North East Link State Tolling Corporation Annual Report 2023-24

2023-24 was a significant year for the North East Link State Tolling Corporation (STC).

The year saw significant progress in the construction of the North East Link, including the arrival of the twin 4,000 tonne tunnel boring machines that will be used to dig the twin 6.5 kilometre tunnels at the project site, the realignment of Bulleen and Manningham Roads in preparation for the commencement of tunnelling, and the first major procurement milestones for the Toll Collection Capability Project to prepare for the North East Link operations.

As the delivery of the North East Link itself gathered pace, 2023-24 was also a year of rapid development and evolution for STC into an organisation capable of driving value from the largest ever investment in a Victorian road project. We are equally proud of STC’s continued strides towards becoming a centre of excellence within the Victorian Government in the investment, management and operation of major road infrastructure assets.

The decision to establish STC as a State-owned commercial toll road operator was a first in Australia. It requires the development of technical and commercial capabilities that have not traditionally sat within the public sector. It has been wonderful to see the organisation take shape over the year, drawing together a group of exceptional professionals from across both the public and private sectors to build capabilities and capacity and deliver on the Victorian Government’s objectives.

We are confident that STC’s capability will only continue to grow. We are particularly excited to have established all organisational systems, processes and infrastructure to be compliant with our legislative, regulatory and industry best practice requirements, including securing a permanent office space for the Corporation which can provide the physical environment and advanced technology required for STC to develop and be ready to manage and operate the North East Link once it is complete.

Although there is still much more work to do before the North East Link opens to the public, the past year saw some remarkable achievements. We are grateful to the staff and management of STC, as well as our partners at Major Road Projects Victoria, the Spark North East Link Consortium, the Department of Transport and Planning and the Department of Treasury and Finance for their continued dedication to the North East Link Program and support of STC.

Responsible Body Declaration

In accordance with the Financial Management Act 1994, we are pleased to present the North East Link State Tolling Corporation’s Annual Report for the year ended 30 June 2024.

An Nguyen
Chief Executive Officer

Brad Vann
Chair, Board of Directors

STC’s role in delivery of the North East Link

The North East Link is the largest investment in a road project in Victoria’s history. It will complete the missing link in Melbourne’s orbital freeway network between an upgraded Eastern Freeway and the M80 Ring Road. The new road will improve traffic flow, reduce travel times, remove non-local traffic from local roads and increase reliability for road users with up to 135,000 vehicles using the motorway daily.

The Program will be delivered across multiple packages. The north-south section from the M80 Ring Road interchange to the Eastern Freeway will be tolled (Central Package) by the North East Link State Tolling Corporation (STC).

The State established STC to pay for, own, operate and collect tolls from the North East Link for a concession period of 50 years. STC and the State jointly entered an Availability Public Private Partnership (PPP) to contract a private sector party (Spark North East Link Pty Limited or Project Co) to design, construct, finance, operate and maintain the North East Link for a period of 25 years. STC has engaged Major Road Projects Victoria (MRPV), a division of the Victorian Infrastructure Delivery Authority (VIDA) (an administrative office in relation to the Department of Transport and Planning (DTP)) as its delivery agent to manage the PPP contracts on its behalf during the construction phase of the Central Package.

Figure 1.1 provides a highly simplified overview of STC’s position in relation to other key transport bodies.

Figure 1.2 provides an overview of the commercial and contractual structure for the Central Package of the North East Link, and STC’s role within it.

STC will manage the PPP contracts directly when construction is completed.

Vision, purpose, mission and values

STC is established under the North East Link Act 2020 (Vic) (NEL Act). STC’s vision, purpose and values are designed to enable the organisation to fulfil our mandate as the commercial owner and operator of the North East Link, while also supporting DTP’s broader strategy for the network and upholding the values of the Victorian Public Sector (VPS).

