Department of Transport spending on consultants

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19 March 2013
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Committee was briefed on the audit on the use of consultants by the Department of Transport (DoT). The areas of deficiency were planning and appointment; internal capacity; training and transfer of skills; performance management and monitoring; extension of contracts and closing and finalising of projects. The progress on the recommendations to the DoT was explained, including the commitments received from the Dot. The two areas that generated the most discussion were the eNaTIS and Taxi Recapitalisation Project.

Members expressed dismay that even though the democratic era had already proceeded quite a long way, the Department still did not have a grip on the control of its expenditure. Consultants still managed to operate without proper oversight from the DoT. They asked if DoT had conducted forensic enquiries into personal finances of persons who had been disciplined, to see whether they had gained financially from the irregular awarding of contracts.  The Committee questioned the discrepancy in dates where contracts had been extended illegally in the eNaTIS project. The Committee thought that the responses from the Chief Financial Offer and the Deputy Director-General, in answer to the questions about the extensions of dates for the contract on the eNaTIS programme, were contradictory. The Taxi Recapitalisation had caused upset for the Auditor-General because the budget needed to be R2.1 billion more than was initially planned.

Members asked if officials who had received kick-backs had been dealt with and if the Department had conducted forensic audits. SCOPA had requested the Department to have the Hawks investigate the issue of the extension of contracts in the eNaTIS programme. The Committee asked if the Department had measures in place to take over the eNaTIS programme. Members were concerned that it had taken the Department seven years to scrap 54 000 taxis out of 134 000, and yet it now said it planned to scrap 81 000 in 2.5 years. They enquired why the Taxi Recapitalisation programme was slowing down and why extra money to the value of R2.1 billion was needed. They were told that it was near impossible for taxis to find their way back into the system after they had been scrapped. The DoT expressed its readiness to take over the eNaTIS programme.

The National Transport Master Plan was explained and the Committee was told that provincial transport plans were not integrated into this plan but were guided by it. Integrated transport planning was taking place in provinces and the National Transport Master Plan served as a guide. 

Meeting report

Appointment of Acting Chairperson, and opening remarks

Mr L Suka (ANC) was nominated to be Acting Chairperson until the Chairperson arrived.

Mr Suka extended condolences to the victims and families involved in the recent bus accidents.

Mr Suka emphasised that this meeting would be important, since it would detail figures and their impact on service delivery.

Mr I Ollis (DA) noted that there were visitors from the rail commuter organisation at the meeting.

Mr Suka welcomed members from the Passenger Rail Agency of South Africa (PRASA), members from the United Voice Commuter Forum (UCV), representatives from the Ministry, the office of the Director-General of the Department of Transport (DoT), and of the Parliamentary Monitoring Group (PMG) whom he said “kept people on their toes”. 

Audit on the use of Consultants: Briefing by the Department of Transport (DoT)
Mr Ollis said that two of the three documents before the Committee today had been seen twice before, by SCOPA and this Committee. He urged the presenters to focus on the new document first, to avoid repetition. 

Mr Dan Pretorius, Acting Chief Financial Officer, Department of Transport, outlined the focus areas of the Auditor General South Africa (AGSA), during the audit on the use of consultants by departments. . These were the closing and finalising of projects, extension of contracts; performance management and monitoring of consultants; training and transfer of skills from consultants to employees; internal capacity at departments and planning and appointment processes. The areas of deficiency, in relation to the DoT were found to be planning and appointment, internal capacity,  training and transfer of skills,  performance management and monitoring,  extension of contracts and closing and finalising of projects.

The recommendations of AGSA to the Department were highlighted (see attached presentation). Of these, proper planning for the provision of financial and other resources necessary for projects and their implementation was considered one of the most important. The progress on the recommendations to the Department was explained, including the commitments that the DoT had made.

Under key findings of the audit, the history and development of eNaTIS was explained, and it was noted that on this project, payments of R575 million were made to consultants. With regard to the Taxi Recapitalisation Project  (TRP) it was noted that the taxi scrapping process was to be ended. The proceeds of scrapped taxis had not been accounted for by consultants to the Department. By the end of March 2013, taxis to the value of R2,9 billion would have been scrapped and 54 719 taxis had been scrapped. Progress on key findings showed that the TRO had been extended for two and half years past its initial scope, to implement the Public Transport Strategy.

