Annual Audit and Inspection Letter - Final1

Annual Audit and Inspection Letter - Final1

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2004 Annual Audit and Inspection Letter Oldham Metropolitan Borough Council INSIDE THIS LETTER PAGES 2 - 17 • Executive summary • Key messages • Introduction • Council performance • Accounts and governance • Other work • Looking forward • Closing remarks PAGES 18 - 24 Appendices • Appendix 1 - Reports issued during 2004 • Appendix 2 - Scope of audit and inspection • Appendix 3 - Audit and Inspection fees • Appendix 4 - Summary of 2003/04 audit recommendations • Appendix 5 – Follow-up of 2002/03 audit recommendations Oldham MBC - Annual Audit and Reference: Inspection Letter January 2005 Date: 2004 ANNUAL AUDIT AND INSPECTION LETTER The current overall category is Weak but for social services remaining a zero-star rated Executive summary service the Council would, on all other aspects of corporate ability and service delivery, have been rated in overall performance terms as Fair. The purpose of this letter Social care remains a priority for improvement This Annual Audit and Inspection Letter (AAIL) and a re-inspection of children’s services is for Members incorporates the Annual Audit underway. The results from this re-inspection Letter, and is presented by the Council’s should become clear early in 2005. Relationship Manager, Clive Portman of the Audit Commission and the appointed auditor, The Accounts KPMG LLP (Adrian Lythgo the Engagement The annual audit of the accounts and financial Partner). The letter ...

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2004
Annual Audit and Inspection Letter Oldham Metropolitan Borough Council
I N S I D E T H I S L E T T E R
Executive summary Key messages uction Introd Council performance Accounts and governance Other work  Looking forward  Closing remarks
P A G E S 1 8 - 2 4
Appendices Appendix 1 - Reports issued during 2004 Appendix 2 - Scope of audit and inspection Appendix 3 - Audit and Inspection fees  Appendix 4 - Summary of 2003/04 audit  recommendations 5 – Follow-up of 2002/03 auditAppendix  recommendations
Reference: Oldham MBC - Annual Audit and Inspection Letter Date:January 2005
 2004
Executive summary The purpose of this letter This Annual Audit and Inspection Letter (AAIL) for Members incorporates the Annual Audit Letter, and is presented by the Council’s Relationship Manager, Clive Portman of the Audit Commission and the appointed auditor, KPMG LLP (Adrian Lythgo the Engagement Partner). The letter summarises the conclusions and significant issues arising from our recent audit and inspection programme. Both the Audit Commission and KPMG LLP have issued separate reports during the year having completed specific aspects of the audit and inspection programme. These reports are listed at Appendix 1 for information. Appendix 2 sets out the scope of audit and inspection. Appendix 3 provides information about the fees charged. Appendix 4 provides a summary of this year’s  recommendations. Appendix 5 provides a summary of prior year’s recommendations and actions taken. Auditor’s responsibilities are summarised in the Audit Commission’s statement of key responsibilities of auditors. The responsibilities of Audit Commission Inspectors are detailed in Section 10 of the Local Government Act 1999. The contents of this Letter should be viewed in the context of that more formal background.
Key messages Council performance The Council has made significant improvements in the way it works (as evidenced in the October 2004 Corporate Assessment) and in the delivery of services (in particular Education and Youth services). Recent inspections of Waste Management, Supporting People Programme and Education all show an improving position.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
The current overall category is Weak but for social services remaining a zero-star rated service the Council would, on all other aspects of corporate ability and service delivery, have been rated in overall performance terms as Fair. Social care remains a priority for improvement and a re-inspection of children’s services is underway. The results from this re-inspection should become clear early in 2005. The Accounts The annual audit of the accounts and financial systems was completed in line with the advanced national timescales. KPMG LLP issued an unqualified opinion. There is a need to further improve the accounts preparation. In particular the corporate responsibilities of Directorate Accountants in relation to accounts preparation and audit need to be developed, if the Council is to meet the further advance in the timetable for the publication of audited accounts in future years. We will work with officers to set out a critical path for accounts production to help meet the deadline of 31 October for the issue of the opinion in 2005. Financial position The Authority has maintained its financial position for 2003/04 but is currently predicting an overspend for 2004/05 and a funding gap for 2005/06. The Revenue Support Grant settlement has been favourable to Oldham, but actions are being considered to ensure that the organisation is prepared to meet future challenges. The ongoing management of its financial position through its developing Medium-Term Financial Plan (MTFP) is a key element for ensuring the successful delivery of the Council’s aims and objectives. Progress has been made in the last year and the strategy will need to be developed and monitored in the context of the Council’s wider and ongoing management of risk.