Vision

STC’s vision describes its role as a key enabler to achieve the Government’s overarching vision for the Victorian transport system that aligns with the direction of DTP and the TIA. It focuses on developing key elements of the system – such as simplicity and connection – for which STC has greater control and licence to influence in its role as a toll road owner-operator and an enabler for transport policy implementation

Purpose

STC's purpose captures the State’s overall policy intent in creating STC. By contributing to the value and legacy of the North East Link, STC supports DTP’s purpose of creating simple, safe, and connected journeys.

Values

STC acknowledges and abides by the seven VPS core values outlined in the Public Administration Act 2004. In addition, STC has adopted four key values unique to the organisation.

• Excellence
• Integity
• Respect
• Collaboration

Organisational structure and governance

STC's Ministers

Minister for Transport Infrastructure

Pursuant to a declaration by the Premier under the NEL Act, the Minister for Transport Infrastructure is the responsible minister (Minister) for STC during the delivery phase of the North East Link, responsible for providing policy oversight of STC. The Minister is one of two shareholders who hold the shareholding of STC on behalf of the Crown.

The Hon. Danny Pearson MP is currently the Minister for Transport Infrastructure and therefore STC’s Minister. Minister Pearson is also the Assistant Treasurer, Minister for WorkSafe and the TAC, and Minister for the Suburban Rail Loop.

Treasurer of Victoria

The Treasurer is the second shareholder minister and is responsible for financial outcomes of STC. The Treasurer also has certain approval rights and obligations relating to tolling aspects of STC.

Tim Pallas was appointed as the Treasurer of Victoria in December 2014. He is also the Minister for Industrial Relations and Minister for Economic Growth.

STC's Board of Directors

Brad Vann

Mr Vann was appointed to the Board on 15 August 2022 as Chair.

Mr Vann is an industry leading adviser on the delivery and long-term management of infrastructure, having worked with governments and businesses on some of Australia’s largest and most complex projects for over 35 years.

Mr Vann has also been involved in a range of projects in the Asia-Pacific. He is the Independent Chair of the IFM Australian Infrastructure Fund Investor Advisory Committee. IFM is a pioneer and leader in infrastructure investing on behalf of institutional investors globally, managing $113 billion in infrastructure.

Mr Vann was a partner at Clayton Utz before retiring in 2020.

Aneetha De Silva

Ms de Silva was appointed to the Board on 15 August 2022 as Deputy Chair.

Ms de Silva is a senior executive with 25 years of infrastructure experience across the government and private sectors in Australia, South Africa and the Asia Pacific. She has expertise as an advisor, developer and manager of large infrastructure assets and services, especially in road and rail transport, telecommunications and property.

Ms de Silva is also currently a member of the boards of LaunchVic and MAP Co, and Chair of Roads Australia. She has extensive experience in complex commercial and stakeholder environments.

Leilani Few

Ms Frew was appointed to the Board on 15 August 2022 as Director.

Ms Frew has over 30 years of commercial and financial experience in the infrastructure, energy and utilities sectors, with 20 years of experience in governance of major infrastructure investments. In 2015, Ms Frew was a member of the inaugural Board of the Sydney Motorway Corporation, the New South Wales Government owned corporation responsible for managing the WestConnex toll road in Sydney and was Chair of the WestConnex sale in 2017. Ms Frew’s senior executive roles, in both the public and private sectors, have covered all aspects of operational and major projects, particularly finance, capital markets, strategy, risk, mergers and acquisitions. Ms Frew possesses a highly valued combination of strategic, commercial and leadership experience.

Ms Frew was appointed as Chair of the Audit and Risk Committee of the STC Board on 23 March 2023.

Ms Frew is currently the Deputy Secretary, Financial and Commercial, Te Tai Ohanga - The Treasury, New Zealand.

Chief Executive Officer, An Nguyen

Ms Nguyen was appointed the inaugural Chief Executive Officer (CEO) of STC on 19 June 2023 after undertaking the role of acting Managing Director for STC since the entity’s inception.

Ms Nguyen is an experienced infrastructure leader, with close to two decades of solid and broad expertise in strategic leadership and innovation, major project structuring and delivery, complex commercial and funding models, and a strong policy focus gained within the Victorian Department of Treasury and Finance (DTF).

