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OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Special Report
Congressional Request
Regarding EPA Grants to the
National Rural Water Association
Report No. 2006-S-00003
May 30, 2006

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Report Contributors:	Janet Kasper
Robert Adachi
Kevin Lawrence
Eileen Collins

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U.S. Environmental Protection Agency	2006-S-00003
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Office of Inspector General
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At a Glance
CS
proI^
Catalyst for Improving the Environment
Why We Did This Review
In response to a congressional
request, the Office of
Inspector General examined
the execution of
Environmental Protection
Agency (EPA) grants awarded
to the National Rural Water
Association (NRWA). To
address the request, we sought
to answer four specific
questions.
Background
The NRWA is a non-profit
organization that provides
technical assistance, training,
and legislative representation
to water providers serving
rural communities. NRWA is
a federation consisting of
48 State associations
representing 49 States. Since
October 2000, NRWA has
received over $70 million
from EPA to provide training
and technical assistance to
rural water systems.
For further information,
contact our Office of
Congressional and Public
Liaison at (202) 566-2391.
To view the full report,
click on the following link:
www.epa.aov/oia/reports/2006/
20060530-2006-S-00003.pdf
Congressional Request Regarding EPA Grants
to the National Rural Water Association
What We Found
We found the following regarding the four questions we sought to answer:
What environmental benefits result from the EPA grants to NRWA?
Under its grants, NRWA is not required to measure the environmental
outcomes of the technical assistance activities it provides. As a result, the
environmental benefits could not be determined. EPA grants awarded to
NRWA, after January 1, 2005, include outputs but do not link the outputs to
environmental outcomes and measures.
What improvements can be made in NRWA's administration of the
program?
NRWA's administration of the grants can be improved to more effectively
meet the needs of rural water systems. The number of organizations eligible
to perform work for NRWA can be expanded to include non-member
organizations. Rather than distributing funds equally to all States, NRWA
could take into consideration the individual needs of rural water systems in
each State in determining funding and the required activities and outputs.
Are there other options for awarding some rural water assistance funds?
Rather than earmarking funds for NRWA, Congress has other options for
ensuring rural water systems receive needed assistance. Congress could
require EPA to award the grants through a competitive process. Congress
could incorporate into the appropriation language requiring NRWA to award
funds to technical assistance providers based on State needs. Another option
would be to consolidate grants awarded to NRWA.
How does NRWA develop white papers and policy positions?
NRWA prepares white papers to address the challenges facing rural water
systems. NRWA and its contractor determine the topics for the white papers.
The State associations" participation is limited to the development of white
paper and policy positions through their representatives on NRWA's board of
directors. According to NRWA officials, non-Federal revenue (e.g.,
investments, member services, and other revenues) is used to finance the
white papers.

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Table of C
At a Glance
Introduction 		1
Purpose 		1
Background		1
Scope and Methodology		2
Results 		3
What environmental benefits result from the EPA grants to NRWA?		3
What improvements can be made in NRWA's administration of the program?		6
Are there other options for awarding some rural water assistance funds?		8
How does NRWA develop white papers and policy positions?		9
Appendices
A Additional Details on NRWA	 10
B Details on Scope and Methodology	 12

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Introduction
Purpose
In response to a congressional request, the Office of Inspector General (OIG) examined the
execution of grants the Environmental Protection Agency (EPA) awarded to the National Rural
Water Association (NRWA). To address the request, we answered the following questions:
•	What environmental benefits result from the EPA grants to NRWA?
•	What improvements can be made in NRWA's administration of the program?
•	Are there other options for awarding some rural water assistance funds?
•	How does NRWA develop white papers and policy positions?