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 2004
Governance issues The further development and enhancement of the Council’s financial governance arrangements needs to continue to be a high priority and focus for Members and Senior Officers. Changes to the Constitution were made in June 2004. Ongoing development of arrangements needs to ensure that appropriate financial and legal advice is taken in relation to delegated decisions as well as those in relation to development of the policy framework. The Council has included a Statement on Internal Control within its accounts. Procedures have been developed to enable it to produce this report but the process has highlighted the need to: further develop risk management procedures; improve decision recording, following a review of the Community Care contract; and clarify the Council’s land disposal protocol. In other areas reviewed during the year, the Council’s arrangements were found to be satisfactory. The Council has discussed at Standards Committee the final reports detailed below and the necessary action has been taken in relation to: Clayton Playing Fields;  Oldham Property Partnership; and Napier Mill. Action needed by the Council This audit letter is presented at a time when the Council is undergoing a period of significant change and development. It is vital that it does not lose sight of the overall vision and targets set to assist its journey to excellence, whilst maintaining its strong customer focus. Key actions include: continue to develop the Council’s improvement plan in line with the Council’s own priorities but also taking into account external assessments and inspections, particularly the recent corporate assessment; further improve the accounts closedown arrangements to ensure the more onerous future deadlines are met;
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
continue to develop the medium term  financial plan and review the level of reserve balances alongside the Corporate Risk Strategy;  further develop risk management procedures so that these are fully embedded within the Council’s procedures; and amend the land and property protocol so that it clearly reflects the procedures for obtaining external valuations intended by the Council.
Introduction Background to audit and inspection programme To ensure that councils receive a tailored, seamless service, integrated with the work of other inspectorates, the Audit Commission has appointed a Relationship Manager for each council. The Relationship Manager is the Commission’s primary point of contact with the Council and is also the interface between the Commission and the other inspectorates, Government Office and other key stakeholders. Both the Audit Commission and KPMG LLP have also worked with the Council on its improvement planning process to ensure that the work of the Audit Commission and other inspectors is co-ordinated and targeted at key areas for improvement. Objectives of audit and inspection Audit– KPMG’s main objective as your appointed auditor is to plan and carry out an audit that meets the requirements of the Code of Audit Practice. This includes a risk-based approach to planning audit work focussing on your significant financial and operational risks that are relevant to our audit responsibilities. Central to the audit are your corporate governance arrangements. The audit is then structured around the three elements of our
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 2004
responsibilities as set out in the Code and shown in Appendix 2.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
Oldham Metropolitan Borough Council – Page4
 2004
Inspection- Inspection work is based around Section 10 of the Local Government Act 1999, which requires the Audit Commission, as your inspectors, to carry out inspections and deliver reports that will: enable the Council and the public to judge whether best value is being delivered; enable the Council to assess how well it is doing; enable the Government to assess how well its policies are being implemented; and identify failing services where remedial action may be necessary.
