Heat oven to 375

Bring water to a boil in frying pan, add potatoes, onions, and carrots. Cover and cook 10 minutes, or until tender. Drain.

In medium saucepan, melt margarine, remove from heat. Stir in flour, salt, pepper. Add milk, blending well. Bring to a boil over medium heat, stir until thick and smooth. Stir in cheese, cook over low heat, stir constantly until cheese melts.

Layer half the potatoes, onion, and carrot in a slightly greased 9x13 pan. Top with half sauce. Repeat. Bake covered 30 minutes or until potatoes are tender. Remove cover during last 10 minutes of cooking.