Official Report (Hansard)

Session: 2007/2008

Date: 29 November 2007

Update on the Position of the
Northern Ireland Events Company

29 November 2007

Members present for all or part of the proceedings:
Mr Barry McElduff (Chairperson)
Mr David McNarry (Deputy Chairperson)
Mr Dominic Bradley
Lord Browne
Mr Kieran McCarthy
Mr Nelson McCausland
Mr Pat Ramsey
Mr Ken Robinson
Mr Jim Shannon

Witnesses:
Mr Edwin Poots ) Minister of Culture, Arts and Leisure
Mr Mick Cory ) Department of Culture, Arts and Leisure

The Chairperson (Mr McElduff):
I welcome the Minister, along with his adviser, Mr Mick Cory, to the Committee. The Minister will provide the Committee with an update on the position of the Northern Ireland Events Company.

The Minister of Culture, Arts and Leisure (Mr Poots):
I do not intend to speak for very long, because I made a statement to the House on Monday. If any Committee members were not in the House for that statement, they should have it in front of them. I will not repeat what I said in the House. I will take questions from members.

I have given clearance this morning for the appointment of a forensic auditor. In the first instance, the responsibility of the forensic auditor will be to identify what accounts can be processed and cleared for payment. The Department referred to a figure of £655,000, and it will have to identify whether all the accounts are valid. If someone else comes looking for money, the Department will have to identify the validity of those claims and make an assessment on them. The responsibility for all of that falls on auditor. The auditor will also carry out a report on how the deficit has arisen and where procedures have fallen down. The Department hopes to have that report by February 2008.

That is all that has happened since Monday. I do not anticipate that the Committee will want me to read out the statement that I made on Monday.

The Chairperson:
Thank you, Minister.

Mr McNarry:
Good morning, Minister. I appreciate that questions will reveal more than anything you want to say. It is hard to believe that someone has not gained financially, in kind or in some other way, as a result of the deficit. The real cash has ended up somewhere, and there must be a trail that will lead to that money. The Committee has discussed the matter, and it cannot understand how that large sum accumulated. It went unnoticed at £50,000, £100,000, £250,000 and £500,000, and no one was picking up on that.

Last week, the Minister’s officials told the Committee the criminality has been ruled out. I have to ask the obvious question: has there been a cover-up? One cannot hide a £1·2 million deficit. How much at fault is the Department’s accounting officer? He has overall responsibility for the Northern Ireland Events Company. What are his explanations and, if he was doing his job as accounting officer, how come he did not notice the patterns of overspend? The £1·2 million obviously did not arise —

Mr Poots:
Can I respond to Mr McNarry’s questions? He may ask too many, and I may not remember them all. However, he may come back with more.

The accounting officer for the Northern Ireland Events Company was the chief executive of the Northern Ireland Events Company.

Mr McNarry:
I was asking about your Department’s accounting officer, who has overall responsibility.

Mr Poots:
The accounting officer for the Events Company is, or was, the chief executive of the Events Company. It is now the acting chief executive of the Northern Ireland Events Company. Have we already taken it back in?

Mr Mick Cory (Department of Culture, Arts and Leisure):
We have not yet taken any steps on the matter, but we are considering the matter very seriously to see whether that should continue.

Mr Poots:
Each year, the Department awards a grant to the Northern Ireland Events Company and, in fairness, that grant was monitored by the Department quarterly. However, the Department was not the accounting officer for the Northern Ireland Events Company. Nevertheless, it will be for whatever Department is responsible for the Northern Ireland Events Company when the matter is examined by the Public Accounts Committee — and that will be either the accounting officer for the Department of Culture, Arts and Leisure or, if the matter goes to the Tourist Board, for example, it will be the permanent secretary of the Department of Enterprise, Trade and Investment — who will respond. In that sense, Mr McNarry is correct, but the accounting officer was the chief executive of the Northern Ireland Events Company.

How did the deficit arise, and was there criminal activity or fraud? I cannot say that there was not. However, to date, that has not been revealed. I anticipate that when the forensic auditor’s work has been completed, we will have a clearer picture. If there has been fraudulent or criminal activity, that should be revealed. For example, we are aware that, for some events, funding was awarded before the events took place. In one case, the amount of money paid out by the Northern Ireland Events Company exceeded the cost of the event by 750%. An event that was to have cost £50,000 ended up costing £380,000. That kind of activity can build up a deficit very quickly. However, fraud has not been identified at this moment. That is not to say that fraud did not take place. There is a difference.

