National Lottery Board on its allocation to sport

Sports, Arts and Culture

29 July 2014
Chairperson: Ms B Dlulane (ANC)
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Meeting Summary

The National Lotteries Board (NLB) said that the selected national lottery operator operated for eight years according to the Lotteries Act and in June 2015, the third licence cycle will commence with a new operator. The six members of the board of the NLB were selected by Parliament and the seventh by the Minister of Trade and Industry. It distributes on average about R2 billion per annum.

The NLB regulated and distributed all the lotteries and their proceeds in the country, through the National Lotteries Distribution Trust Fund (NLDTF). The distribution agencies (DAs) were appointed by the Minister of Trade and Industry. The NLB was phasing out the use of temporary DAs for the different sectors as a result of the new Act, which sought to use those agencies on a full-time basis. That would also make them accountable to the NLB board, instead of the Minister alone. Moreover adjudications could be adjudicated expeditiously at the request of the board going forward. Before the amendment to the Lotteries Act, sport federations and organisations such as the South African Sport Council and Olympic Committee (SASCOC) could nominate four to five members into the DA where the very members then would be conflicted, affecting adjudication. The DTI was currently dealing with the matter of individuals with vested interests forming part of the distribution agencies.

With sport facilities, the NLB made it a condition that national teams when in preparation for global tournaments had to be allowed the use of the high performance equipment stationed at university high performance centres funded through the NLDTF. Currently the DAs were trying to enforce municipalities to agree to maintain facilities established through the NLDTF benefit.

National federations were allowed to apply for multiyear allocations and the NLB could provide a breakdown table of such allocations to the Committee. SASCOC was a beneficiary of such funding processing. The NLB asked the Committee to help it in fighting fraudulent use of its systems by so called ’consultants’ which were operating in the constituencies of some Members of Parliament. The Sport and Recreation Distribution Agency (SRDA) had resolved to focus on school sports in the 2014/15 financial year.

The NLB was also working on establishing an electronic application system. Moreover it was negotiating with the SA postal service and other stakeholders to make access to the NLDTF forms easier. The NLB was also negotiating with the DTI to simplify the application form.

The Committee wanted to know what had happened to the remaining balance of allocations in the SRDA. Who accounted for the allocations going to provinces and who was responsible for handling those funds? It asked how the NLB was sharing its successes when delivering multipurpose facilities both in urban and rural communities. If the NLB was aware that monies were being transferred into consultants’ personal accounts, why was that trend continuing when adjudication processes where supposed to be thorough? How were the allocated monies tracked? Were there monthly reports accounting for monies leaving the NLDTF? What had happened to the remainder of the budget for 2011/12? Did the NLB acknowledge receipt and declination of applications? Could the NLB give the Committee a provincial breakdown of the support it had given to early childhood development?

The NLB chairperson explained that if there was unused funding, it was returned to the pool and would be redistributed according to the sector percentages as outlined. What caused unused remaining budgets was the temporary nature of adjudication by DAs. The NLB did conduct workshops in provinces to enlighten organisations on how to access funding and that was also where it shared information on what projects it had funded previously. The challenge with transferring monies into individual accounts was that ‘consultants’ supplied their personal details in the application documents when assisting organisations to apply for funding. Such cases were handed over to law enforcement, but generally the NLB worked with the available information though it did a lot of verification. That spoke to the delays in transfer of payments as well. Indeed the NLB constantly monitored organisations through progress reports required each time before tranches were transferred. The charities sector had launched a project on early childhood development which the NLB had funded across provinces. When organisations handed in applications with proper contact details, acknowledgement of receipt with a reference number was issued quickly thereafter. Throughout the adjudication process there was constant contact to update applicants on the progress of their applications.

The Committee discussed its Committee Programme.

Meeting report

National Lotteries Board (NLB) briefing on the sport allocation
Prof Alfred Nevhutanda, Chairperson of National Lotteries Board, explained that the NLB would become a commission in the future as the new Amendment Act was implemented. The reporting department for the NLB was the Department of Trade and Industry (DTI) and that Portfolio Committee. SRSA and others were partner departments. The national lottery operator operated for eight years according to the Lotteries Act so the NLB was approaching its third licence cycle for a new operator. The six members of the board of the NLB were selected by Parliament and the seventh by the Minister of Trade and Industry.

