1/3 c. butter
1/3 c. chopped onion
1/3 c. flour
4 c. milk
2 c. water
1 tsp. salt
2 1/2 c. grated Cheddar cheese
2 c. diced cooked ham
2 tbsp. parsley (optional)

Saute onion until tender, in butter. Blend in flour. Gradually add milk and water. Cook, stirring constantly, until thickened. Reduce heat. Add cheese, salt, hot pepper, seasoning and ham. Stir until cheese has melted.

Serve garnished with parsley.