Mr McNarry:
I appreciate what the Minister has said. Public money is involved, and the public have a great interest in the matter. I asked whether there was a cover-up, and I sense that it is too early to say so. However, that question still hangs in the air.

Mr Poots:
Certainly, from the Department’s point of view, there was no cover-up.

Mr McNarry:
With all due respect, that remains to be seen.

Mr Poots:
OK.

Mr McNarry:
The jury is out on that one, as far as this member of the Committee is concerned, and there may be others.

Mr Poots:
That is fair enough

Mr McNarry:
I come back to the issue of the accounting officer. When the Minister’s officials spoke to the Committee last week — and Mr Cory was one of them — the response to a question I asked was:

“Under the financial memorandum the accounting officer does bear responsibility in that area”.

That was a reference to the accounting officer and chief executive who resigned in April or May, at the beginning of this financial year. However, the response from the Department’s senior official continued:

“ultimately the permanent secretary of the Department of Culture, Arts and Leisure is the first accounting officer, so that is where the buck stops.”

What are the permanent secretary’s explanations for that? How come he did not notice the patterns of overspend? Perhaps you might like to return to that point — contrary to what you may have just said, or what I understood you to have said.

Is it true that one sport received payments for two events — well above the funding that had been allocated to it — and that that excess has contributed to most of the deficit? To come back to the key issue of the accumulating deficit, can the Minister confirm that neither the company’s previous chief executive — and its current acting chief executive — nor the Department’s accounting officer — the permanent secretary — made the directors of the company aware of any accumulating deficit?

Mr Poots:
The answer to Mr McNarry’s first question —

The Chairperson:
Minister, before you answer that, I understand, David, that you may be referring to a Hansard copy of the report of the meeting. As Chairperson, I am duty-bound —

Mr McNarry:
I was referring to that document earlier, in relation to the officials.

The Chairperson:
I am duty-bound to point out that that Hansard document is an uncorrected transcript. Forgive me for doing that, but it is my duty.

Mr Poots:
I have not seen that document. It would be useful to have a wee look at it some time.

Mr McNarry:
The Committee had a discussion about that this morning, and I will not bore you with the semantics of it.

The Chairperson:
I was duty-bound to make that point. I ask the Minister to continue.

Mr McNarry:
If the Minister cannot answer that question —

Mr Poots:
In answer to Mr McNarry’s question about one sport and two events, yes, there were serious overruns on two events organised for one particular sport. It would have accounted for just short of half of the deficit.

Mr McNarry:
Can the Minister confirm that neither the company’s previous chief executive, the acting chief executive nor the permanent secretary made the directors of the company aware of that accumulating deficit?

Mr Poots:
I do not believe that they were made aware of it.

Mr Cory:
The company operates under companies’ legislation. The primary responsibility for the operation of the company rests with the board of directors. It is true to say that they were not informed about the accumulating deficit. The board has made that quite clear. The chief executive at the time did not inform the board fully about the financial circumstances of the company. That appears to be the case. However, it needs to be examined in much more detail for an explanation.

Mr McNarry:
With all due respect —

Mr Cory:
Can I finish my point, please? It is equally true that the chief executive, under monitoring meetings, was required to inform the Department of the financial situation of the company, and that did not happen either. I am sorry for interrupting.

Mr McNarry:
That is no problem; the information is valuable.

I find that scandalous — totally outrageous. I do not think that anyone goes out looking for problems. However, I go back to my previous comment: nothing was picked up at £50,000, £100,000, £250,000 or £500,000. It has to hit this staggering figure of £1·2 million, which is almost half the company’s total budget — and you did not know about it until 20 September 2007. That beggars belief.

I compliment the Minister on the action that he has initiated and on the manner in which he has reacted. He has employed a forensic accountant. I am not too sure exactly what that is, but I am sure that he or she will do a very clean and thorough job. The public need to have confidence in the use of public money. The fact that no one picked up on such an accumulation is pathetic.

Mr P Ramsey:
I welcome the Minister and Mr Cory to the meeting. I want to place on record, for the SDLP, our appreciation of the Minister’s response. In difficult circumstances and over a short period of time, he has taken appropriate action. I was particularly relieved to hear that a forensic audit is due to start, and I thank the Minister for that.