There had been a number of developments in the Department as a result of the audit, one of which was that a Chief Directorate: Strategic Planning and Monitoring was created in the Office of the Director-General, to improve on strategic planning and quarterly progress reporting. (see document)

Mr G Krumbock (DA) said that he had seen elements of this report when it was presented to SCOPA, but the part that was quite disturbing was the extent of  the cost over runs. The eNaTIS programme alone had run into billions of rands, and he had the impression that despite the fact that South Africa was many years into democracy, the same problems continued to occur. It was uncertain why it had taken the Department so long to get a grip on the control of expenditure. It seemed that consultants could get large amounts of money very easily without proper oversight from the Department. Mr Krumbock asked why this continued to happen to such a degree, without abating.

Mr Pretorius said that this tied into the earlier comment about the Public Finance Management Act (PFMA), where it was stated that within reason, accounting officers could extend contracts. Possibly the PFMA should restrict those powers more.

Mr Krumbock commented that there were often kick-backs, as some officials got very rich with contracts being awarded through their offices. He asked if there had been a proper forensic enquiry into the personal finances of the people who were disciplined, in order to see whether they had gained financially from the irregular awarding of contracts. 

Mr Pretorius said that this possibility had not been investigated. The Standing Committee on Public Accounts (SCOPA) had actually requested the Department to have the Hawks investigate the extension of contracts. This would include further investigations into the extension of the eNaTIS contract.

Mr Suka asked if the Department had initiated its own forensic investigations.

Mr Pretorius replied that the Department had done and concluded a forensic investigation.

Mr Suka asked if that report would be available to Committee Members.

Mr Pretorius said that a legal opinion had to be obtained first, as there were some restrictions.

Mr Suka said that he was raising this matter deliberately as Committee would have a keen interest and would want to monitor if action had been taken.

Questions about eNaTIS programme and dates for the extensions of the contract
Mr Ollis said that a discrepancy existed between the dates where contracts had been extended illegally. Firstly, the Chief Operations Officer (COO) had told the Committee repeatedly, as set out on page 17 of this briefing,  that two legal opinions existed which indicated that the extension of the eNaTIS contract for another five years from 1 May 2010 was invalid. However, Mr Rajesh Jock, Deputy Director-General, DoT, had also told the Committee, on two occasions, that the contract was illegally extended from September 2012. The time between 2010 and 2012 was not five years. He asked for an explanation as to why there were different dates being quoted.

Ms D Dlakude (ANC) said that the first bullet on page 17, under the heading for Progress of Key findings, stated that:’Two legal opinions indicate that the extension of the contract for another 5 years from 1 May 2010 onwards is invalid’.  However, on page 13, it was stated that the extension was done on 11 May 2010. She asked who was operating the system in between the two dates, and said that these dates were contradictory.

Ms Dlakude also asked if the Department had measures in place to take over the eNaTIS system. The millions of rands paid to the service provider could be used elsewhere.

Mr Rajesh Jock, Deputy Director-General: Transport Information Services: Department of Transport,  said that it was important that the dates must be stated correctly. The period 1 June 2002 to 12 April 2007 was the build phase of this contract, and 13 April 2007 to 31 May 2007 was the operation phase. Those two phases combined, from June 2002 to May 2007, was the initial five year contract. The period 1 June 2007 to 31 May 2012 was the Transfer Management Period. This Transfer Management Period was made possible by Clause 15 in the contract the Department had with the service provider. This contract allowed for the transfer of the system to the state, equal to the period of the building and operation phases. This clause was invoked. It provided for the service to be rendered on a time and material basis. In the period  31 May 2007 to 31 May 2012, there was a change in shareholding, which took place in 2010, and the shareholders then proposed a further five year period. In 2010, an extension was then granted, and that was where the legal opinions came from. The legal opinion found that this contract could not, however, be renewed by the effluxion of time. Therefore in terms of Clause 15, the Department basically had no contract. The whole of that contract had fallen away, except for Schedule 15 which was the transfer to the state.

