The Committee had a wide-ranging engagement the Department of Correctional Services on matters arising from its Annual Report 2014/15. The Committee was unsatisfied with most of the department's responses which they found overly general and lacking detail.
There were a number of serious performance issues in the department which emerged. The most important of these were: the high vacancy rate at senior management level; the over-reliance on consultants for core departmental function like internal auditing, and the slow pace of skills transfer from these consultants to departmental staff; over-reliance on a small number of contractors for most of the department's facilities projects (like fencing, security, information technology infrastructure), some of whom turned out to be unreliable; poor research into bidders for lucrative tenders; large amounts of impaired debt and contingent liabilities from legal claims against the department; poor record-keeping and financial reporting; the poor quality of the department's pre-determined objectives and performance indicators; and irregular expenditure and non-declaration of financial interests.
The meeting concluded with statements from the Public Service Commission, the Audit Committee and the Deputy Minister of Correctional Services. The Public Service Commission raised concerns about long periods of precautionary suspension; the lack of performance agreements for senior management; poor use of the national corruption hotline; and the non-declaration of financial interests. The Audit Committee shared many of the sentiments of the Public Service Commission. The Deputy Minister thanked the Committee for the quality of their oversight; pointed out that the DCS was facing immense structural challenges, many of which had deep historical roots; said that the DCS management had not shown enough appreciation of the role of the Committee, the Office of the Auditor-General, and the internal and external Audit Committees; suggested that the interface between Levels 1 (the executive, accounting officer and top level management) and 2 (the next level down) of the department was its Achilles' heel; and called for an improvement in regional management.
Outstanding documents: four annexures that the Chairperson distributed midway through ther meeting
The Chairperson said that the Standing Committee on Public Accounts (SCOPA) Committee was committed to assisting Correctional Services in complying with the Public Finance Management Act (PFMA) and other important legislation. He invited Committee members to raise questions about the Department's Annual Report and financial statements for 2014/15.
Mr V Smith (ANC) observed that on page 78 of the Annual Report, DCS reported that 38 440 out of 42 006 established posts in the department were filled in 2014/15, giving a vacancy rate of 8.1%. It mentioned a further 2189 positions created and filled on a contract basis. Was this included in the 38 440?
Mr Zach Modise (National Commissioner, DCS) replied that this number was in addition to the 2189.
Mr Smith questioned why the Department had engaged contractors when it had vacancies.
Mr Modise explained that there were particular projects done from time to time, such as the Victim-Offender Dialogue and Victim-Offender Mediation that were outsourced.
Mr Smith said that Victim-Offender Dialogue and Victim-Offender Mediation seemed like something that should be part of the core business of the Department and therefore should be permanently staffed.
The Chairperson asked DCS to provide a written list indicating exactly what the 2189 contractors had been doing.
Mr Smith observed that at senior management level, only 167 out of 215 funded posts were occupied, giving a 22% vacancy rate, with only four new appointments made by 2 November 2015. Which posts were these?
Mr Modise explained that the four positions were national commissioner, chief financial officer, head of strategic management and [inaudible].
Mr Smith looked at the vacancy rates in the various management branches. The vacancy rate of the internal audit branch was 18%, finance 28%, strategic management 24% and government information technology office (GITO) 53%. He struggled to believe that DCS could be struggling to find qualified individuals, as none of these offices required scarce skills. The Audit Committee had also expressed its dissatisfaction with the vacancy situation.
Mr Modise agreed that the situation could not continue, but said that they were facing serious challenges in filling vacancies. The major challenge was the work environment, which made it difficult to retain staff for long periods. The Department had begun a job fair to try and improve the situation.
Mr Smith said that they could not accept the argument that the correctional services environment was unique. Many departments had similar challenges. Rather, there seemed to be a critical lack of human resources planning. Nor could this justify the amount of R614m that had been transferred from human resources to goods and services in 2014/15.
Mr Modise said that officials had been resigning in droves, and that the situation had been exacerbated by panic induced by the proposed government pension reforms. He would provide a written report on the problem to the Committee.
Mr Teboho Mokoena (Chief Deputy Commissioner: Human Resources, DCS) admitted that there was a problem and it needed to be prioritised. DCS needed to re-evaluate the way in which hiring was delegated and centralise the powers and responsibilities in head office.
