diff --git a/XMLCONF b/XMLCONF
index 33c08ae..6b2cf7b 100644
--- a/XMLCONF
+++ b/XMLCONF
@@ -160,10 +160,7 @@ xmltest/not-wf/sa/159.xml [not validating:] not-wf [validating:] not-wf
 xmltest/not-wf/sa/160.xml [not validating:] not-wf [validating:] not-wf
 xmltest/not-wf/sa/161.xml [not validating:] not-wf [validating:] not-wf
 xmltest/not-wf/sa/162.xml [not validating:] not-wf [validating:] not-wf
-xmltest/not-wf/sa/163.xml [not validating:] FAILED:
-  The variable CXML::*EXPAND-PE-P* is unbound.
-[
-    Invalid placement of Parameter entity reference. ]
+xmltest/not-wf/sa/163.xml [not validating:] not-wf [validating:] not-wf
 xmltest/not-wf/sa/164.xml [not validating:] not-wf [validating:] not-wf
 xmltest/not-wf/sa/165.xml [not validating:] not-wf [validating:] not-wf
 xmltest/not-wf/sa/166.xml [not validating:] not-wf [validating:] invalid
@@ -1881,4 +1878,4 @@ ibm/valid/P86/ibm86v01.xml [not validating:] input [validating:] input
 ibm/valid/P87/ibm87v01.xml [not validating:] input [validating:] input
 ibm/valid/P88/ibm88v01.xml [not validating:] input [validating:] input
 ibm/valid/P89/ibm89v01.xml [not validating:] input [validating:] input
-20/1786 tests failed; 376 tests were skipped
\ No newline at end of file
+19/1786 tests failed; 376 tests were skipped
\ No newline at end of file
diff --git a/xml/xml-parse.lisp b/xml/xml-parse.lisp
index 4e75f2d..a5a7434 100644
--- a/xml/xml-parse.lisp
+++ b/xml/xml-parse.lisp
@@ -217,7 +217,7 @@
   (entity-resolver nil)
   (disallow-internal-subset nil))
 
-(defvar *expand-pe-p*)
+(defvar *expand-pe-p* nil)
 
 ;;;; ---------------------------------------------------------------------------
 ;;;; xstreams