Mr Jock said that, administratively, the DoT therefore had an extension to 2010. Two legal opinions supported this. The Director-General then set up a task team in November 2011, ahead of the 31 May 2012 deadline, to negotiate with the service provider. It was intended that they should set in place a migration plan to the envisaged ICT plan. However, the constant co-operation of the service provider was required, as the plan could not be done without them. The key in this process was to look at the network and infrastructure. This period of negotiation was used to strike a plan with the service provider, an exit as planned by the end May 2012.

Unfortunately this did not happen. The negotiations started off on a high note, but broke down. The service provider started to make demands, which the state was not in a position to fulfil. When the negotiations broke down in June 2012, the Department sent notice to the service provider to say it  was not going to pay any amount. The service provider then took the Department to court. The Court ruled in favour of the service provider, noting that the DoT must honour its contractual obligations, and seek a remedy through dispute resolution processes. This process had been started. Meantime, the DoT was appealing the court judgment., so the matter was still sub judice  and not all steps had been exhausted.

He noted that the only period deemed to be irregular was the period after 31 May 2012. Everything  up to that point was regular.

Mr Pretorius replied that the audit findings were put down verbatim. The contract was extended on 11 May, the date of signature, but it was stated that this extension took effect from 1 May 2010. The signature of the extension would have run from 1 May 2010, for five years.

Mr Jock said that the Department was ready to take over the eNaTIS system as envisaged from  1 June 2012. The necessary capacity had been planned for, as well as  the secondary data and the accompanying support centre that went alongside it, in order to receive the function from the service provider. The Department had partnered with the State Information Technology Agency (SITA) who had themselves identified the skills required within the SITA. A third party had been contracted to the SITA, (not the Department), to support with the migration.  The Department and the SITA were meeting on a monthly basis to revise the plan already in place for 2012.  The Department was also working with the State Attorney’s office to fast track some of the legal measures for this programme, under the guidance of the Minister.  The provisions of the contract were being used to do only the core services and not the peripheral services. 

Mr Suka said that this sounded contradictory to what Mr Jock had said.

Mr Pretorius said that there was no contradiction.

Mr Suka said that the meeting would continue but the conflict in the statements was observed.

Questions about the Taxi Recapitalisation programme
Mr Ollis asked if he could run through what he understood to be the current situation on the Taxi Recapitalisation Programme (TRP). As he understood it AGSA had been concerned that the budget figure was initially set, but now the DoT said that it needed a further R2.1 billion because it was intending to scrap not the original number of 100 000 taxis, but had revised the figure to 135 000. However, to date, only 54 000 had been scrapped, which was 81 000 less than the first projected number.. Reports last year had indicated that this programme was slowing down and would soon be stopped.

Mr Ollis said that there seemed to be different reasons for slowing down the programme. He asked if the extra money was indeed needed. He also asked if the Auditor –General was commenting that incorrect procedures were followed. If the extra amount would not in fact be needed, it seemed pointless to argue the point. He also wanted to know if the DoT had a view on why the programme was slowing down.

Ms N  Mdaka (ANC) asked what had happened with the TRP  in the years mentioned, and what was the total amount paid for the project. It seemed that the report was just written for the sake of reporting.

Mr P Mbhele (COPE) said that if it took seven years to scrap 54 000 out of 134 000, then he wondered how 81 000 taxis were going to be scrapped in two and half years. He asked what the DoT would do if this initiative was not succeeding.

Mr Mathabatha Mokonyama, Deputy Director-General: Public Transport: Department of Transport, said taxi recapitalisation looked at economic empowerment and safety on the road. The intention was that old taxis were going to be replaced with new, safer vehicles.  Cabinet had approved the seven year programme at a cost of R7.7 billion, during which it was intended to scrap 100 000 taxis. The DoT had embarked on the special legalisation process. However, a second campaign then started, entitled “To be Legal” and this resulted in another 35 000 taxis being added. AGSA had seen this as implying the addition of another R2.1 billion, but this was not the case. Two years into the programme, in 2009, the DoT went back to AGSA and noted the addition of another 35 000 taxis to the programme. The figures did not only relate to the seven year period, but to the numbers as well. If the DoT did not get the additional allocations to cover the R5.5 billion from the National Treasury, then the numbers would not be covered in the seven year period of the programme. Cabinet had indicated that the DoT would not get additional funding from the National Treasury. The challenges now were that there were a number of taxis coming in, and financial institutions were not assisting the Department. He conceded that perhaps the TRP, in its current form, might not necessarily yield the desired result. It was not a sustainable business model. An option analysis was going to be done by the DoT. Two years were needed to complete the process with 81 000 taxis. The new model was going to be concretised. This model was the Public Transport Transformation and Integration Plan, which sought to integrate all modes of transport. The focus would be on the commuter, and this new plan would cost in the region of R12.9 billion.