She has been widely recognised for her contribution and achievement within the global infrastructure industry and Victorian public service: she was awarded the Infrastructure Partnerships Australia’s National Woman in Infrastructure in 2017, the Partnerships Bulletin’s Individual Contribution of the Year PPP Award 2018 and the prestigious Public Service Medal in the Australia Day Honours List 2021 for outstanding public service in infrastructure delivery.

Legislative environment

The primary legislation governing STC is the NEL Act, which defines its specific objectives, functions and powers regarding the North East Link toll road. STC must also address specific elements of other legislative instruments.

North East Link Act 2020

The NEL Act covers a range of matters related to the delivery and operation of the North East Link. Key features relevant to STC include:

• Establishing STC as a public entity that is separate from the State.
• Providing STC’s functions and powers to:
  • Manage access as well as operate and maintain the North East Link toll road;
  • Fix and collect tolls for the use of the North East Link toll road (in accordance with the NEL Act and the North East Link Tolling Agreement);
  • Optimise the value of, or return from, its infrastructure and other assets;
  • Procure, deliver, and operate the North East Link tolling system;
  • Be the primary funding entity for the delivery, operation, and maintenance of the North East Link toll road;
  • Engage in activities in relation to the delivery of the North East Link; and
  • Engage in other activities connected with the North East Link toll road, and charge fees for those activities.
• Providing requirements for STC’s Board of Directors, appointment of a CEO and employment of key personnel.
• Providing STC’s initial equity capital.
• Providing for the tabling and amendment of the North East Link Tolling Agreement.

Other legislation relevant to the operation of STC

Transport Integration Act 2010

The TIA is the overarching transport legislation in Victoria and sets a vision for an integrated and sustainable transport system that contributes to an inclusive, prosperous and environmentally responsible State. To achieve this vision, the TIA requires that decisions affecting the transport system be made within the same integrated decision-making framework, consisting of six transport system objectives and seven decision-making principles.

Road Management Act 2004

The Road Management Act 2004 (RMA) establishes a coordinated management system for public roads, promoting safe and efficient State and local road networks and responsible road use. Before the road opens, STC will be designated as the Responsible (Prescribed) Road Authority under the RMA for the NEL with powers, rights and obligations as specified under the RMA.

Major Transport Projects Facilitation Act 2009 and Environment Effects Act 1978

The Major Transport Projects Facilitation Act 2009 (MTPFA) provides a single process for assessment, approvals, and delivery of major transport projects in Victoria. However, the North East Link is declared under the MTPFA for use of delivery powers only.

Planning approvals for the delivery of the North East Link were obtained through an Environment Effects Statement Process under the Environment Effects Act 1978. The approvals are conditional on compliance with environmental performance requirements (EPRs) as part of the review process. During the Plan Period, compliance with the EPRs is primarily the responsibility of MRPV.

Other legislative reporting and governance requirements

In addition, as a Government Business Enterprise (GBE) and, in particular a Public Non Financial Corporation (PNFC), STC is subject to various legislative instruments which will form the basis of activities required to be carried out by STC, including (among others) the:

• Public Administration Act 2004 (PAA) – establishes the general governance framework for the VPS, including public entities. As a “public entity” for the purposes of the PAA, STC and its Board of Directors are subject to various duties under Part 5 of the PAA;
• Financial Management Act 1994 (FMA) – establishes the financial accountability framework for STC. As a “public body” for the purposes of the FMA, STC is bound by directions of the Minister for Finance given under the FMA (Standing Directions 2018); and
• Borrowing and Investment Powers Act 1987 (BIP Act) – provides for the borrowing and investment powers of certain statutory bodies. By virtue of amendments effected to the BIP Act by the NEL Act, certain borrowing and investment powers under the BIP Act are conferred on STC

Role of the Board

Under section 21 of the NEL Act, STC must have a Board of Directors comprising no fewer than three and no more than nine Directors, including a Chair and Deputy Chair. The Governor in Council appoints Directors for periods not exceeding three years.