The NLB regulated and distributed all the lotteries and their proceeds in the country respectively, through the National Lotteries Distribution Trust Fund (NLDTF).

The Miscellaneous Purposes distribution is adjudicated directly by members of the National Lotteries Board (NLB) who have been appointed as the distributing agency members for this sector. It assisted the other sectors when applications of importance had been submitted after those sectors had closed receipt of applications. The percentages had been a decision of Parliament and all that the NLB did was to disburse according to the Act.

The distribution agencies (DAs) were appointed by the Minister of Trade and Industry. The NLB was phasing out the use of temporary DAs for the different sectors as a result of the new Lotteries Amendment Act, which sought to use those agencies on a full-time basis. That would also make them accountable to the board of the NLB, instead of the Minister alone. Moreover adjudications could be adjudicated expeditiously at the request of the board going forward.

In the older Act, federations or organisations like South African Sport Council and Olympic Committee (SASCOC) could nominate four to five members into the DAs where these very members then would be conflicted, affecting adjudication. The DTI was currently dealing with individuals with vested interests from going into DAs.

He apologised for the absence of the chairperson of the Distributing Agency for Sport and Recreation, Mr Mveleli Ncula, and his deputy chairperson, Dr Harold Adams, who were currently in Scotland supporting the SA team in the Commonwealth Games.

The Chairperson accepted the apology but said that, in future, apologies needed to be submitted in written form.

Strategic Overview
Ms Thabang Mampane, NLB Chief Executive Officer, took the Committee through the NLB strategic overview. The NLB ensured that the operator delivered as it had promised by monitoring all its activities.

Strategic Alignment
The NLB had been able through its partnerships to place about 1 000 unemployed graduates with some of its beneficiary charities to capacitate them as well.

The new legislation was also granting the NLB the opportunity to conduct research and to recommend to its board where proactive funding needed to be prioritized.

Grant Funding: Sports DA
Mr Jeffrey du Preez, Senior Executive, Grant Funding, NLB, told the Committee about the kind of work the grant funding division did in the NLB.

Grant funding had to balance between access and impact with individual applications benefiting from the NLDTF. With sport facilities, the NLB made it a condition that national teams when in preparation for global tournaments had to be allowed the use of the high performance equipment stationed in university high performance centres funded through the NLDTF. Currently the DAs were trying to enforce municipalities to agree to maintain facilities established through the NLDTF benefit. The positive side of capping the amount that could be disbursed as categorised per applicant, was that the expectation for funding was manageable. Adversely, that could limit the intent of the strategic focus of the DAs in enhancing the impact of the NLDTF. An example would be a big impact project that could not be funded completely which would limit the impact of the NLDTF. This was the ongoing juggling that the DAs were facing in wanting to spread the cake as wide as possible and ensure that did not limit beneficiation across the board.

The biggest challenge was having a stabilised income for the DAs whereas the demand for funding had increased over the years.

Sports Grant Allocation Status as at 31st March 2014: Provincial Split
The Sport and Recreation Distribution Agency (SRDA) had started to separate the National Federations allocation from the provincial spilt because historically Federations would have head offices in Johannesburg or Cape Town. Therefore when they applied and received funding that skewed the SRDA statistics when accounting for the provincial split since the Federations did not sever particular provinces.

National Federations were allowed to apply for multiyear allocations and Mr du Preez said that the NLB could provide a breakdown table of such allocations to the Committee. SASCOC was a beneficiary of such funding processing

Ms Mampane said that the SRDA had completed all its adjudication for 2013/14. In the same financial year the NLB had intercepted around R300 million which would have been paid to non-existent or fraudulent organisations.

In 2010 the NLB Proud Project had funded artificial turfs to the tune of R117 million in very remote areas of the country.