Ms R Motsepe (ANC) asked about the reports that some taxis were finding their way back into the system even after they had been scrapped.

Mr Mokonyama said that this was not possible, even though there would always be people involved in fraudulent activities. A few people had been arrested in Mpumalanga. There was serious collusion between persons purporting to have scrap and officials at the municipality. Notwithstanding the criminal element, the Department had put a mechanism in place to ensure that this could not happen. A taxi could not be scrapped that did not have an operating license. A physical vehicle had to be submitted, and that vehicle would never be seen again, because once it was de-registered, the whole vehicle would be crushed, including batteries, tyres and the engine. This was where receipts and money came into the trust, to prove the sale of the scrap. The processes followed were fairly fool-proof.

Mr Ollis asked if the National Transport Master Plan brought together the nine Provincial Transport Plans into a total master plan for transport.  

Mr Mokonyama said that the National Transport Master Plan (NLTA) was a project of the Department. Implementation was going to be done by implementation agents, like the provinces and local government. The Department had made provision for a unit that would deal specifically with the monitoring of the National Transport Master Plan.

Mr Mokonyama said that ideally the National Transport Master Plan would have brought together all provincial master plans, but this process had started before some of the provinces that were now engaged in integrated transport planning had started their plans. Provinces were, however, guided by the National Transport Master Plan, as a national planning framework. Whilst this may not be a consolidation of those plans, it was a national framework which therefore guided the way in which integrated transport planning should be done. Provinces had provincial transport frameworks, in terms of the National Land Transport Act (NLTA).

Ms Ngele said that in the section on “Other detailed findings and Responses”, it was stated that: ‘The discussion document only informed policy development. A policy is only implemented when it has gone through Parliamentary processes.’  She asked how far it had gone, and what was happening with the discussion document.

Mr Pretorius replied that discussion document had been developed and was going to be used to develop the rail policy. It was not a policy in itself, but just a discussion document.

Mr Suka asked for progress on this document, asking if it was still in discussion and if there was a draft.

Mr Pretorius said the discussion document had been completed, but the rail policy was currently very close to completion and would probably be finalised very soon.

Mr Suka asked Mr Mokonyama for confirmation.

Mr Mokonyama said that the rail policy was at the consultation stage and would be finalised soon.

Mr Suka asked when it would be finalised.

Mr Mokonyama said that it was at the Green Paper stage, which meant that it would be gazetted for comments. This information could be obtained now from the rail section.

Questions about project managers and the monitoring of consultants
Ms Dlakude said that the skills transfer from consultants to departmental staff was ineffective. She asked if the Department was doing its best to ensure that scarce skills were transferred to our people, and what was the reason for having consultants within the Department if the skills transfer programmes were not being monitored. She also asked why work was not being monitored.

Ms Mdaka said that the report was confusing. She asked if consultants were going to be monitored by project managers, where these project managers were based, and why project managers were not making progress more visible. 

Mr Pretorius replied that for every contract awarded, there were project managers assigned to monitor the work that was being done by consultants and to sign off on all the payments to that consultant. However, the Department did not have its own monitoring team to monitor the use of consultants. The Department did keep track by using a system called LOGIS (Logistical Information System) which captured all contracts. Contracts were captured at a particular seeding amount and for a specific period. Obviously all payments had to be within the seeding amount and within the period specified. 

Mr Suka asked for information about the Basic Accounting System (BAS) and Logistical Information System (LOGIS).

Mr Pretorius replied that BAS – the Basic Accounting System - was the main system for the Department’s ledgers and expenditure accounts. LOGIS was the procurement system on which fixed assets were recorded. It had an asset register function, and was where the procurements system was kept. Any procurement was done through an order issued through LOGIS. Payments were also processed on LOGIS and were interfaced with the BAS, where payment was finally approved. The two systems were linked.

Mr Mokonyama said that the BAS was a government system and used by all departments.