The Board is responsible for leading STC’s governance, setting strategic vision and objectives, overseeing key strategic and operational activities, and establishing committees as required.

As at 30 June 2024, the STC Board is comprised of three Directors. Attendance by Directors at Board meetings held during the reporting period is detailed below.

Directors’ fees are fully disclosed in Note 9.1. There have been no related party transactions with Directors and their related entities Committees of the ‘Board’

The Audit and Risk Committee

The STC Board has established the Audit and Risk Committee to oversee and advise on matters of risk, accountability and internal control affecting the operations of STC, as set out in STC’s Risk Management Framework.

As at 30 June 2024, the Audit and Risk Committee is comprised of the three Board Directors.

Attendance by Directors at the Audit and Risk Committee meetings held during the reporting period is detailed below.

1. DTP Strategic Plan 2023-27
2. Victorian legislation; Transport Integration Act 2010

Financial Performance

For the year ended 30 June 2024, STC’s comprehensive loss was $16.74 million (30 June 2023: $7.6 million loss). Total Equity of STC as at 30 June 2024 was $539.99 million (as at 30 June 2023, $370.51 million). The Net Cash Outflows from operating activities for the year ended 30 June 2024 were $18.1 million (30 June 2023: $19.6 million).

Delivery of the North East Link

Preparations for tunnelling commencement

Over the course of 2023-24, preparations for the commencement of tunnelling on the Central Package of the North East Link were largely completed.

In line with contractual requirements, in July 2023 senior representatives of STC, the State and Project Co formally certified the two tunnel boring machines (TBMs) that will be used to construct the twin 6.5 kilometre tunnels in the Central Package. The process involved travelling to the Herrenknecht manufacturing facility in Guangzhou, China.

The certification process is a contractual precondition for transporting the TBMs by ship to Australia, required to ensure that they will meet the North East Link’s technical requirements before they leave the factory. The process was successful and the TBMs began arriving in August 2023. When assembled, each TBM is 90 metres long, 15.6 metres in diameter and weighs around 4,000 tonnes. The machines were shipped in pieces and reassembled at the TBM launch site in Watsonia.

Other tunnelling infrastructure took shape, including the TBM launch box, manufacture of concrete tunnel segments, construction of a large acoustic shed at Macleod to manage the dirt and rock from tunnelling, and excavation of the ventilation tunnel using road headers.

Bulleen Road and Manningham Road were both successfully realigned, with thousands of vehicles diverted onto new lanes to allow for continued major excavation of the tunnel ramps. Major excavation of the TBM retrieval box occurred at the Manningham site, while further south at the Trinity Grammar compound concrete supporting walls were installed while major cut and cover excavation progressed through the site toward the Eastern Freeway.

The TBMs are scheduled to be launched the first quarter of 2024-25.

Interface management and operational readiness

In December 2023, MRPV awarded the contracts to deliver upgrades to the M80 Ring Road and the Eastern Freeway at the northern and southern ends of the Tunnels respectively.

Although these elements of the North East Link are not being financed by STC, they have significant interfaces with the Tunnels in both the delivery and operations phase of the project. These contract awards provided greater certainty around scope and timing for these projects, enabling early preparations for the operational phase to commence.

North East Link Operational Systems

In October 2023, the delivery strategy for the systems required to operate tolling on the North East Link was formally approved by Government. This enabled the procurement process for the Toll Collection Capability Project (TCC Project) to commence.

The TCC Project is being procured and delivered through four separate packages:

• Tolling Enabling Infrastructure;
• Roadside systems;
• Back office systems; and
• Cyber Security and Information and Communications Technology (ICT) Network.

Enabling infrastructure

As part of the PPP, Project Co continued design development of the enabling infrastructure for the systems required to operate the North East Link. In 2023-24, this included laying foundations for gantries and signage, finalisation of design on pits and conduits, and planning for electrical and communications connections.