Prof Nevhutanda said that the NLB had signed a Memorandum of Understanding (MOU) with the National House of Traditional Leaders (NHTL), the South African Local Government Association (SALGA), the Black Lawyers Association (BLA) and the Chartered Accountants of South Africa (CSA) to ensure that applicants understood the responsibility of public funds. Moreover the challenges were compounded by consultants who even sold NLDTF application forms to organisation saying they represented the NLB. In assisting schools to apply, when the money was transferred it went into the consultant’s account and the consultant would then have the prerogative of how much to give the schools. A case in point was where a consultant had charged a school R50 000 from a R100 000 grant that the consultant had assisted in applying for. In another case there was an NLDTF signpost on an un-worked field which was supposed to have been a facility sponsored by the NLB. He reiterated that if the NLB had managed to supply 27 artificial turfs in 2010 alone, there should have been more facilities around the country were it not for the defrauding of the NLDTF by some applicants. He pleaded with the Committee to help the NLB in fighting fraudulent use of its systems by so called ’consultants’ which were operating within the constituencies of Members of Parliament.

The SRDA had resolved to focus on school sports in the 2014/15 financial year.

The NLB was also working on establishing an electronic application system. Moreover it was negotiating with the SA postal service and other stakeholders to make access to the NLDTF forms easier. The NLB was also negotiating with the DTI to simplify the application form.

Discussion
The Chairperson said that she understood the work of the NLB because in her first week of office she had been bombarded with requests about NLDTF funding for facilities establishment in rural schools. She informed the NLB of the primary priority of the Committee which was to transform sport in rural schools. She had been expecting the NLB to speak to whether it had started facility projects since February 2014 when it had last presented to the Committee. What had happened to the remaining balance of allocations in the SRDA? Who accounted for the allocations going to provinces and who was responsible for handling those funds? Could the NLB elaborate more on Sport Infrastructure investment for the year ending 31 March 2014 (as unaudited)? Why were there so few NLB regional offices? How could the NLB assist small sport federations in setting up offices?

Mr Bergman said that he was glad that the NLB had already introduced the multipurpose courts SRSA was envisioning to introduce. He asked how the NLB was sharing its successes when delivering multipurpose facilities both in urban and rural communities. He cautioned against centralising all the decision making to the NLDTF and leaving out local industry from making profits from supplying the beneficiaries of the NLDTF. Simultaneously if there was central buying power and that the NLDTF could supply everything itself because it was cheaper that way. How could equity of distribution be ensured down the line? Because the reason for application of money for sport was to get people to participate and to even the playing field, between rural and urban schools.

Mr Malatsi wanted to know how any applications had been for sport infrastructure visa-vie the 26% allocation for infrastructure, seeing that there was a desperate call to the Committee to look into facilities in rural and remote schools. There were certain things which could be mitigated in terms of the so called ‘consultants’ if there were very strong internal controls for accountability and tracking funding within the NLB. If the NLB was aware that monies were being transferred into consultants’ personal accounts why was that trend continuing when adjudication processes where supposed to be thorough? The provincial offices would go a long way in also curbing that trend as applications would be dealt with directly, but if the NLB was not using those to the benefit of the applicants there would always be a market for fraudulent consultants.

Applications were also quite strenuous but the NLB needed to be more proactive in assisting new entrants for funding. How were the allocated monies tracked? Where there monthly reports to keep account of monies leaving the NLDTF? What had happened to the remainder of the budget for the 2011/12financial year?

Mr Moteka suggested that Committee members should be given NLDTF application forms so that they could assist NLB with distribution. The 22% for sport budget needed to be rural and township biased. In new entrant schools R100 000 was too little to start facilitating sport development therefore could the allocation be increased. How did the NLB track and monitor its funding impact?

Mr S Mmusi (ANC) wanted to know where in the North West the NLB offices would be. He agreed that rural areas needed to be prioritised. He had received numerous complaints from schools about declines from the NLB without notifications, could it speak to that? Of the R 463 million budget allocation mentioned in February and the R 319 million grants allocated, what had happened to the R162 million balances after the R18 million withdrawals at that time?

Ms B Dlomo (ANC) said that in comparing Gauteng and the KwaZulu Natal (KZN) province as outline in the 2012 call for applications report there was an anomaly there. Were the R100 000 grants for schools per application and not through proactive funding? Were the workshops proactively held or where they held in places where there had been requests from provinces?

Ms Manana said that seeing that the NLB had signed the MOU with NHTL, BLA, SALGA and CSA, the Committee would always want to be briefed on the monitoring and evaluation of how NLDTF funding was used, especially regarding curbing of fraud in the NLB.

Did the NLB acknowledge receipt and declination of applications? Could the NLB give the Committee a breakdown per province, of the support it had given to early childhood development?