Background
Approximately 272 million people receive their drinking water from nearly 53,000 community
water systems. These systems range from very small, serving populations of 500 or less, to very
large, serving over 100,000. A prior EPA OIG report noted that although these systems share
".. .problems of aging infrastructure, underfunding, and meeting regulations, small systems have
had great difficulty keeping up with the Safe Drinking Water Act regulations."1
NRWA is a non-profit organization that provides technical assistance, training, and legislative
representation to water providers serving rural communities. NRWA defines rural communities
as water systems serving populations less than 10,000 people.2 NRWA receives the majority of
its funding from EPA and the United States Department of Agriculture (USDA). During the
fiscal year ending February 28, 2005, $37 million of NRWA's total revenues of $43 million
came from EPA ($13.5 million) and USDA ($23.5 million).
EPA awarded grants to NRWA based on Congressional earmarks. The Office of Management
and Budget defines earmarks as funds for projects, activities, or institutions not requested by the
executive branch, or add-ons to requested funds which Congress directs for specific activities.
Congress specifically identified NRWA as the recipient for earmarks relating to the water
security, technical assistance, and groundwater protection grants. The earmark for the source
water protection grant did not specify NRWA as the recipient. NRWA, using EPA grant
funding, issues subawards to State rural water associations to carry out the activities approved in
1	EPA OIG Report No. 2003-P-00018, Impact ofEPA and State Drinking Water Capacity Development Efforts
Uncertain, issued September 30, 2003.
2	EPA defines a water system serving a population of 3,300 to 10,000 as a medium system; 501 to 3,300 as a small
system; and less than 500 as a very small system. For purposes of this report, rural systems refer to medium, small,
and very small systems.
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the grant work plans. During the period of October 1, 2000, through March 7, 2006, NRWA was
awarded $70 million in EPA earmarked grants. Currently, NRWA has three active EPA grants,
with awards totaling $20 million. NRWA also receives funds from USDA for technical
assistance and rural water circuit rider technical assistance.
See Appendix A for further details on NRWA and the grants it receives.
Scope and Methodology
This assignment was not an audit in accordance with generally accepted government auditing
standards. We did not complete this assignment with the intent of providing an independent
assessment of the performance of a government organization or activity, as required by
Government Auditing Standards, issued by the Comptroller General of the United States. We
performed our field work between December 29, 2005, and March 7, 2006. We limited our
assignment to EPA grants and amendments awarded after January 1, 2005. The report
incorporates comments received from EPA Office of Water officials. See Appendix B for details
on scope and methodology.
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Results
What environmental benefits result from the EPA grants to NRWA?
Under its EPA grants, NRWA is not required to measure the environmental outcome of the
technical assistance activities it provides. As a result, the environmental benefits could not be
determined. EPA has developed a model of how technical assistance activities, such as those
that NRWA performs, contribute to the long-term outcome of protecting human health.
Although we believe State associations provide valuable services, without outcome measures,
EPA is unable to measure the specific benefits of the more than $7.6 million in grants awarded to
NRWA since January 1, 2005.
As a result, We were unable to determine the environmental benefits of the grants to NRWA
It is EPA policy to ensure, to the maximum extent practicable, that outputs and outcomes are
appropriately addressed in grant competitive funding announcements, work plans, and
performance reports.3 The policy provides the following definitions for outcomes and outputs:
The term "outcome " means the result, effect or consequence that will occur
fi'om carrying out an environmental program or activity that is related to an
environmental or programmatic goal or objective. Outcomes may be
environmental, behavioral, health-related or programmatic in nature, must be
quantitative, and may not necessarily be achievable within an assistance
agreement funding period.
The term "output" means an environmental activity, effort, and or associated
work products related to an environmental goal or objective, that will be
produced or provided over a period of time or by a specified date.... Outputs
reflect the products and services provided by the recipient, but do not, by
themselves, measure the programmatic or environmental results of an assistance
agreement.
For the grants issued or amended since January 1, 2005, the work plans contained outputs, but
NRWA did not state how the outputs would result in obtaining environmental outcomes. The
proposed environmental outcomes and outputs for the grants are presented in Table 1. In the
case of the wellhead and source water protection grants, the stated outcomes are similar, and are
not quantitative.