Mr Smith questioned the expenditure of over R3m on contractors to assist with DCS's internal audit, reported on page 102. Despite the involvement of contractors, both the Audit Committee and the Auditor-General had been unhappy with the quality of the internal report at DCS. He suggested that this be accounted for as fruitless and wasteful expenditure. He questioned why the same service provider had been engaged despite the apparently substandard work.
Mr Modise requested time to provide a full report in writing on the use of consultants in DCS. He said that they had drastically reduced the number of consultants in DCS.
The Chairperson asked if DCS could respond specifically on the internal audit. What was the name of the service provider? How long had they been contracted for?
Mr Modise said it was PricewaterhouseCoopers (PwC). The contract had expired in September 2014.
Mr Smith said that this contract had been in place since 2012/13.
Mr Nick Ligege (DCS Chief Financial Officer) said that as of 2015/16, contractors would only be used for specialised work such as information technology (IT) audits.
Mr Smith questioned the amount paid to the contractor. There had been 39 individuals who had worked for 125 days, which according to his calculations worked out to a fee of over R2000 per hour on average, even at a conservative estimate. This was an exorbitant sum.
Mr Ligege explained that it actually worked out to just under R700 per day if the number of employees was correctly accounted for.
Mr Smith questioned the value of the other two contracts, to Software Consulting Services and Tech Mahindra. He calculated even higher numbers per hour. He wondered how these contractors could have worked 264 days in the year as indicated in the Annual Report. Assuming they did not work weekends, that would mean that they would have worked every public holiday and taken no leave.
The Department was unable to explain this.
The Chairperson asked for a detailed breakdown of the work done by these consultants.
Mr Smith wanted to know where the R28m spent on consultants in 2014/15 had come from.
Ms N Khunou (ANC) asked where the funding for the job fairs had come from.
Mr Modise explained that it had been funded before the transfer of funds from human resources to goods and services.
Mr M Hlengwa (IFP) observed that the vacancy rate had risen from 5.4% in 2013/14 to 8.1% in 2014/15. He was concerned that it was getting worse. There seemed to be a lack of will to sort out the human resources problems.
Mr Mokoena said that many employees, sometimes more than 100 per month, were leaving as a result of the uncertainties around the changes to the government pension system. There were also many positions that required scarce skills which DCS struggled to attract and retain.
Mr Hlengwa was not satisfied with this response. The first problem was that there was a shortage of human resources staff.
The Chairperson said that he was not getting a sense that the human resources team in DCS had matters under control.
Ms T Chiloane (ANC) asked what if any progress had been made on DCS's intention to appoint an executive officer to strengthen its internal auditing capabilities.
Mr Modise said there was now a structure in place for internal auditing.
Mr M Booi (ANC) assured DCS that they wanted to ensure that DCS was functioning smoothly. Nevertheless, he was concerned about the large number of absences, suspensions and disciplinary problems in DCS, as indicated on pages 99-100. For example, there were 1 150 absences without reason or permission. What consequences followed from these offences? How did disciplinary problems affect overall performance?
Mr Modise admitted that there were discipline challenges in DCS, because the conduct of staff influenced the conduct of offenders. He had recently begun a tour to all the administrative regions during which he had talked to staff about discipline and performance.
The Chairperson reminded DCS of the Committee's recent visit to Johannesburg during which they had been addressed by an apparently drunk official.
Mr Smith asked whether disciplinary action had been taken against this official.
Mr Modise replied that the Acting Regional Commissioner of Gauteng had concluded an investigation into the incident. It had emerged that the official had had an adverse reaction to some medication.
Mr C Ross (DA) asked whether the contracts given to consultants had included clauses to ensure that DCS was assisted in building its own internal capacity.
Mr Modise replied that the contracts and also the service level agreement had included clauses dealing with transfer of skills.
The Chairperson asked whether these clauses had been honoured. Had there actually been any skills transfer? In the Committee's experience, these clauses were often ignored.
Mr Ross agreed. There was a trend of consultants not honouring skills transfer clauses in their contracts.
Mr Modise said that to the best of his knowledge, there had been skills transfer.
Mr Smith asked why there was still such a high vacancy rate in internal audit if there had been skills transfer.
Ms Khunou said that the Committee had already requested and DCS had promised a report on the phasing-out of consultants. She agreed that there was no evidence of the transfer of skills.