Mr Ralegoma asked for the spread of the 22% between SASCOC, Federations and schools and the number of schools that had applied and those which had received funding and where they were located. He reiterated his concern as well over the monitoring of NLDTF funding. He was also interested in the new proactive funding that would come with the new Act and the issue of conflicted members in DAs. It would have been useful as well if the NLB could already have completed the impact study, so that the Committee could assist it going forward as well.

The Chairperson thanked the NLB over the supply of those multipurpose courts. She also encouraged the NLB that if it could further assist with completion of the remaining facilities in the Proud Project, it was welcomed to do so.

Prof. Nevhutanda was available to educate the Committee further on the NLB operations. He said that the NLB was not a DSD in that it made budgets available to its beneficiaries and was not granted a budget by Parliament. Moreover it accounted for all its budget allocations to its beneficiaries.

The process of funding had been established by the Lotteries Act to be application based. That meant that the only way for organisations to benefit was to have a financial statement that was audited, that was a directive of Parliament. Even the miscellaneous percentage needed organisations to be properly registered and that that could be verified for them to benefit. That was also the reason behind the declined applications for funding: the NLB had been currently trying to teach organisations on how to fill the application forms. Moreover the issue of submitting on time delayed the processing of applications.

When organisations handed in applications with proper contact details, acknowledgement of receipt with a reference number was issued quickly thereafter. Throughout the adjudication process there was constant contact to update applicants on the progress of their applications.

The Chairperson interjected that the forms were not easy to fill in and there was a lack of assistance from the help desks of funding organisations. She reiterated Mr Moteka’s sentiments over issuing of forms to the Committee.

Prof. Nevhutanda continued that the challenge with the form was that it had been developed to be a gazetted document, which could not be simply changed. It simply was not proper to have a one size fits all document of application for different amounts of grants. The new Act sought to categorise grants according to different amounts where there was also a need then to have different application documents as per category.

The NLB did conduct workshops in provinces to enlighten organisations on how to access funding and that was also where it shared information on what projects it had funded previously.

Normally the NLB consulted provincial governments over where it could locate its offices so that they could be accessible to all in the provinces. In the Western Cape there was an NLB office next to Parliament and that had been suggested by the provincial government. There were other offices of the NLB that would be opening soon countrywide.

The NLB was willing to put forms in constituency offices of parties as long as it would not be criticised of being partisan. Moreover there was an agreement with SALGA to use its offices nationwide as one source of form distribution and to use the NHTL as well in that regard.

In the call the NLB did specify what it could fund, but sometimes even if it had specified that infrastructure could be funded, schools would still apply for apparel and it was not allowed to force facilities provision in schools or to alter applications in that regard either. There was a booklet detailing all the projects the NLB had funded since 2000-2013 which would be available shortly to members. That included the Federations that were funded yearly by the NLB.

Sporting Federations in SA were also not acknowledging of the support they had received from the NLDTF.

Mr Malatsi clarified that his question on allocated funds for sport infrastructure was what the total figure was visa-vie the applications for sport infrastructure given the 26% Percentage infrastructure spend reported on, in the presentation?

Prof. Nevhutanda continued that even Iziko Museum had been funded by the NLDTF and asked that the Committee needed to help the NLDTF beneficiaries to acknowledge support, because SASCOC had received more than R600 million since the establishment of the NLB. Those were the people that needed to account to the Committee over how they had used NLDTF support.

The Chairperson interjected that indeed that was the reason behind the Committee wanting Federations to come account and also why it had asked the NLB to account.

Prof. Nevhutanda said that what he had meant earlier when he said that it reported to DTI was not a rebuke to the Committee over its invitation to the NLB, but that when in future there were clashes between invitations from the Committees on trade and industry and sport: trade and industry would get preference.

The challenge with transferring monies into individual accounts was that ‘consultants’ supplied their personal details in the application documents when assisting organisations apply for funding. Such cases were handed over to law enforcement, but generally the NLB worked with the available information though it did a lot of verification. That spoke to the delays in transfer of payments as well.

Indeed the NLB constantly monitored organisations through progress reports that would be required each time before tranches would be transferred if a grant was large and would be transferred in tranches.

Prof. Nevhutanda suggested that a new form needed not to be legislated but rather it needed to be translated into languages spoken by South Africans.