Ms Mdaka asked what the receipts mentioned on page 21 of the report as ‘Total Receipts from September 2006 to October 2012  were for, and asked where the other receipts were to be found.

Mr Pretorius said that the remaining receipts were in a trust which was subject to income tax. Receipts were available after provision was made for income tax.

Mr Mokonyama added that the receipts were for the money obtained from the scrap metal resulting from the scrapping of the vehicle. When the scrap was sold, the money went into a trust fund. This money had to go back into the industry via a distribution mechanism called the Development Trust. The Department had a person monitoring how monies came into and exited the Trust Fund.  Part of the money that came in was in a shareholding account for the taxi industry.  30% went back into the industry.

Ms Mdaka asked what the amounts were that were declared as irregular expenditure with regard to the Events management project, where those fees were now, and if the fees were recovered from the project manager.

Mr Pretorius replied that a legal process was followed and at the end of the day the Department did not pay more than the total contractual amount.

Mr Mbhele said that subsidising or assisting the South African National Taxi Council (SANTACO) was a good thing. He asked why the National Taxi Alliance (NTA) was not featured anywhere and if having SANTACO as the Department’s “sweet heart federation” was part of mimicking the divide and rule strategy of the past.

Mr Mokonyama said that SANTACO was a formation of the government. Originally, when people were dissatisfied with the election process, the government intervened and reconvened the same grouping. This resulted in the formation of SANTANCO (with an ‘N’). Out this process there were a few disgruntled people again, who could not get onto the positions of power in SANTANCO. They formed the National Taxi Alliance (NTA) and Top 6, and these combined into the NTA. At the start of the programme SANTACO existed, with the NTA was the first splinter group. The main aim was to unite the two organisations into a single body and bring other in also. The best thing was for the NTA to come back.

Ms Dlakude noted that competitive procurement processes were not followed and asked what happened to officials dealing with procurement who did not follow the proper procedures. They seemed to be working still for the DoT.

Mr Pretorius replied that, to his knowledge, one had been dismissed. In other cases where auditors found that competitive processes had not been followed, there were closed bids, but those had been approved, for proper reasons provided.

Mr Suka said that it seemed that there was a collapse in the systems as far as this project was concerned.

Ms Motsepe said that there should be a list of the consultants who were not doing their job well because government should be aware of them.

Mr Mokonyama said that these consultants had been black listed by the government and the National Treasury and could never acquire more government work.

Mr Suka said that the TRP needed further probing.

Mr Suka appealed to the Department to work very hard as far as consultants were concerned. This was a very serious matter, as they were milking public funds. Consultants should be the last option to be used only if the specific skills were not present in the Department. The Committee looked forward to the Department’s forensic reports. He urged the Department to do oversight in the areas of concern and this information should be exposed. 

Expenditure to Quarter 3 of 2012/13: Briefing by the Department of Transport
Mr Pretorius briefed the Committee on the expenditure in quarter 3 of 2012/13. The Expenditure per Programme was outlined, with Administration at 85.2%; Integrated Transport Planning at 40.8%; Rail Transport at 75%; Road Transport at 80.8%; Civil Aviation at 55.9%; Maritime at 44.9% and Public Transport at 55.6%.He also gave a table showing the line item expenditure. He explained the S’Hamba Sonke programme and the Provincial Road Management Grant, including their areas of weakness. (see document). Members asked him to stop the presentation at page 26, due to time constraints.

Ms Ngele asked what was happening with Mthatha airport.

Mr Zakhele Thwala, Deputy Director-General: Civil Aviation,: Department of Transport, said that project was aimed at changing the status of Mthatha airport to bring it in line with  East London and other ACSA airports. The Department had taken over the project only two weeks ago. Prior to that, it had merely held the money and paid the bills when invoiced, but now the whole project and its management was transferred to the DoT. The two main projects envisaged were an extension to the runway to allow bigger aircraft to land at this airport; and  finishing the terminal building. It was hoped that the two projects would be completed soon.

Mr Ollis said that Public Transport Infrastructure and Systems (PTIS) was sitting at only 36.3% expenditure of the budget. He asked what this item was for, what it was meant to be spent on and why was it represented as a percentage only. 