Mr Modise conceded that the management of contracts was an ongoing challenge. A deputy commissioner for legal services had recently been appointed to assist with this.
Mr Booi questioned why DCS did not have a dedicated AIDS budget.
Mr E Kekana (ANC) asked how the Workplace Skills Programme (WSP) worked, and whether DCS did an internal skills audit. He also asked why DCS had needed to employ ten foreign chaplains.
Mr Mokoena explained that the WSP was based on personal development plans. All Departmental officials were expected to consult with their superior to identify areas in which they would like to develop their skills. Over and above this, critical skills were identified at an organisational level, such as contract and supply chain management. The National Learning Committee combined the information from these two sources and distilled it into the WSP.
Mr Kekana said that it did not appear that DCS was paying enough attention to critical skills at an organisational level because these were still lacking. The fact that the Annual Report indicated an over-achievement by the WSP was a contradiction.
Mr Smith asked what work Tech Mahindra had been contracted to do. Were they still contracted?
Ms Nthabiseng Mosupye (Chief Deputy Commissioner: GITO, DCS) explained that Mahindra had been responsible for IT infrastructure. Their contract would run until the end of 2015.
Mr Smith asked who was going to take over the work from them.
Ms Mosupye said that about nine permanent employees had joined in October 2015, and another nine would be appointed soon.
Mr Hlengwa wondered why skills only seemed to be transferred at the end of the contract period.
Ms Mosupye said that skills had been transferred throughout the contract, but some people had resigned.
Mr Smith asked for an update on the Integrated Inmate Management System (IIMS).
Ms Mosupye replied that they had gone out on tender, and a tender had been awarded to the National Bid Adjudication Committee. The contract and service level agreement were in the process of being signed.
Mr Smith asked who the contract had been awarded to and how much it was worth.
Mr Modise replied that the R378m contract had been awarded to Integritron Solutions.
Mr Smith said that National Treasury had sent DCS a letter on 28 October 2015 stating that only one bidder had met the functionality requirements and therefore only one financial plan had been seen, making it difficult for DCS to assess the competitiveness of the bid. Treasury was of the opinion that this rendered the process unfair, unreasonable and uncompetitive. Yet DCS went ahead with awarding the tender. What was the process leading to this decision? How did you respond to the letter from Treasury?
Mr Modise replied that it was important to consider the origin of the letter. They had asked for the Director General to clarify Treasury's position, and they were still waiting for a reply. The Department had concluded differently from Treasury, and had gone ahead with the award.
Mr Smith reported that Integritron was part of Secure Control Proprietary Limited, the same holding company as SA Fence and Gate, who had been awarded a lucrative security and perimeter fencing contract by DCS. Was DCS aware of this?
Mr Modise admitted that he was not aware of this.
Mr Smith thought that this was serious neglect by the National Commissioner. He was also concerned that "we have put all our eggs in one basket". If this company went bankrupt, DCS would be facing a serious problem.
Mr Modise said that he did not sit on any of the Committees that oversaw bidding and the awarding of tenders.
Mr Smith said that Mr Modise should take some responsibility for the decisions of these committees. According to the PFMA, the accounting officer was the ultimate authority. If the award was found to be irregular, he would be the one held responsible.
The Chairperson agreed that the National Commissioner needed to take responsibility for the actions of his subordinates.
Mr Smith asked whether the IIMS would completely supersede the Remand Detainee Offender Management System (RDOMS). How much of the R27m ring-fenced for this project was left, and had Dimension Data been paid for their aborted work on it?
Mr Modise was unwilling to comment on these matters as they would be coming before the courts very soon.
The Chairperson said that they were asking for non-confidential information.
Ms Mosupye explained that R17m had been paid to Dimension Data, who had taken legal action against DCS for the remaining R10m.
Mr Smith said this seemed like fruitless and wasteful expenditure. What had the R17m actually bought?
Ms Mosupye said that the payment was for deliverables agreed upon according to a 2013 settlement with Dimension Data. These included enterprise licenses for software, a database conversion from Sequel to Oracle, and gap analysis and design of the solution. The system they produced had failed at the testing stage, however.
The Chairperson was taken aback by the arrogance of the service provider in taking DCS to court after having failed to deliver a working product.