The SRDA adjudicated everything of its allocations because that DA had decided to keep working till the last day of the 2013/14 financial year, just to ensure that even incomplete applications could be verified thoroughly.

The Chairperson asked if the rest of the NLB delegation would contribute to the responses.

Prof. Nevhutanda replied that he had wanted to clarify a few issues he was knowledgeable over, but the delegation would remain and contribute, since only he was the only one needing to leave early.

Ms Mampane emphasised that the NLB was required by law to publish information annually on all the projects it had funded. There were pre-adjudication processes that the NLB used to keep applicants informed of the various stages of the application process which was fully automated. There was a compliance unit and an internal audit arrangement at the NLB staffed by auditors and others where those teams sometimes went to actually check physically whether organisations existed and for self monitoring respectively.

The establishment of offices in provinces was needs and access based.

The charities sector had launched a project on early childhood development which the NLB had funded across provinces.

As the NLB went through the process of developing its strategic plan on what formed funding and a call for applications, it sat with Department Directors General to align Department priorities with those of the NLB.

Mr du Preez replied that the 26% expenditure was also impended by the issue of responding to what had been asked for by applicants. Moreover the DAs with the board were trying to move towards impact based funding, because the challenge was that there was only so much the NLB could fund with R500 million. The trade-off choices then would be that in having decent facilities, moving from the R100 000 facilities school grant to possibly R500 000 per school; less schools would be funded even though the impact would be bigger. Moreover if schools sport was the key priority for everyone in sport, from the SRSA to Federations and others, they would have to deal with their stakeholders in making them understand that for the next three years 80% of the 22% from the NLB would be going towards schools. The age old issue then was that because of the closed out nature of the sport sector, where there had been conflict of interests with adjudicators; which why the DTIs new Act was suggesting that if one was becoming a distributing agent, one could not be a member of any organisation that could become a potential applicant. Recusal from adjudication only could go so far, because adjudicators could simply lobby each other to favour particular organisations in rotation.

Mr du Preez felt that for the NLB to have an impact, it could not have a too broad budget approach focus in funding. It needed to narrow its focus so that it could translate its strategic priorities to fundable programmes. For example if there was a call the NLB had put with 10 items it could fund, it could not determine what the applicants applied for even if it was repetitively asking for the same things.

The NLB was currently working with its information officer to contextualise from what the total amount for infrastructure the 26% expenditure came from: And how many applications had specifically been for infrastructure and how had been approved.

The Report on current Funding Programs was showing the Committee the amount of applications received from provinces and not allocations, which was the very first challenge the NLB had to deal with. Because the bigger provinces where not applying as much as the others and even then there issues of compliance in those received applications, made the starting group of applications very small. Moreover the reason for the high percentage in Gauteng would be that most of the National Federations which applied for large amounts were located there.

Additionally there was a limitation to the amount of money the NLB could spend on operational costs, which also affected the establishment of NLB offices provincially and regionally, that then meant offices had to be centralised. A suggestion was that the NLB needed to think about visiting its partners like the NHTL and municipalities and using their facilities to service the NLB beneficiaries.

The Chairperson reiterated the Committee’s sentiment of monitoring of beneficiaries and how they used NLDTF funding.

Mr Mmusi requested Prof. Nevhutanda to ask his office to compile a list of those projects adjudicated by the SRDA on the last day of the 2013/14 financial year.

Mr Moteka said that the issue of applying for apparel repeatedly was probably due to the limits in the categories that applicants were applying in. The Committee was not saying the NLB was doing nothing in rural areas but that most of its funding went to one sport in urban areas.

Mr Malatsi repeated his question over the shortfall in the budget versus allocation in the 2011/12 financial year.

Prof. Nevhutanda replied that if there was unused funding, it returned to the pool and would be redistributed according to the sector percentages as outlined in the presentation. What caused unused remaining budgets was the temporary nature of adjudication by DAs.

Regarding the percentages in the Report on current Funding Programs, the amounts that organisations were requesting did not translate into how much they were going to get. That depended on adjudication criteria satisfaction. What the 2012 report was also speaking to was the fact that the NLB was receiving applications for funding beyond what it had in its kitty.

Currently the SRDA was working towards the Integrated Facilities Plan which SRSA had made to the NLB, which spoke to building at least one facility in each province so that by the end of 2014, SRSA and the NLB could have facilities that it could be proud of.

