How to replace variables in Database Loop SQL

HI, 
I have a very small script where I am trying to pass a variable 

select * from [items].[dbo].[quickbase_download] where report_id = '#report#';

Conversion failed when converting the varchar value '#report#'' to data type int
I can confirm I am able to pass 72 to #report# and the query works fine as 

select * from [items].[dbo].[quickbase_download] where report_id = '72'; OR
select * from [items].[dbo].[quickbase_download] where report_id = 72';

I have tried this with embedded report and with regular script action too

Please post some screenshots

 

When I try the database loop I get

 

Please post parameters of database loop

The same behaviour exists if I try to pass a variable into VARCHAR , substitution of variable is not taking place.