Mr Mxolisi Zulu (Deputy Commissioner: Legal Services, DCS) explained that unfortunately the contract had involved payment in stages. The Department was counter-suing for the damages suffered as a result of the non-delivery of a working product.
Mr Smith asked about the progress on the security and perimeter fence contract awarded to SA Fence and Gate during the last Parliament. How many of the 27 sites had been completed?
Mr Modise replied that that all the first phase sites were more than 95% complete and most of the second phase sites were more than 50% complete.
The Chairperson asked if DCS could confirm the progress made on the ground.
Mr James Smalberger (Chief Deputy Commissioner: Incarceration, DCS) said that regular site visits were taking place and that he would sign off on completion at each site.
Mr Smith asked if DCS could indicate the rand values of the two phases.
Mr Ligege replied that phase one was R619m, of which R525m (84%) had been paid as of November 2015.
The Chairperson asked if the amount paid could be linked to the completion levels.
Mr Ligege said that that link could not be made on the basis of information in the Annual Report.
Mr Smith said that during their oversight visit in Pretoria, a contractor had indicated that they had customised the solution, whereas GITO had later said that it was off-the-shelf. If it was being customised, would the need for uniformity of the systems not lock DCS into a single service provider, effectively granting them a nationwide contract? It was also a problem if security systems were being customised by non-vetted individuals.
Ms Mosupye said that the cameras and fencing were off-the-shelf items, although some customisation might have been done to integrate the systems. She added that DCS would own any customisations made.
Mr Modise noted that that as far as he was aware, no customisation had been requested.
Mr Smith asked what was being done to improve internal access control, and whether it would be integrated with the perimeter security system.
Ms Mosupye replied that the systems were independent. It would be the responsibility of DCS to integrate the systems.
Ms Khunou asked how much DCS had budgeted for the project and whether DCS did market research to determine the reasonableness of tenders.
Ms Mosupye replied that they did not have a definite, fixed budget yet. The projection was for a total cost of R500m-R1bn.
Mr Booi asked about the relationship between DCS and the Ministry.
Mr Modise replied that that DCS submitted quarterly performance reports, and as National Commissioner, he held regular meetings with both the Minister and Deputy Minister.
Impairment and contingent liabilities
Ms Khunou was a little frustrated with the answers the Committee was receiving. She asked if DCS had its own lawyers and how much was budgeted for legal services. What was DCS's relationship with state law advisors?
Mr Zulu said that DCS did have its own legal officers, and there was also a budget for use of the Office of the State Attorney, who handled litigation on behalf of DCS, but he did not have the precise budget figures.
The Chairperson was unhappy that the Head of Legal Services in DCS did not know his precise budget.
Ms Khunou observed that the total amount of material impairments had increased in 2014/15 to R60.5m, from R44m in 2013/14. Some of this amount was staff debt. Why did DCS have staff debt?
He explained that this amount was debt that had been outstanding for more than three years (and some dating back more than twenty years), but it had not all been written off.
The Chairperson asked Mr Ligege to explain the increase from 2013/14 to 2014/15.
Mr Ligege was unable to give specific details.
Mr Mokoena said that he would have to come back with a precise breakdown of the staff debt.
Mr Booi commented that there was a lack of preparation within DCS.
Mr Modise apologised for the inadequacy of the responses to this question.
Ms Khunou asked about the situation at Mangaung Correctional Centre, which had been managed temporarily by a contractor in a public-private partnership. A large amount was owed to DCS. Could it be recovered?
Mr Modise replied that that there was a disagreement about the size of the debt, which DCS claimed was R110m. The Department's legal office was getting senior counsel opinion on the matter. It was a priority of DCS to finalise the matter.
Mr Smith asked what the nature of the dispute was.
Mr Modise explained that the operation of the Mangaung Correctional Centre had been taken over for a period by DCS. The contractor had to pay back DCS expenses for this period. The dispute arose around the contractor's readiness to take over operation again.
Mr Kekana said DCS needed to provide a specific time frame for the resolution of these issues.
Ms Khunou asked about payments of invoices totalling R6m that had exceeded the 30 day deadline. How did DCS justify this?
Mr Modise admitted that there could be no justification for payments exceeding 30 days. There were challenges however, such as service providers submitting incorrect invoices which caused delays, and DCS also had IT problems.