There is a difficulty in reinstating public confidence. Many of the events handled by the Events Company were community based. Will the Minister react to this in the same way that he did to difficulties in the Fisheries Conservancy Board? Will you take a strong hold of events management and pull it into the Department? Will you make an early intervention to ensure that the company is transferred, sooner rather than later, to the Northern Ireland Tourist Board and the Department of Enterprise, Trade and Investment, which are due to take over the company in any case?

In my response to the Minister’s statement on 26 November 2007, I made the point that that is important. One can only presume that a limited amount of staff were aware of this deficit. We should not put other staff under a cloud; they were doing a decent job on behalf of the Events Company, and we should retain their ability to deliver events.

What groups are involved in the overspend or overcommitment? What activities are involved? What events were involved? Were they big events or small ones? Officials may not be able to tell the Committee now, but, at some stage, that will come out. Please tell the Committee who they were. Can you tell the Committee whether the overspend of £655,000 was committed in 2005-06 or 2006-07? Was it committed as far back as early 2005?

Mr Poots:
I have only indications. The forensic auditor may come up with figures that are different, but the following are the figures that the initial audit has identified. In 2005-06, there was an overspend of £369,000 with the MotoCross GP. If members are shocked by that figure, I assure them that I was also very shocked when I received this information. I received a complaint about that event that started the process of asking questions about the financial position of the Events Company from former members of staff.

Mr P Ramsey:
What grant should have been allocated?

Mr Cory:
The grant in that case was £50,000, and it was capped. We are not absolutely sure why the overspend occurred, but it appears that the company in receipt of that grant went bust and required the Events Company to step in to run it — hence the overspend.

Mr Poots:
The SuperMoto GP of Northern Ireland —

Mr McNarry:
May I stop you there? Did the Department authorise the Events Company to step in?

Mr Cory:
No.

Mr Poots:
No.

Mr Cory:
The Department was not asked. It appears that the board was not asked either.

Mr Poots:
It remains to be seen whether minutes can be produced. I know that some board members have asked for minutes to be produced to show them having cleared it, but they believe that they did not clear it either.

In 2005-06, there was an overspend of £176,000 with SuperMoto GP of Northern Ireland and of £86,000 in general running costs.

Mr P Ramsey:
Can you tell us what grants were initially awarded, Minister?

Mr Cory:
We will send you those figures.

Mr Poots:
I have only the overspend figures with me.

Mr Poots:
In 2006-07, there was an overspend of £155,854 with the FIM World Championship MotoCross Grand Prix of Northern Ireland; £122,000 with the FIM SuperMoto of Nations; £46,000 with the North West 200; £6,500 with the Northern Ireland Milk Cup; £100,000 with the Circuit of Ireland International Rally; £75,000 with the Coca-Cola Cinemagic International Film and Television Festival for Young People; £71,000 on professional fees; and £16,000 on other costs.

Mr P Ramsey:
I am no mathematician, but given some of those figures, the total seems to add up to much more than £665,000.

Mr Poots:
It totals £1∙224 million. However, because we have the money that was supposed to go to the Events Company this year, it means that new events can be taken on for the early part of next year, and before the end of that financial year.

Mr P Ramsey:
I thank the Minister again for the information.

Has the former chief executive made herself available to the Department or the auditor or whoever is investigating the overspend? Procedures between her and her line management — which I presume was the board of directors — ought to be investigated. Obviously, there was something wrong there. What is the position?

Mr Cory:
As I understand it, the former chief executive has met once with the chairman of the board, but once figures of this order are revealed, we need to examine the documentation before specific questions are put to her, the acting chief executive or other board members about the circumstances. We need to be sure what the record says before those questions are put.

Mr P Ramsey:
I have one final question for the Minister. A considerable amount of community-based activity was managed by the Events Company, such as the University of Ulster Foyle Cup, the Northern Ireland Milk Cup and other smaller events that require only minimal amounts of money. Do we have your assurance that those will continue?

Mr Poots:
Events will continue: funding for such events next year is included in the draft Budget. For obvious reasons, the Northern Ireland Events Company will not be delivering them, but the events organisers can still apply for funding, and they will be considered for funding, based on the quality of their applications. It has yet to be decided whether that process will be done in the Department of Culture, Arts and Leisure, in a subsidiary of the Department or in the Tourist Board.