Council performance Though the Council’s overall performance in 2004 has been assessed as Weak, the Council has made significant improvements in the way it works (as evidenced in the October 2004 Corporate Assessment) and in the delivery of services (in particular Education and Youth services). Recent inspections of Waste Management, Supporting People Programme and Education all show an improving position. But for social services remaining a zero-star rated service the Council would, on all other aspects of corporate ability and service delivery, have been rated in overall performance terms as Fair.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
CPA Scorecard The Audit Commission has assessed core service performance in the service areas shown below. EXHIBIT 1 Element Assessment Overall Weak Current performance out of 4 Education 4 Housing 2 Use of resources 3 Social care (children) 2 Social care (adults) 2 Benefits 4  Environment 3 Libraries and leisure 2 Overall score for service block 3 out of 4 Capacity to improve 2 out of 4 (reassessed in 2004) (Note: 1=lowest, 4=highest) The Council has made improvements in education, community safety, youth services, planning, waste collection and street cleansing over the last year. Social care remains a zero star rated service and this is a priority for improvement. The Audit Commission has identified significant improvements in the way the Council works, with clearer ambitions and the Council is better able to direct resources to priority front line services. Significant progress has been made on community cohesion leading to positive outcomes and increasing confidence in dealing with issues of equality and diversity. While much progress has been made in the last two years, the Council recognises the need to continue recent progress to improve the way it manages performance across all services. Just over half of the indicators of performance have improved but this is often from a low starting position. Based on Oldham Metropolitan Borough Council's plans, the Council is well placed to continue to improve the way it works and the services it provides to local people.
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 2004
CPA Improvement Report Summary of judgements Oldham Metropolitan Borough Council describes itself as being on a ‘journey towards excellence.’ Nobody reading the report of the 2002 Corporate Governance Inspection (CGI) could doubt that such a journey would take time. The Council was then assessed as being weak, and clearly deficient in its capacity to address the many problems faced by the Borough which it serves. While there is still much to do, there is much that has changed. The Council shows evidence of progress in all the areas examined, and that progress has generally resulted in an improved corporate assessment score. It is still a long way from achieving the excellence to which it aspires, but there is every reason to take encouragement from the improvements that have been made so far. The Council has increasingly clear ambitions that are being developed in consultation with partner organisations and community groups. Its work on community cohesion and on a vision for the future of the Borough of Oldham is increasingly targeted on real outcomes for local people and will gain further impetus with the publication of a revised community strategy next year. It is more effective at identifying what is and is not a priority, and in communicating those priorities internally and externally. The size of the task it faces is considerable and can make prioritization difficult, as exemplified by slowness to identify growing problems in social services; but there are grounds for confidence that such failings will be less likely to occur in future and the Council’s ability to focus on the important issues is much improved. The Council has increased its capacity to achieve change. Most importantly, it is increasingly confident in dealing with issues of equality and diversity, and accomplished at working in partnership with other organisations to deliver shared objectives. It has reinforced and reorganised its senior management team, and revised and clarified the responsibilities and accountabilities of officers and council members.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
Management remains stretched and it will be some time before recent investment in human resources and organisational development translates into real increases in capacity and capability. A new performance management system was introduced during 2003, is led from the most senior levels of the organisation, and is beginning to stimulate change. A new business planning process was introduced at the start of the current financial year. There is some way to go, however, before a culture of continuous improvement is embedded throughout the organisation. There has been real achievement in improving services including education, environment, housing and community safety; and in addressing deprivation. There have however been problems in social services and progress against performance targets remains variable. The Council has made considerable investment in the building blocks for future improvement. Resources have been diverted to priority front-line services and investment made in human resources, organisation development, a new regeneration department, training and development for members and managers and other capacity-building initiatives. The Council faces a significant challenge in generating large savings to deliver its ambitious plans for investing further in its priorities for improvement. The Council has a realistic but positive attitude to its achievements so far and the distance it has still to travel. The CGI noted that since 2000 the Council had been open and responsive to external challenge, and that has continued. External links have been formed with other councils and the Improvement and Development Agency (IDeA), and while more remains to be learned about scrutiny arrangements the willingness to learn from its own and other’s experience is clear. Future plans are becoming progressively clearer and more focussed on outcomes and mechanisms for engaging staff, partners and communities in developing strategies are increasingly well-developed. 