The Chairperson thanked the NLB for its presentation and said that the Committee could then be able to attend all those gala functions it had been invited to during the World Cup in Brazil because at least SA was represented in Glasgow, but there were no invitations.

Committee Programme for the second quarter
The Content Advisor took the Committee through the Committee’s programme where the new priorities had been issued for the second term by the National Assembly (NA). The Management Committee (MANCO) was still to deliberate on the new changes from those priorities. Those MANCO new changes had to be submitted by the end of the last week of July to the House Chairperson. Joint meetings had been included within those new priorities and ensuring the Committee’s strategic five year plan could be drawn so that its budget could be allocated speedily.

There next meeting of the Committee would be on the 19 of August where a possible two day strategic workshop would occur even though the Committee had previously envisaged having another sport entity instead, but that all depended on the Committee still. The current programme going until the 22 of September would possibly have two changes where joint meetings possibly would have to sit.

The Chairperson proposed that in the middle or towards the end of August the Committee needed to adopt its strategic plan, but asked for contributions from the Committee on her proposal and programme changes.

Mr S Malatsi (DA) suggested that one Department that the Committee needed to meet was that of Cooperative Governance and Traditional Affairs (COGTA) given its frustrations with what was happening with the Municipal Infrastructure Grant (MIG). Moreover there was a need for a proper briefing with Boxing South Africa (BSA) given the administration issues in that organisation.

Mr S Ralegoma (ANC) noted that there was a challenge in terms of joint meetings and carrying out the rest of the Committee’s programme. In fast tracking the work of the Committee, most pressing was the issue of the tobacco and alcohol banning Bill from the Department of Health (DOH) and the school sport issue from the Department of Basic Education (DBE). He was proposing that the Chairperson needed to engage the Chairpersons of the Committees on basic education and health before moving with Departments. Moreover the Committee might have to consider having subcommittees to help fast tracking the work of the Committee. Worryingly the Committee seemed to have a lot of work ahead.

The Chairperson said that the worries raised by Mr Ralegoma would be taken care of by the MANCO and tabled before the Committee. BSA had told the Chairperson that they could not come before the Committee just yet and she felt that entities and Federations could not hold the Committee at ransom over transformation and the MIG issues. The Committee needed to be proactive in holding Federations to account.

Ms D Manana (ANC) proposed that the Department of Social Development (DSD) was also a partner that needed to be engaged seeing that it ran senior games with a budget from Sport and Recreation South Africa (SRSA).

Mr D Bergman (DA) was concerned that subcommittees would hinder the Committees understanding of its work which needed to occur speedily. He proposed that instead the Committee needed to consider meeting twice a week instead of only the Tuesday mornings. BSA was becoming problematic even before its first meeting with the Committee; it was unacceptable for BSA to dictate the terms of its accounting to the Committee which oversaw SRSA. He urged the Chairperson to write to BSA that it would come present to the Committee on a date the Chairperson had chosen.

Mr P Moteka (EFF) suggested that the three priorities that the Committee had to work on were engaging the DBE, SALGA and BSA. Moreover there needed to be an oversight plan in the Committee programme.

The Chairperson said that she was also surprised by the BSA response to her request, but more importantly the MANCO needed to meet on the Thursday of the last week of July. Oversight could not be done without planning and such issues would be dealt with in that meeting. She agreed with the priorities raised by the Committee and asked the complimentary staff to remain after the meeting so the MANCO business could be planned.

The content advisor informed the Committee that according to the NA programme had plenaries from Tuesday to Thursday until the end of the third term. Therefore there could be no oversight let alone external meetings that the House Chairperson would approve, thus the issue of extra meetings for the Committee could only be possible on a Friday and that still needed the approval of the House Chairperson.

The Chairperson welcomed the National Lotteries Board (NLB) delegation and asked where Mr Mveleli Edwin Ncula who was the Chairperson of the Sport and Culture Distribution Agency.

She noted that some of the entities partnering SRSA had been offended by the Committee invitation to present to Parliament whereas the Committee was genuinely asking to be informed so that it could further assist partners with the work of SRSA.

She asked the MPs to carry the Committee's mandate in their party caucuses.

The meeting was adjourned.

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