The Chairperson:
Groups or individuals may be concerned about an event that is already in the calendar. One organisation contacted me about that. I referred them to the Department of Culture, Arts and Leisure and told them to ask for Mick Cory. I hope that that was correct, and that Mick will steer such people through the process.

Mr Poots:
Events that have already been approved, such as Tennis Legends 2008, which will take place in February in the Odyssey Arena and which is a significant event, will go ahead. That is within the £655,000 that is required.

Mr McNarry:
I would like clarification on something: are the organisers of the FIM World Championship MotoCross Grand Prix of Northern Ireland and the FIM SuperMoto of Nations the same people?

Mr Cory:
The event is licensed by a world body; I think that it is a company called Youthstream. However, the company that was running it in Northern Ireland went bust. The company that will run it in future is licensed to the Events Company through Youthstream. We will have to look at those future events. Past events were run by —

Mr McNarry:
Were the people who received these moneys the same people?

Mr Cory:
Do you mean the £369,000?

Mr McNarry:
I mean the £369,000 for the MotoCross GP, £176,000 for the SuperMoto GP, £184,000 for MotoCross and then another figure for SuperMoto.

Mr Cory:
I do not know whether they are all the same people.

Mr P Ramsey:
I thought that SuperMoto was a Nintendo game.

Mr McNarry:
Can we find out whether they are the same people?

Mr Poots:
We can find out. However, it is a serious question, and we had better give it to the Committee in writing.

Mr D Bradley:
Good morning, Minister. What efforts have you made to identify the shortcomings in the Department’s monitoring of arm’s-length bodies such as the Northern Ireland Events Company? What action do you intend to take to ensure that a situation such as the one that we are now discussing will not arise in the future? Are you in a position to give the Committee details of any new arrangements that the Department intends to put in place?

Mr Poots:
The Department asked the Northern Ireland Events Company to establish its own audit committee, and in June 2006, we were told that that had been done. We have since discovered that that was not the case, and the audit committee has only recently been put in place. That was a significant failure on the part of the Events Company. Perhaps the Department should have done more to ensure that it was not being misled. However, there were no reasons to believe that it was being misled.

With regard to internal audit matters, the Department concluded in August 2007 that the Events Company’s risk management control and governance arrangements were satisfactory, but contained a number of significant weaknesses that could undermine the achievement of system objectives and leave it vulnerable to material and error abuse. In view of the significant weaknesses identified, the Department engaged with the Events Company to address the recommendations and action points set out in the internal audit report.

As a result of this incident, the Department is currently examining all the arrangements for non-departmental public bodies in order to prevent a similar incident happening in the future. Steps are being taken to prevent such incidents and help us to get on top of things.

Mr D Bradley:
Will the Department provide the Committee with details of any new arrangements to be applied to the arm’s-length bodies?

Mr Cory:
That information will be made available after completion of the review that has been commissioned to examine all the bodies linked to the Department.

Mr D Bradley:
Will the forensic auditor provide you with details of his work?

Mr Cory:
The forensic auditor is examining the Events Company. The review will have a broader remit.

Mr D Bradley:
Surely there are lessons to be learned from that, especially from the forensic auditor’s examination of what happened at the Events Company.

Mr Cory:
As the Minister pointed out, the expectation is that the forensic audit, which will examine the reasons for the deficit and learn lessons from the incident, will be completed within four months. That will also apply to the other arm’s-length bodies.

Mr Poots:
There will be lessons to be learned for Government and for people who take on the role of quangos or non-departmental public bodies.

Mr K Robinson:
My question is supplementary to the points made by Dominic Bradley. Minister, what mechanisms were used to transfer moneys down, presumably from the Department of Culture, Arts and Leisure, to the Events Company? What was the chain of command, or of physical movement of resources?

Mr Cory:
It is possible to do that. We can let you know what that is in writing. I do not have those details to hand.

Mr K Robinson:
That would be useful. Thank you.

Mr Shannon:
I welcome the Minister. On behalf of the Committee, I want to say that the Minister acted responsibly and quickly. When we asked for officials to appear before the Committee, they came down at the Minister’s bidding. The Minister has made himself available today, and his actions and responses have been impeccable.