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2004 2004 Un Weight Weight ed ed Score Score 2 2 2 2 3 3 2 2 2 2 2 6 3 6 3 3 3 3
EXHIBIT 2 CORPORATEASSESSMENT SCORE Key Theme 2002 Question Final Weight ed Score What is the Ambition 1 Council Prioritisation 1 trying to achieve? Focus 2 How has Capacity 1 the Council Performance 1 ut dseetli vaebroing Management its priorities? What has Achievement 2=6 the Council achieved Investment 2=4 to date? In light of Learning 1 what has Future Plans 1 been learnt, what does the Council plan to do next? TOTAL THEME SCORE 18 29 Other Audit performance work Performance management KPMG LLP has a responsibility to review and where appropriate, report on the arrangements that the Council has put in place: to comply with statutory requirements in respect of the preparation and publication of its best value performance plan; for collecting, recording and publishing specified performance information; and to secure economy, efficiency and effectiveness in the use of resources.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
Best Value Performance Plan The Council has produced a Best Value Performance Plan which included all the required Best Value Performance Indicators (BVPIs). The process for the compilation of the BVPIs and the audit has improved. KPMG LLP concluded that the plan complied in all significant respects with relevant legislation. The plan overall was given an unqualified audit opinion. Two BVPIs were found to be unreliable when we submitted them but additional evidence was provided for one after the deadline and the qualification was removed for this indicator. Also a small number of BVPIs were amended following the audit. Use of resources Both the Audit Commission and KPMG LLP review aspects of the Council’s arrangements to secure economy, efficiency and effectiveness in its use of resources. Review of Housing Strategy and contract monitoring arrangements with First Choice Homes Oldham KPMG reviewed housing strategy, including arrangements for monitoring the contract with First Choice Homes Oldham (FCHO). Working arrangements with FCHO have successfully improved. There has been the formation of a Council Housing Strategy team and completion of a performance management framework. Within the private sector there have also been significant changes with the creation of the Regeneration Department responsible for private sector housing and Housing Market Renewal. There are still areas for development and these have been discussed with officers. e-Government and ICT Strategy The Council’s e-Government and ICT have been included in the strategic delivery partnership. The OJEC notice to select a partner was issued in Autumn and a much more strategic approach is now being taken. KPMG’s review of the ICT Strategy raised some technical issues that have been discussed with officers. Auditor Scored Judgements KPMG had an input into the CPA process through the auditor scored judgements. As part Oldham Metropolitan Borough Council – Page6
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of this we scored the Authority against individual aspects of the Code of Audit Practice, such as financial standing and legality of financial transactions. We assessed Oldham as follows. Financial Standing 2 Internal financial control 3 Standards of financial conduct and the 3 prevention and detection of fraud and corruption Financial statements 3 Legality of financial transactions 3 (Note: 1=lowest, 4=highest) The approach to auditors scored judgements will change under CPA 2005 though the further developments that are planned to be implemented as part of the 2005/06 budget process will improve the authority’s capacity regarding the financial standing category. Other Audit Commission inspections Waste management The Audit Commission inspected the Council’s Waste Management service, including refuse collection, recycling, street cleansing, environmental education and enforcement. The net budget for the service (2004/05) is £5.8 million. We have assessed the Council as providing a ‘good’, two-star service that has promising prospects for improvement. Our judgements are based on the evidence obtained during the inspection and are outlined below. The service is good because it has a number of strengths, including: efficient and effective refuse collection and street care services that are accessible and responsive to users and recognise the diversity of Oldham’s communities; high satisfaction with the refuse collection service; overall improvements in the cleanliness of streets across the borough and within local areas to exceed the Government’s target; an extensive recycling infrastructure, complemented by kerbside collections of
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
recyclables, is now improving the Council’s performance; positive and proactive approaches to environmental education and enforcement; and strong contribution to achieving the Council’s corporate priorities. However, some matters still require attention, including: side streets in some residential areas have quite a lot of litter with small build ups and the correct balance between proactive and reactive cleansing has not yet been achieved;  the improvements in environmental cleanliness are not meeting users’ perceptions and expectations; 15 per cent of calls to the service’s Customer Services centre from users are abandoned; the Council did not meet its statutory recycling/composting target for 2003/04; recycling sites generally lack signage and information and are not used to communicate service aims and standards and raise awareness; and sickness absences, although not causing significant disruption to services, create additional costs through the supply of agency staff cover. The service has promising prospects for improvement. Positive developments include: an improved environment is a corporate priority for action; councillors, managers and staff are committed to service improvements; the Council has invested additional resources in the service, which have had an impact on the quality of service delivered; performance and business planning systems  have been strengthened, with firm plans to integrate continuous improvement processes within the service; and strong partnership working to improve the local quality of life and develop community solutions to local problems.