Roadside systems

The Roadside Systems Package is the technology solution that will be used to detect and classify vehicles using the North East Link. It includes gantries and screens, cameras, radio frequency transponders, computer and communications systems and road markings.

In December 2023, STC issued the Expression of Interest documentation for the delivery of Roadside Systems. The process received strong market engagement, with 17 parties formally expressing interest in the procurement process and 10 submitting responses. In May 2024, three respondents were shortlisted to progress to the Request for Proposal (RFP) stage of the procurement. The RFP was released in early July 2024.

Back office systems

The Back Office Systems Package includes the systems required to identify users of the North East Link and charge their accounts. It includes computers and servers, software including numberplate recognition systems, customer billing and accounting systems.
During 2023-24, preparations to procure these systems were made ahead of the commencement of procurement in the first half of 2024-25.

Corporate and risk management

Over the year, STC continued the progressive build out of the corporate systems and processes required to support the organisation’s development into an independent commercial toll road operator. Key milestones included:

• Securing a new office site, which will provide the ICT infrastructure required to operate the North East Link upon completion, and allowed STC to move out of its temporary shared premises with Cenitex.
• The implementation of an integrated risk management framework, which provides a mechanism for monitoring and mitigating risks across the entire organisation. This includes STC’s obligations in relation to the delivery of the North East Link Central Package, its direct role in the procurement and delivery of the TCC Project, and other corporate and financial risk management obligations.
• Continued build out of corporate systems and policies, which will gradually reduce STC’s reliance on DTP and other parts of Government for support in the administration of human resources (HR), ICT and other corporate functions. This is in line with STC’s statutory obligations relating to its independence from Government.

Accountable Officer’s, Chairperson’s and Chief Financial Officer’s declaration

The attached financial statements for the North East Link State Tolling Corporation have been prepared in accordance with Standing Direction 5.2 by the Assistant Treasurer under the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards, including interpretations, and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the comprehensive operating statement, balance sheet, cash flow statement, statement of changes in equity, and accompanying notes, presents fairly the financial transactions during the year ended 30 June 2024 and financial position of the North East Link State Tolling Corporation at 30 June 2024.

At the time of signing, we are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on 18 September 2024.

An Nguyen
Chief Executive Officer
North East Link State Tolling Corporation
18 September 2024

Brad Vann
Chair
North East Link State Tolling Corporation
18 September 2024

Independent Auditor’s Report

Independent Auditor’s Report

To the Board of Directors of North East Link State Tolling Corporation

Opinion

I have audited the financial report of North East Link State Tolling Corporation (the corporation) which comprises the:

• balance sheet as at 30 June 2024
• comprehensive operating statement for the year then ended
• statement of changes in equity for the year then ended
• cash flow statement for the year then ended
• notes to the financial statements, including material accounting policy information
• accountable officer's and chairperson's declaration.

In my opinion, the financial report presents fairly, in all material respects, the financial position of the corporation as at 30 June 2024 and its financial performance and cash flows for the year then ended in accordance with the financial reporting requirements of Part 7 of the Financial Management Act 1994 and applicable Australian Accounting Standards.

Basis for Opinion

I have conducted my audit in accordance with the Audit Act 1994 which incorporates the Australian Auditing Standards. I further describe my responsibilities under that Act and those standards in the Auditor’s Responsibilities for the Audit of the Financial Report section of my report.

My independence is established by the Constitution Act 1975. My staff and I are independent of the corporation in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to my audit of the financial report in Victoria. My staff and I have also fulfilled our other ethical responsibilities in accordance with the Code.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other information

The Board of Directors is responsible for the other information. The other information obtained at the date of this auditor's report in information included in the Annual Report for the year ended 30 June 2024, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

Board of Directors' responsibilities for the financial report

The Board of Directors of the corporation is responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Financial Management Act 1994, and for such internal control as the Board of Directors determines is necessary to enable the preparation and fair presentation of a financial report that is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Board of Directors is responsible for assessing the corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is inappropriate to do so.

