check when entering into a federal program covered transaction. Context: The School worked with multiple vendors to properly spend the federal funding from the CSP grant and did not have procedures in place to verify and document whether those entities were suspended or debarred. Recommendation: We recommend that the School adopt policies and procedures to ensure that prior to entering into covered transactions under the federal program the School ensures the entity is not suspended or debarred. Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Management will work to enact a plan to check if entities are suspended or debarred going forward.

FINDING: 2021-006 MATERIAL WEAKNESS IN INTERNAL CONTROL OVER CHARTER SCHOOL PROGRAM (CSP) GRANT ALLOWABILITY Federal agency: U.S. Department of Education Federal program title: Charter School Program (CSP) Grant Assistance Listing Number: 84.282 Pass-Through Agency: Minnesota Department of Education Award Period: Year ended June 30, 2021 Type of Finding: - Material Weakness in Internal Control over Compliance Finding Condition: One of the employees charged to the federal program was incorrectly paid at a rate that was higher than the approved contract amount. This resulted in additional expenditures being charged to the federal program. Criteria: The Uniform Guidance requires that all payroll costs charged to federal programs be supported by proper documentation that is incorporated into the official records of the entity. Effect: There were payroll costs charged to the grant which were not supported by appropriate time and effort documentation. Cause: The School had a typo on the personnel action form and did not catch it during the review process or the payroll process, resulting in more being paid for the time than was initially approved. Context: Out of a total of five payroll disbursements tested which were charged to the grant, we noted one which was paid at the incorrect pay rate. This was a statistically valid sample. Recommendation: We recommend that procedures be implemented to ensure that all approved wage rates are properly incorporated into the payroll system to ensure all amounts charged to federal programs are appropriate. Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Management will work to ensure that all payroll amounts agree to approved wage rates.