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Issues still to address are: the Council has not yet assessed the local implications of the Greater Manchester Municipal Waste Strategy and the infrastructure required; the overall competitiveness of the service has not been challenged; the scrutiny role has not yet been developed in challenging service performance and operational delivery; and policies to address sickness absences are  not yet having an impact across all of the service. We have made a number of recommendations aimed at: improving responsiveness and accessibility; improving efficiency and effectiveness; and demonstrating community leadership. We will follow up actions taken in respect of these recommendations in future audit and inspection work. Other Housing inspections Supporting People ‘Supporting People’ is the government’s long-term policy to enable local authorities to plan, commission and provide housing related support services that help vulnerable people live independently. The programme went live on 1 April 2003. The aim of the Supporting People programme is to establish a strategic, integrated policy and funding framework, delivered locally in response to identified local needs, to replace the current complex and uncoordinated arrangements for providing housing related support services for vulnerable people. The Supporting People programme brings together a number of funding streams including transitional housing benefit (THB), which has paid for the support costs associated with housing during the implementation phase, the housing corporation’s supported housing management grant (SHMG) and probation accommodation grant scheme (PAGS) into a single pot to be administered by 150 administering local authorities.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
Oldham Metropolitan Borough Council was inspected in the first year of the Supporting People programme. Our report therefore reflects the current context for the council as it moves from implementation to the introduction of the programme and focuses on determining the effectiveness of current service delivery and the outcomes of this for vulnerable people. Oldham Metropolitan Borough Council acts as the administering local authority for the Supporting People programme in its area. The Council works in partnership with Oldham primary care trust and Greater Manchester probation service in commissioning Supporting People services. The total amount of Supporting People grant funding available in 2003/04 is £8,759,775. The Council receives £303,580 Supporting People administration grant to fulfil its role as the administering authority. We have assessed the council as providing a ‘fair’, one-star service that has promising prospects for improvement. Our judgements are based on the evidence obtained during the inspection and are outlined below. During our inspection we found a number of positive features in the way that the Supporting People programme has been implemented to date. These include: evidence that the supporting people programme is already beginning to produce positive outcomes for the people of Oldham that link to the priorities in the shadow strategy of increasing the range of service available and increasing access to people from black and minority ethnic communities; work on the five year strategy is linking in to the wider strategic agenda including the housing market renewal pathfinder; preparation of a supported housing strategy and the private finance initiative project to provide extra-care sheltered housing; providers are positive about the Council’s supporting people team, their depth of knowledge and the facultative style they have adopted in implementing the supporting people programme; and cross-authority working is developing well with examples of positive outcomes for vulnerable service users. Oldham Metropolitan Borough Council – Page8
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However, we found the following weaknesses with the Supporting People programme that need to be addressed. These include: service users and their carers have not been involved in the development of the Supporting People strategy; feedback to service providers has not been consistent and the role of the communication has not been defined; and the current programme lacks specific, measurable, achievable, realistic and time bound (SMART) performance targets. It is therefore not possible for the commissioning body to assess and monitor the success of the programme. We have judged that the Supporting People programme has promising prospects for delivering further improvements. We found the following strengths: the Council is moving forward on improving its corporate performance which includes positive progress on the equality and diversity agenda; the Supporting People grant has been used to facilitate the growth in cross tenure floating support and improve access to people from black and minority ethnic communities who were identified as a priority within the shadow strategy; both internal and external partnerships working to deliver improved outcome for vulnerable people are positive and facilitative; and the Supporting People team are viewed by providers as committed to providing a good service, are approachable, supportive and knowledgeable. There are, however, some areas in which the Council needs to improve: the previous lack of senior management within the lead department left the Supporting People team without appropriate line management support and direction for a period of approximately ten months until interim management arrangements were put in place;