Auditor’s responsibilities for the audit of the financial report

As required by the Audit Act 1994,my responsibility is to express an opinion on the financial report based on the audit. My objectives for the audit are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

• identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the corporation’s internal control
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors
• conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the corporation’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the corporation to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

MELBOURNE
20 September 2024

Simone Bohan
as delegate for the Auditor-General of Victoria

Comprehensive operating statement

For the year ended 30 June 2024

The accompanying notes form part of these financial statements.

Balance sheet

As as 30 June 2024

The accompanying notes form part of these financial statements.

Cash flow statement

For the year ended 30 June 2024

The accompanying notes form part of these financial statements

Statement of changes in equity

For the year ended 30 June 2024

The accompanying notes form part of these financial statements.

Notes to the financial statements

01 About this Report

The North East Link State Tolling Corporation (STC) is a public entity but does not represent the Crown.

Its principal address is:

Level 8, 80 Collins Street (North Tower), Melbourne VIC 3000

ABN: 86 585 150 837

Basis of preparation

These financial statements are in Australian dollars, and the historical cost convention is used unless a different measurement basis is specifically disclosed in the note associated with the item measured on a different basis.

The accrual basis of accounting has been applied in preparing these financial statements, whereby assets, liabilities, equity, income and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Consistent with the requirements of AASB 1004 Contributions, contributions by owners (that is, contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the income and expenses of STC.

Additions to net assets which have been designated as contributions by owners are recognised as contributed capital. Other transfers that are in the nature of contributions to or distributions by owners have also been designated as contributions by owners.

Judgements, estimates and assumptions are required to be made about financial information being presented. The significant judgements made in the preparation of these financial statements are disclosed in the notes where amounts affected by those judgements are disclosed. Estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised and also in future periods that are affected by the revision.

These financial statements cover STC as an individual reporting entity. STC is a for-profit organisation.

All amounts in the financial statements have been rounded to the nearest $1,000 unless otherwise stated.

Going Concern

The Central Package of the North East Link project will be delivered as an Availability Public-Private Partnership (PPP) under an Incentivised Target Cost (ITC) model with STC as the asset owner, assuming all payment obligations under the contract, and Major Road Projects Victoria (MRPV), a division of the Victorian Infrastructure Delivery Authority (VIDA) (an administrative office in relation to the Department of Transport and Planning (DTP)), acting as STC’s agent, being the delivery agency. As part of this arrangement, the Treasurer provided a guarantee to the PPP contractor (Project Co) for all STC’s financial obligations to Project Co in relation to the delivery and operation of the Central Package of the North East Link.

Compliance information

These general-purpose financial statements have been prepared in accordance with the Financial Management Act 1994 (Vic) (FMA) and applicable Australian Accounting Standards (AASs), which include Interpretations issued by the Australian Accounting Standards Board (AASB). In particular, they are presented in a manner consistent with the requirements of AASB 1049 Whole of Government and General Government Sector Financial Reporting. Accounting policies selected and applied in these financial statements ensure that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

Details of the material accounting policy information are disclosed in the applicable notes in the financial statements

02 The cost of delivering services

This section provides an account of the expenses incurred by STC in delivering services.

2.1 Employee benefit expenses

Employee expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, termination payments and WorkCover premiums. As STC is getting established as an organisation, employee costs have risen in line with STC’s growing workforce and the enhanced skill sets required to support STC’s development.

STC currently utilises DTP to directly manage all aspects of STC resource engagements for both secondments and directly contracted staff. These costs therefore include the costs for both directly contracted and seconded staff.

The amount recognised in the comprehensive operating statement in relation to superannuation is employer contributions for members of both defined benefit and defined contribution superannuation plans that are paid or payable during the reporting period. STC does not recognise any defined benefit liabilities because it has no legal or constructive obligation to pay future benefits relating to its employees. Instead, the Department of Treasury and Finance (DTF) discloses in its annual financial statements the net defined benefit cost related to the members of these plans as an administered liability (on behalf of the Victorian Government as the sponsoring employer).