3 EPA Order 5700.7, Environmental Results under EPA Assistance Agreements, effective January 1, 2005.
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Table 1: Environmental Outcomes and Outputs In Grant Proposals
Grant No.
Environmental Outcome
Outputs
X683236101 During the course of this program the State
Wellhead	associations will assist local communities in
Protection the development of wellhead protection
plans that will include, but will not be not
limited to, identification of possible sources
of contaminants, improving water quality,
and safeguarding water infrastructure.
Local contamination prevention
activities will be implemented in 1,833
systems enhancing the level of public
health through contamination
prevention, greater public awareness,
and environmental protection
ownership at the local community level.
X82384401 During the course of this program the
Source Water NRWA will assist local communities in the
Protection development and implementation of source
water protection plans that will include, at
minimum, delineated protection areas,
identification of possible sources of
contaminants, initial implementation of
management measures in each plan, and
contingency planning to safeguard water
infrastructure. As time and resources
permit, the plans will supplement the State
source water assessments and provide
information that was unavailable to the State
and provide followup implementation upon
request.
Source Water Specialists will provide a
minimum of 3,900 hours of on-site
assistance nation-wide during 2006 in
the facilitation of planning teams and
development and implementation of
plans, including followup assistance on
plans completed during previous years.
EPA Office of Water developed a logic model to link inputs to long-term environmental
outcomes for the Public Water System Supervision (PWSS) Program. According to Office of
Water, NRWA is a partner organization within the PWSS Program. The logic model is a way of
graphically displaying a program's resources, activities, outputs, and outcomes. The logic model
spells out in reasonable detail all the things a program does and what can be accomplished, and
tells the story in a linear, graphic way. Figure 1 is a portion of the logic model that shows how
NRWA's activities contribute to the goal of protecting human health through safe drinking
water.
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Figure 1: Logic Model for NRWA Activities
Outputs
Inputs
Activities
Long-Term
Outcomes
Short- and
Medium-Term
Outcomes
A3.
Training for
primacy agencies
and PWS
L2. Human health
protected via safe
water from PWS
A2.
Technical
assistance for
primacy agencies
and Public Water
System (PWS)
S2.
PWS improves
knowledge of
managerial and
financial capacity
building
02.
Primacy agencies
and PWS trained
and assisted in
building
managerial and
financial capacity
PWS maintains
adequate
technical, financial
and managerial
capacity to provide
safe drinking water
S3.
Primacy agency
and PWS improve
knowledge of
PWSS program
requirements
(includes technical
capacity)
Partner
Organizations
(NRWA)
03.
Primacy agencies
and PWS trained
and assisted in
learning PWSS
program
requirements
(includes technical
capacity)
S5.
PWS remains in
compliance, or
takes corrective
action to return to
compliance with,
rule requirements
(includes
monitoring/
reporting and
public notification)
In a prior report, we noted that EPA's current drinking water program performance measures
focus on program activities rather than long-term outcomes. 4 In response to the report, the
Office of Water issued final guidance on source water protection measures, and is developing
measures for capacity development activities. The capacity development measures are expected
to be completed in December 2006. In addition, Office of Water officials stated that outcome
measures would be addressed in the new strategic plan scheduled for final issuance in the fall of
2006. The Office of Water will develop methods to measure outputs and outcomes at a
nationwide, programmatic level and not for individual grantees. However, to comply with EPA
4
EPA OIG Report No. 2005-P-00021, Progress Report on Drinking Water Protection Efforts, issued August 22,
2005.
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policy, the Office of Water will need to describe the linkage between the intended outputs under
the grants to environmental outcomes and measures.
Even though EPA has not developed measures, States are making progress in measuring the
impact of capacity development activities. For example, the Pennsylvania Department of
Environmental Protection is using both quantitative and qualitative methods to track changes in
water system capacity over time.