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
scrutiny arrangements have been slow to be embedded and there has not been any consideration given to facilitating a structure which involves representatives from health and probation; and service users and their carers have not been involved in the development of the Supporting People strategy and are therefore not able to influence the future direction of the programme. We have made a number of recommendations for action to address the areas for improvement highlighted above. We will follow up these recommendations as part of future audit and inspection work programmes. Working with other inspectorates and regulators An important aspect of the role of the Relationship Manager is to work with other inspectorates and regulators who also review and report on the Council’s performance. These include: Ofsted; Commission for Social Care Inspection (CSCI); Benefits Fraud Inspectorate (BFI); and Local Government Office contact. The Audit Commission shares information and seek to provide ‘joined up’ regulation to the Council. During the last year the council has received the following assessments from other inspectorates. Ofsted The Council received a positive report from Ofsted and it commented that ‘Oldham local education authority (LEA) has made highly satisfactory progress since the previous inspection and is very clear about its strengths and weaknesses. Its overall effectiveness and capacity for further improvement are also highly satisfactory. 
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The strengths identified were: strategic planning for education, in particular the school improvement strategy and its contribution to raising achievement and improving community cohesion; improvement rates for pupils are mainly  above the national rates at Key Stage 2 and for all three core subjects at Key Stage 3; the gap in the performance of minority ethnic pupils and key vulnerable groups is closing;  there has been a marked improvement in the provision made for meeting special educational needs (SEN); and the education service and schools have collaborated effectively to introduce a range of initiatives to extend the cultural awareness of pupils. However, it was also identified that there remains more to do, particularly in encouraging all schools to contribute fully to community cohesion. Commission for Social Care Inspection The performance rating for Social Services for the year 2003/04 is zero stars and the ratings are detailed in the table below. Children Adult services services Serving people well Some Some Capacity for improvement Poor Uncertain The Council has taken steps this year and there have been significant improvements achieved which CSCI have recognised. A Performance Improvement Plan has been introduced and this provides a clear action plan for the Department for the next two years.
Accounts and governance
KPMG LLP’s opinion and certificate We gave an unqualified opinion on the Council’s accounts on the 30 November 2004.
Annual Audit and Inspection Letter 2004
ANNUAL AUDIT AND INSPECTION LETTER
Statement of Auditing Standards 610 Under SAS 610, KPMG LLP are required formally to communicate to those charged with governance any matters which come to our attention as a result of the audit of the financial statements.  Our letter dated 24 November identified one unadjusted audit difference relating to the overstatement of Housing Benefit and Housing Subsidy debtors by £130,000. This was not considered material and therefore no amendment to the accounts was proposed. We also identified a number of internal control weaknesses and action has been agreed to avoid errors in future years. In particular we have agreed the need to provide a more robust audit trail to support the bank reconciliation, especially around supporting documentation for balancing items. We are working with Finance staff to ensure that issues are addressed in 2004/05. Closedown of the final accounts The Council had a final accounts closedown process and met its statutory target of presenting its financial statements to members for approval by 31 August 2004. In line with agreed timescales, the financial statements audit commenced in mid-August 2004. However, the audit process took longer than anticipated due in part to the decentralisation of the finance function. The Council needs to consider the organisation of the Finance Function going forward, particularly the corporate responsibilities of devolved accountants, and arrangements for accounts production to meet the deadline of 31 October. Recommendation R1 Final accounts closedown. The Council should further im rove the accounts closedown arrangements to ensure that future deadlines are met.
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