The appointment of a forensic auditor is one of the most important steps to take in relation to these matters. A constituent of mine who had bought a business and used the services of a forensic auditor told me that the interpretation of the books, the analysis of the company’s dealings and the discovery of discrepancies were invaluable to him. The right things have been done, and credit must be given to the Minister for his response, which has been positive, effective and straight to the point.

I have a couple of questions —

The Chairperson:
Will they be difficult questions, Jim? I am only joking.

[Laughter.]

Mr Shannon:
I have made the most important statement. I have a question about the sum of £369,000. The Events Company obviously ran that particular event, and it must have secured some sponsorship deals. Perhaps when the company went bust, the sponsorship deals went with it. What steps were taken by the Events Company, long before the Minister was involved, to try to add to the sponsors of that event and grasp the money that was lost and get it back into the system? I agree with Pat Ramsey that one of the most important issues is the message that events that are due to come to Northern Ireland still go ahead. We need reassurance of that so that the people who are organising the events can be confident that they will not be left with large deficits.

Mr Poots:
One of my concerns is that confidence is retained in Northern Ireland’s ability to host events. We have a good record, but if bills were left unpaid and, consequently, small companies that supply materials went bankrupt, the wrong message would have been sent out. That is why the Department of Culture, Arts and Leisure sought approval from the Executive for the Department to underwrite the Events Company. That was to create confidence that we would not let people down, having taken the issue to this point. We are keen to ensure that confidence continues and that the steps that we took were to improve confidence.

I do not know what exactly went wrong for the companies that were involved in organising those events. Not as much money came into those events as had been anticipated at the outset. I had a discussion with representatives from one of Northern Ireland’s leading companies, which had supported many events in Northern Ireland. Those people told me that once a particular member of staff had left the Events Company, they had little contact with the Events Company. Previously, that leading company had been in contact regularly and had supplied goods and materials, which it felt was to its benefit because of sponsorship.

It is clear that losing some staff from the Events Company led to a lower income or led to expenditure that would previously have been covered by sponsorship. The company to which I have referred stated that it did not have to go headquarters to look for £30,000 or £40,000, but it could have supplied materials that would have cost it £6,000 or £7,000. That happened regularly with a number of companies, and when those sums are extrapolated upwards, one can see how shortfalls in funding can be exacerbated by not having the right personnel in place to deliver key sponsorship.

Although that is one reason for the deficit, I cannot for the life of me see how an overspend of £369,000 happened on an event that was originally to have cost £50,000. Clearly, in that instance, the situation was grossly mismanaged. There is no reasonable explanation for that happening; it should not have happened. The Department awaits the figures that the forensic auditor will produce. I have no doubt that the Public Accounts Committee will want to examine the situation in some detail and that it will expose what happened. At this point, I am not in a position to give you that definitive exposure.

Mr McCausland:
Thank you, Minister, for your helpful explanation and statement in the House on 26 November. The previous chief executive of the Events Company resigned in April or May 2007. Was the acting chief executive appointed immediately, and at what point was the acting chief executive appointed permanently? Was that person employed by the company before becoming acting chief executive?

Mr Poots:
Yes, he was. He is still the acting chief executive, and that appointment was immediate.

Mr McCausland:
In September, the Committee had a meeting to discuss the potential transfer of the Events Company from the Department of Culture, Arts and Leisure to the Department of Enterprise, Trade and Investment and thence to the Tourist Board. At that point, would the chairman of the Events Company and the officials in the Department of Culture, Arts and Leisure have known that financial issues were arising?

Mr Cory:
What date was the meeting?

Mr Poots:
It came to light on 20 September, and the chairman, who was on holiday, was made aware of the situation by our officials.

Mr McCausland:
A reference was made to MotoCross GP in 2005-06, after which the company went bust. However, the same event appears to have taken place in 2006-07. Did a different company run that event?

Mr Cory:
Yes. Originally it was run by a company called Schism, which went bust.

Mr McCausland:
How is that spelt?

Mr Cory:
S-C-H-I-S-M.

Mr McCausland:
I see — schism.

Mr McNarry:
Yes, you know that word. [Laughter.]

Mr McCausland:
Separation is not the same as schism. What was the subsequent company called?

Mr Cory:
We will look that up.