While the impact of the NRWA grants have not been measured, we believe that State rural water
associations play an important role in helping rural water systems comply with drinking water
standards, and thus there are positive outcomes. An OIG evaluation of challenges facing small
drinking water systems found that third party organizations, such as State rural water
associations, play a key role in assisting these systems.5 Discussions with State primacy
agencies also highlighted the benefits of the rural water associations. For example:
•	The Florida Department of Environmental Protection considers the Florida Rural Water
Association a part of its training program, and indicated that the association has
contributed to an increase in compliance rates.
•	The Indiana Department of Environmental Management believes that the Alliance of
Indiana Rural Water is a key to the success of communities developing protection plans.
•	The Georgia Department of Natural Resources uses the Georgia Rural Water Association
as a tool to help bring non-complying systems back into compliance.
What improvements can be made in NRWA's administration of the
program?
NRWA's administration of the grants can be improved to more effectively meet the needs of
rural water systems. The number of organizations eligible to perform work for NRWA can be
expanded to include non-member organizations. Rather than distributing funds equally to all
States, NRWA could take into consideration the individual needs of rural water systems in each
State in determining funding and the required activities and outputs.
Expand Number of Eligible Subrecipients. NRWA could expand the number of organizations
that are eligible to be subrecipients under the grants. Currently, NRWA only provides Federal
funding to rural water associations that are dues paying members of NRWA. The membership
fee structure consists of two parts - a base fee of $2,300, and an additional $300 fee per each
Federal grant. A State association conducting activities under all three grants would have $900
added to the base membership fee. However, other organizations provide training and technical
assistance to small and rural water associations that are not members of NRWA. For example,
two rural water associations in Indiana - one a member of NRWA and the other not - both
provide training to rural water systems. State primacy agencies have used other non-profit
5 EPA OIG Report No. 2005-P-00021, Progress Report on Drinking Water Protection Efforts, issued August 22,
2005.
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organizations, along with State rural water associations, to provide technical assistance to rural
water systems.
Change Funding Method. Even though the number and needs of rural water systems in each
State vary, NRWA distributes funds equally to all States. The State association distribution
process begins with NRWA determining its expenses to manage the grant program for the year.
The remaining available grant funds are divided equally among the State associations conducting
activities under the grant, with the exception of Alaska (which receives extra funds due to the
additional costs of operating in Alaska). For example, all 48 State associations participate in the
technical assistance and training grant program, and each association in the continental United
States receives $96,332. NRWA officials said the equal distribution of funds is due to their
inability to determine a distribution method that its board of directors will approve. Nonetheless,
NRWA's equal distribution method does not consider the differences among its 48 State
associations. We believe NRWA can distribute funds to State associations based on need, such
as by the number of rural water systems. Officials for seven associations reviewed noted
significant variations in the number of water systems for which they provide training and
technical assistance, yet they received the same amount of funding (see Figure 2).
Figure 2: Number of Community Water Systems per State
The equal distribution of funds limits the effectiveness of the State associations in meeting the
needs of the local water systems, particularly the States with a large number of associations. For
example, California Rural Water Association officials, with 3,123 systems, said that they could
double the amount of training and still have room for growth, while the Delaware Rural Water
Association, with only 226 systems, is able to annually visit a majority of its systems.
Allow Workplan Flexibility. NRWA could consider the needs of individual States when
developing the activity requirements for State associations. NRWA specifies the terms of the
subawards without negotiation or input from the State associations on the activities to be
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conducted under each EPA program; if a State association wants to receive Federal funding, it
must accept NRWA's terms. All of the participating State associations have the same terms and
activity requirements. The NRWA Performance Procedures Manual details the activities to be
conducted and how to conduct them; there are three manuals, one for each EPA-funded program.
For example, the manual for the technical assistance and training program states each association
is required to complete an annual assistance plan with 280 hours of training and technical
assistance (a minimum of 80 hours of formal classroom training with the balance being a
combination of classroom training or technical on-site assistance). The manual states the
assistance plan is to be ".. .developed to address the state's unique on-site technical assistance
and training needs for rural and small water systems." However, the uniform terms and activity
requirements do not take the State's unique needs into consideration.