Ms Khunou said that the Auditor-General had reported that DCS record keeping of legal claims was inadequate. This was important because claims against DCS amounted to R801m in 2013/14 and R791m in 2014/15. Why was DCS unable to keep proper records? Where would this money come from?
Mr Modise replied that no system had been in place at the time of the audit, but a system had now been put in place under the leadership of Mr Zulu. He pointed out that many of the claims would be withdrawn or successfully disputed by DCS, and it was likely that the actual amount needing to be paid would be far less.
The Chairperson asked for details about the precise nature of the claims. Even if the actual amount paid was only half the amount claimed, this was a large sum that was not budgeted for.
Mr Zulu explained that there was a budget for legal costs that was used for paying claims.
Mr Smith said it was on page 176 of the Annual Report.
The Chairperson questioned the practice of combining paid, cancelled and reduced claims in a single column. It was misleading, to DCS's disadvantage.
Mr Zulu said that they had used the format provided by Treasury.
Ms Khunou asked about the relationship between national and regional offices in DCS. Did they have good communication structures?
Mr Modise replied that that he met regularly with regional commissioners and chief deputy commissioners. They had a bi-monthly meetings to discuss management and budget issues, and a quarterly meeting to discuss performance.
Predetermined objectives, misstatements, supply chain management
Mr T Brauteseth (DA) observed that in the Administration programme, only five out of eleven performance targets were met. Most related to modernisation and integration of IT, and one of the main problems was that the consolidated and integrated physical security system had not been implemented due to a lack of funding to advertise the tender.
Ms Mosupye explained that the tender had not been advertised because the project itself was not funded, not because there was insufficient advertising budget.
Mr Smith questioned the fact that DCS had made an unfunded project a predetermined objective (PDO). Predetermined objectives were supposed to be measurable and achievable. It was a serious concern if PDOs were not being given enough thought, because it compromised accountability.
Mr Brauteseth said that the Auditor-General had raised concerns about the measurability and reliability of the DCS performance indicators. The same issues had been raised by the Audit Committee in previous years. Why did DCS not seem to take the Audit Committee's observations seriously?
Mr Modise admitted that they had had challenges understanding DCS's technical descriptors at a regional level. They had visited regional offices to ensure the leadership understood the indicators. He believed that there would be improvements going forward.
Mr Brauteseth observed that in the Incarceration programme, only 282 out of a target of 1 081 new bed spaces were created. He thought that this would have been a priority, given the well-known problem of overcrowding in prisons. What was the reason for the under-achievement?
Mr Modise explained that four sites were supposed to be getting additional beds: Vanrhynsdorp, Matatiele, Tzaneen and C-Max in Pretoria. Vanrhynsdorp and Matatiele were due to be completed in 2015/16, and DCS was at an advanced stage of engaging a replacement contractor to complete the work at Tzaneen and C-Max because the original contractor, Keren Kula, had been liquidated.
Mr Brauteseth asked if DCS could give an undertaking as to when the remaining bed spaces would be completed.
Mr Modise replied that that work at C-Max was at a complete standstill. He could not give a precise date yet.
Mr Kekana said DCS needed to provide a comprehensive plan for the completion of the work at C-Max.
Mr Smith asked what the reason for the underspending of R61m was. How could there be underspending as well as under-achievement on facilities?
Mr Ligege explained that the R61m had to do with operating leases at Mangaung Correctional Centre.
Mr Smith said that the problem was that all the money had been spent but only a fraction of the bed spaces had been built. What happened to the money?
Mr Brauteseth asked if DCS paid contractors up front, who had not delivered on time. Would there be penalties against these contractors if this was the case? Or was it never the intention to complete the work in 2014/15? Or did you just under-estimate the time it would take?
Mr Modise replied that that time overruns were common in the building industry. The liquidation of Keren Kula had also caused delays.
Mr Brauteseth said there was a need for a detailed account of how the entire facilities sub-programme budget had been spent, and especially payments made to Keren Kula.
The Chairperson agreed.
Ms Khunou pointed out that such a report had already been requested during the oversight visit to Pretoria.
Mr Booi and Mr Kekana shared her frustration at the absence of the report.
The Chairperson said that perhaps the report had not been received due to the strike at Parliament.