Mr Pretorius replied that the reasons why some of these municipalities were lagging behind could be found on page 55 of the report. Some progress on PTIS could be found on pages 52, 53, and 54.

Mr Ollis said that the North West Province and the Northern Cape Province, in particular, had failed to spend their conditional grants.  He asked if the DoT was investigating what the backlog was; and if it was pressurising the provinces to spend the money to at least allow for provincial roads to be maintained.

Mr Pretorius replied that there had been some assistance given to the North West Province (NW), as evidenced by the section in the report on the S’Hamba Sonke programme on pages 59 to 61 of the report. An agreement could not be reached for the NW Province to surrender any savings, and money could not simply be withheld. The report did provide information about what assistance the Department was providing to the Northern Cape Province as well.

Ms Dlakude said that the North West had spent 57.3% of the conditional grants. The last time the Committee had visited this province, the grant had not been used for its intended purposes but was instead used to pay 110 consultants. She asked what the role was of the National Department of Transport where provinces failed to spend their grants properly in line with the purpose.

Mr Mokonyama replied that the Provincial Road Management Grant (PRMG was not new money, but was basically a consolidation of grant money available to provinces. The idea behind creating a grant like the PRMG was to focus attention on maintenance, to meet the criticism that pieces of road were being built at random. However, the implementing agent was deemed to be the province and a very delicate line had to be followed when deciding if funds should be withheld. Members often complained that  little or nothing was happening in a particular province. This was the second year of the S’Hamba Sonke Programme. The agreement was that all outstanding projects that had started some years back needed to be completed, to be paid out of the PRMG, and that was why some commitments were still being funded that were met prior to the creation or establishment of this grant. The majority of the provinces had indicated that they were still honouring previous commitments.

Ms Dlakude asked if the figures given were a true reflection of what was spent on the grants, citing the figure that for the Mpumalanga Province, 66.7% was spent. She asked if systems were in place to monitor how provinces spent conditional grants.

Mr Mokonyama replied that some of the expenditures were not necessarily linear, and, more particularly for the PTIS, there were changes under “agreement payment settled”. Some disbursements may already have been made. Although the table on page 8 showed 36.3% spending in quarter 3, this did not consist of equal monthly payments, as schedules would be agreed upon of when the money was needed. For instance, there were few payments done in June and July, as this was the start of the local government financial year. There was, however, some evidence of slow spending.

Ms Motsepe said that projects like Moloto Rail Corridor did not exist. She asked what was happening at Pienaars Rivier station, since there was a criminal element there which was very disturbing. The Department should provide a report that showed exactly what it was doing and how it had progressed.  This would make it easier when funds were requested to upgrade areas. She also asked specifically that the DoT monitor the S’Hamba Sonke Programme in the North West Province.

Mr Mokonyama said that with regard to Moloto Rail, the National Treasury had unfortunately set the DoT back by insisting that the DoT must look at options other than rail only. The DoT had originally agreed that it should be a rail corridor for a number of reasons, including travel time and issues around safety. The DoT would do a road based solution, but the cost benefit analysis would include other issues. The DoT was in the final stages of the feasibility study, but it was unlikely to move from its first conclusion that, for safety reasons, this should be a rail corridor.

Mr Mokonyama said that he was waiting for an answer to questions about Pienaars Rivier Station. If a response was not received today, then a written response would be sent to the Committee. 

Ms Dlakude asked how long it would take for the DoT to do a feasibility study on Moloto Rail.

Mr Pretorius said that a new feasibility study was in progress currently on the Moloto corridor options. The previous one related only to Moloto Rail and not the Moloto Corridor, but the current feasibility study would look at both road and rail based transport. He did not know how long it would take, but it was on course.

The following questions were raised but not answered
Ms Dlakude said that mention was made of the appointment of consultants to assist in the case of a breakdown in negotiations with the service provider, but wanted to know why this was necessary.

Ms Mdaka noted the reference to ‘total cost of scrapping and allowances’ on page 30 of the report, and asked what the allowances were for. 

Mr Ollis asked for an explanation why the SETA Transport and Education Authority had not been paid R207 million.

Mr Suka thanked the Department. He noted the concern that underspending was prevalent in many areas. The Committee would follow up on written responses to some of the questions.

Adoption of Minutes
Members adopted minutes of 12 March 2013.

The meeting was adjourned.


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