NRWA also limits who within the State rural association can work on the EPA program. The
manual for both the wellhead and source water protection programs states "... staff paid with
Federal funds cannot perform work under other grants." Both the wellhead and source water
protection plans include wellhead sources of water and refer to the same EPA wellhead
protection publication as a source for activities to be conducted. Specialists for both programs
appear to need the same skills related to wellhead water issues. Since skills and activities
overlap between the grants, limiting staff to working on only one grant limits the State
associations' flexibility and effective use of resources.
Are there other options for awarding some rural water assistance
funds?
Other organizations besides NRWA and its State associations could provide assistance to rural
water systems. All of the State primacy agencies contacted have provided technical services
(e.g., training and operator certifications) to rural water systems through various funding
mechanisms. EPA also awards funds to other non-profit organizations to provide technical
assistance. Rather than earmark funds for NRWA, there are other options to provide needed
assistance to rural water systems. EPA could award the grants through a competitive process,
require NRWA to award funds based on need of States, or consolidate grants to NRWA.
Use Competitive Award Process. Rather than using earmarks, Congress could allow EPA to
award funds through a competitive process. Grants to NRWA currently are not competed
because the funds are Congressional earmarks. NRWA is identified as the recipient for all grants
except for the source water grants. Further, although NRWA is not specifically mentioned for
the source water grant, the recipient is described in an appropriation bill as ".. .an organization
now engaged in ground water and wellhead protection programs," and based on that description
EPA awarded the source water grant to NRWA without competition. A competitive process
would enable EPA to award grants to other entities, including State primacy agencies, State rural
water associations, or other organizations that have the ability to provide technical assistance to
rural water programs. Awarding grants directly to these organizations would allow more
flexibility and input to meet the needs of the local rural communities.
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Award Based on Need. Another option would be to award funds based on specific needs of
each individual State. Congress could incorporate into the appropriation language a requirement
that NRWA distribute funds based on methods used on various other Office of Water grant
programs. One of the methods consists of a base and scale amount, with each State receiving a
base amount (usually 1 percent of the grant amount). The remaining funds are distributed using
a variety of factors, including needs surveys, number of water systems, and number of operators.
Consolidate Programs. A final option would be to consolidate the wellhead and source
protection programs, since the activities for the two programs may overlap. The main purpose of
both programs is to provide technical assistance to rural and small communities in the formation
of protection plans. The wellhead program focuses on groundwater sources of water while the
source water program focuses on ground and surface sources. Both the wellhead and source
water procedures manual refer to EPA's Wellhead Protection: A Guide for Small Communities
as a source of activities that may be conducted. Specialists for both programs appear to need the
same skills related to wellhead water issues.
How does NRWA develop white papers and policy positions?
To address the challenges facing small and rural water systems, NRWA prepares concepts, or
white papers, to examine issues of affordability, balancing benefits and costs, conservation in
regulations, and a variety of other standards and concerns. NRWA, along with its contractor,
determine the topics for the white papers. When necessary, the contractor finds the experts to
conduct the actual research and writing. The State associations' participation is limited to the
development of the white papers and policy positions through its representatives on NRWA's
board of directors. It is up to the State association's representative on NRWA's board to involve
its respective State associations in the white paper and policy position process. NRWA and State
association officials have said the State associations have no direct role in the topic selection,
research, and writing of white papers. NRWA officials stated non-Federal revenue (e.g.,
investments, asset management program, member services, and other revenues) finances the
white papers.
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Appendix A
Additional Details on NRWA
NRWA began as a group of eight States in 1976 to . .improve the quality of life in rural areas
and in small communities." NRWA has evolved into a non-profit federation consisting of 48
State associations representing 49 States. The State associations have water and wastewater
system members in excess of 24,550. NRWA also has programs in developing countries.
NRWA is the sponsoring organization for the International Rural Water Association, which
shares the same location and phone number with NRWA in Duncan, Oklahoma.
NRWA has a board of directors that meets twice a year for the purpose of "... determining
direction and positions of the associations." The board is made up of elected representatives
from each of the member State associations. The State association representatives come from
local rural systems. Idaho is currently the only State association that does not have
representation on the NRWA board of directors.
