Algae is a bit of a misnomer, these are actually bacteria, some are toxic, some are not, and are even used as supplements, I would expect composting to would break down the toxins, but I don't know so, and anyway you would have to expose yourself to it to gather it in the first place, it can be toxic just from skin contact or inhaling from water churned up by motor boats, so the safe answer is DON'T use it.
Is it your lake? How big is it? There are safe ways of getting rid of it if you want to use the lake.