Lord Browne:
Have there been any complaints made against individuals in the Northern Ireland Events Company, and, if so, was any action taken? Was any other payment made to the former chief executive other than statutory pay?

Mr Poots:
Five complaints were made. It was established that one of those complaints did not stand up. Former members of staff were interviewed, who wished to remain anonymous, and a broad internal audit review of the Events Company was initiated for financial management and processes, areas that had been highlighted by the former employees. The review also included an examination of all contemporaneous payment records.

In respect of allegations made by funding applicants, individuals used the Northern Ireland Events Company’s complaints procedure and were presented with the relevant documents. The Department did not deal with them. The additional allegations made by a fifth individual were investigated by a retired senior civil servant, at the request of the Department, whose report concluded that, in that instance, there was no evidence to substantiate the allegations made. In that complaint for that event, there was a significant cost overrun, and it did not pay its way, and the company wished the Events Company to bail it out. It was a complaint of a different nature.

Directors in the Events Company were made aware of issues some time ago, and those were brought to the attention of the chairman by former members of staff. Complaints were made about how the Events Company was being run, which go back for some time.

Mr K Robinson:
The Minister has touched on the point that I was going to raise. Directors are central to any company; have there been discussions with the directors, either individually or as a collective body, since the occurrence became public?

Mr Poots:
Yes, there have been extensive discussions. The last meeting took place on the night of Monday 26 November.

Mr Cory:
The last meeting was on Monday evening. Paul Sweeney and I met a group of five directors, including the chairman.

Mr K Robinson:
Will there be continuing contact with the directors until the matter is properly resolved?

Mr Cory:
Technically, the company still exists, and it is the board’s responsibility to run that company. The Department cannot dictate how that company should operate. There is a danger that a shadow directorship may fall, which would transfer liabilities. However, the board and the Department are working closely in an effort to deal with that issue.

Mr K Robinson:
Is it a positive relationship that will continue?

Mr Cory:
Yes, it is.

Mr McNarry:
The Committee appreciates your openness on this difficult and sensitive subject. Our role is to ask questions and seek answers.

Earlier this week in the House, in response to a question, Mr Poots named the company’s directors. Are all those directors still in place?

Mr Poots:
No, they are not. Roberta Dunlop, from North Down Borough Council, has resigned.

Mr McNarry:
Are you at liberty to say why a director might resign?

Mr Poots:
I am not. However, would anyone wish to stay? One’s attitude might be to stay and see the problem through and accept some responsibility for allowing the problem to occur in the first place. Mrs Dunlop was appointed in April 2007, and, in fairness, she could not be deemed to be responsible for what happened in the previous two years.

Mr McNarry:
That is clear.

Mr Poots:
The responsibility of directors is not to deal with what they know about, but to deal with what they ought to know about. In this instance, that was not the case. Perhaps the directors should have known about certain issues, about which they were not made aware— that will become clear in due course. However, it was their responsibility to ensure that they were made aware.

Given the accountants’ unqualified approval of the company’s 2005-06 accounts, I have some sympathy for the directors. The accountants had greater access than the directors to all the company’s financial dealings, and they gave it a clean bill of health in 2005-06.

Mr McNarry:
Who are the accountants?

Mr Poots:
The accountants are Finegan Gibson.

The Chairperson:
That concludes this part of the meeting. Members may wish to have further information about the draft Budget; we want to sign off on our response. If the Committee staff contact the Department, can we have the Minister’s assurance that that information will be made available as soon as possible?

Mr Poots:
That is no problem.

The Chairperson:
Members — particularly Nelson — should note that the Events Company’s presentation to the Committee was in July, not September.

Mr McCausland:
Time flies so quickly.

The Chairperson:
Especially when you are enjoying yourself. I thank the Minister and Mr Cory for attending. For members’ information, Hansard coverage of this section of the meeting and a transcript of our discussions about the Libraries Bill will be available next Thursday.

Mr Poots:
I intend to make a statement about the Events Company’s role in funding community festivals, which has been caught up in what has happened. The transfer of that role to the Northern Ireland Tourist Board would not work. Therefore, a decision must be made, and I will announce my intentions on 4 December. I am minded that local authorities will assume responsibility for community festivals and, that being so, they must be made aware of the fact in order to budget for the transfer.

The Chairperson:
Thank you.

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