As of March 7, 2006, NRWA had three active EPA grants, as detailed in Table 2. The purpose
of these grants is for wellhead protection, source water protection, and technical assistance and
training.
Table 2: Summary of Active EPA Grants
Grant No.
Total
Project Total Grant Amount
Period Budget Awarded Purpose of Grant
X683236101
7/1/2005 to $15,591,428 $6,115,938 Facilitate the development and
6/30/2008 implementation of wellhead
protection plans at the local
community level.
X82384401
1/1/2006 to 1,487,570 1,487,570 Facilitate the development and initial
12/31/2006 implementation of source water
protection plans at the local
community level.
T83169601
5/1/2004 to 16,134,800 12,548,145 Nationwide technical assistance
4/30/2007 training program to assist rural water
system personnel increase their
knowledge and skills in the primary
areas of drinking water
implementation, capacity
development and contamination
prevention.
Totals
$33,213,798 $20,151,653
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The budgets for the current grants show the following breakdown (Table 3) of planned costs
between NRWA internal costs and the amounts given to State rural water associations:
Table 3: Budget Breakdowns for NRWA Costs
Cost Element
Grant No.
X683236101
Grant No.
X83284401
Grant No.
T83169601
NRWA Direct Costs
$215,029
$112,941
$424,792
State Association Costs
$5,568,427
$1,290,427
$11,515,823
NRWA Indirect Costs
$331,482
$84,202
$607,530
Total Grant Amount
$6,115,938
$1,487,570
$12,548,145
Percentage of State
Association Costs to
the Total Grant Amount
91.05%
86.75%
91.77%
NRWA also receives funding from the USDA-Rural Utilities Service. For the fiscal year ending
February 28, 2005, NRWA received over $23 million from the USDA-Rural Utilities Service.
NRWA receives funding from the USDA-Rural Utilities Service for:
•	Waste Water Technician: Technical assistance and training in the 48 contiguous States
and a full-time water technician in Puerto Rico for wastewater systems serving
populations less than 10,000.
•	Circuit Rider: Technical assistance to rural development eligible systems in the areas of
operation and maintenance, treatment compliance, construction, financial management,
general management, and board training.
•	Source Water Protection: Assistance in implementing source water protection plans
within selected States.
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Appendix B
Details on Scope and Methodology
As part of the assignment, we obtained an understanding of EPA's process for awarding and
managing earmark grants awarded to NRWA. The understanding was obtained through an
analysis of the laws, regulations, and guidance pertaining to grants awarded to the NRWA and an
evaluation of internal controls over the grants. Internal controls include the processes for
planning, organizing, directing, and controlling program operations. Internal controls also
include the systems for measuring, reporting, and monitoring program performance. Our
understanding of the internal controls was gained through the performance of the procedures
outlined below.
The assignment scope was EPA grants and amendments awarded after January 1, 2005, with site
visits to EPA Headquarters in Washington DC, and NRWA's office in Duncan, Oklahoma, and
included the following steps:
•	Review EPA OIG reports to obtain background on whether the Office of Water has
developed program measures for small water systems.
•	Review EPA grant and project files for grants awarded to NRWA after January 1, 2005,
and determine what environmental outcomes are listed in the grant award.
•	Interview EPA grant and program personnel to determine what the environmental
outcomes or measures the grants to NRWA were intended to meet.
•	Verify the process by which NRWA allocates funds to State Rural Water Associations.
•	Interview EPA program officials, State primacy agencies, and State Rural Water
Associations about how assistance is provided to rural water utilities.
•	Interview NRWA officials and review NRWA documents.
•	Interview water associations, such as the Association of Safe Drinking Water
Administrators, to determine whether any studies of the problems facing small and rural
water systems have been conducted and whether recommendations have been made as to
how Federal, State, or local governments can alleviate the problems.
The assignment did not include a review of the USD A grants or verification of any financial
data.
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