Mr Brauteseth pointed out that there were several financial misstatements in the Annual Report, most of which had resulted from inadequate record-keeping and inadequate capacity. This was a long-standing problem. What was DCS's plan to address this?
Mr Ligege agreed that there was a lack of capacity, particularly with the preparation of financial statements, as the standards were changing. Training in the new Modified Cash Standard was planned. He would work closely with regional management to ensure accurate and comprehensive financial reporting.
Mr Ross was pleased to hear that Mr Ligege was going to work with regional management.
Mr Brauteseth asked if DCS could give an assurance that there would be an improvement next year.
Mr Smith said that the R3m spent on contractors in this area should be counted as fruitless and wasteful expenditure.
Mr Brauteseth said that the Auditor-General had been concerned about the long list of pending investigations in DCS, the slow reaction to irregular, fruitless and wasteful expenditure, the weak supply chain management environment, and weak oversight over contractors. He gave several names of officials who had failed to declare substantial interests or were involved in irregular expenditure. He described one person who had incurred irregular expenditure of R1.9m over 132 cases of maintenance and plumbing. In one three-day period he issued eighteen invoices, clear evidence of collusion and corruption. How could this have been allowed to happen?
Mr Modise replied that a steering committee had been set up to deal with these matters, headed by the deputy commissioner for internal controls and compliance. They had begun by tackling the biggest amounts but many smaller amounts were still outstanding. 476 matters had been finalised, as indicated in a report that had been submitted to the Committee.
The Chairperson said he had not seen the report.
Mr Brauteseth was disappointed that DCS did not have a copy of that report with them.
Mr Booi said he was disappointed in general with the quality of DCS's responses.
Ms Chiloane shared his sentiment.
Mr Smith added that DCS's responses seriously disempowered the Committee. He insisted that the supply chain management issues raised by Mr Brauteseth be responded to. He regarded the National Commissioner's repeated comment to provide written reports that would be made available as contempt of the Committee that could not be allowed to continue.
Mr Modise assured the Committee that there was no contempt. He took full responsibility for supplying the Committee with the reports that had been promised.
Public Service Commission statement
Ms Lulu Sizani (Commissioner: Leadership and Management Practices, Public Service Commission) spoke briefly on a range of issues. She explained that it was against the law to keep an employee on precautionary suspension for longer than sixty days. Despite this, DCS's average in 2014/15 was 101 days, and it had been above 70 days for three years running. She also noted that performance agreements for senior management were not being filed. Its response to the National Anti-Corruption Hotline was not optimal; the Public Service Commission (PSC) had received feedback on only 64% of the cases referred to DCS. The non-declaration of interests was unpardonable, as there was nothing difficult about declaring ones interests. The PSC had not received any declarations of financial interest from DCS in 2014/15.
Mr Modise noted the concerns expressed. However, he was of the opinion that declarations of interests had been made.
Audit Committee statement
The Audit Committee representative shared most of the sentiments expressed by the PSC. The Committee was assured that it monitored the preparation of financial statements, performance information and irregular expenditure.
Mr Modise said that he agreed with the findings of the Auditor-General, but he was confident that given time, DCS could be turned around by the current senior management.
Statement by the Deputy Minister of Correctional Services
Deputy Minister of Correctional Services, Mr Thabang Makwetla, thanked the Committee for their wide-ranging engagement with DCS. It was providing valuable oversight. He was impressed with the depth of knowledge about management exhibited by the Committee, and he assured the Committee that the ministry would not seek to explain any issues within DCS they raised. The DCS was on a journey and was facing immense structural challenges, many of which had deep historical roots. There were also numerous pockets of excellence within DCS which should be celebrated. Nevertheless, the DCS management had not shown enough appreciation of the role of the Committee, the Office of the Auditor-General, and the internal and external audit committees. In his view, the interface between Levels 1 (the executive, accounting officer and top level management) and 2 (the next level down) of DCS was its Achilles' heel. Regional reporting needed to improve, and DCS needed to address the issues raised in the Auditor-General's management letter and the governance issues indicated on page 109 of the Annual Report. He was concerned about the financial management issues. Every explanation given seemed to raise more questions. He said that its information management systems were a work in progress.
The Chairperson thanked the Deputy Minister for his input. At the end of the day it was DCS that was responsible for getting the job done. He thanked DCS for their commitment and patience during a long meeting. The meeting was adjourned.
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