Termination benefits are payable when employment is terminated before normal retirement date, or when an employee accepts an offer of benefits in exchange for the termination of employment or expiry of the contract.

2.2 Other operating expenses

Other operating expenses generally represent the day-to-day running costs incurred in normal operations. Supplies and services are recognised as an expense in the reporting period in which they are incurred. Professional services relate to those services provided by professional service firms.

03 Key assets available to support service delivery

STC controls infrastructure and other investments that are utilised in fulfilling its objectives and conducting its activities. They represent the resources that have been entrusted to STC for delivery of those services.

3.1 Property, plant and equipment

Initial recognition

Items of property, plant and equipment are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment.

The cost of constructed non-financial physical assets includes the cost of all materials used in construction, direct labour on the project and an appropriate proportion of variable and fixed overheads.

The cost of a leasehold improvement is capitalised and depreciated over the shorter of the remaining term of the lease or their estimated useful lives.

Right-of-use asset acquired by lessees – Initial measurement

STC recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost which comprises the initial amount of the lease liability adjusted for:

• any lease payments made at or before the commencement date less any lease incentive received;
• any initial direct costs incurred; and
• an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located

Service concession assets (Under AASB 1059 – Service Concession Arrangements: Grantors) - Initial measurement

A service concession asset (SCA) under AASB 1059 Service Concession Assets: Grantors (AASB 1059) is an asset to which a private operator has right of access to provide public services on behalf of the Grantor (STC) in a service concession arrangement.

STC initially recognises a SCA at the commencement of construction at current replacement cost (CRC), calculated in accordance with the 'cost approach' to fair value measurement. The CRC reflects the amount that would be required currently to replace the service capacity of the asset. The assets recognised at the commencement of construction are reported as assets under construction until the project reaches commercial acceptance.

The CRC for the SCA includes the costs that are directly attributable to the design and construction of the SCA by the operator. AASB 116 Property, Plant and Equipment (AASB 116) is applied, which provides guidance on the elements of costs including: the purchase price and costs directly attributable to bringing the asset to its location or condition necessary.

Fair value proxy for SCA construction in progress (significant judgement)

The financing cost to STC implied in the SCA contract during the construction of an SCA is used as a proxy of the financing cost incurred by the private sector constructing the asset. This financing cost is capitalised as part of the asset with the aim of achieving representation of the CRC.

Right-of-use asset – Subsequent measurement

STC depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Typical estimated useful life is 5 years for the leased buildings and 3 years for leased vehicles. The right-of use assets are also subject to revaluation.

In addition, the right-of-use asset is periodically reduced by impairment losses, if any and adjusted for certain remeasurements of the lease liability.

Service concession assets – Subsequent measurement

Once the asset is operational, STC will depreciate the SCA over its useful life using the principles in AASB 116. SCAs are subject to revaluation as required by Financial Reporting Direction 103 Non-Financial Physical Assets (FRD 103).

Impairment of property, plant and equipment

Non-financial assets, including items of property, plant and equipment, are tested for impairment whenever there is an indication that the asset may be impaired.

3.1.1 Reconciliation of movements in carrying amount of property, plant and equipment

For disclosures in connection with fair value determination for non-financial physical assets refer to Note 7

04. Other Assets and Liabilities

This section sets out those assets and liabilities that arose from STC’s operations.

4.1 Receivables

Contractual receivables are classified as financial instruments and categorised as ‘financial assets at amortised cost’. They are initially recognised at fair value plus any directly attributable transaction costs. STC holds the contractual receivables with the objective to collect the contractual cash flows and therefore subsequently measured at amortised cost using the effective interest method, less any impairment. Amounts recognised from the Victorian Government represent funding for all commitments incurred and are drawn from the Consolidated Fund as the commitments fall due.

Statutory receivables do not arise from contracts and are recognised and measured similarly to contractual receivables (except for impairment) but are not classified as financial instruments for disclosure purposes. STC applies AASB 9 Financial Instruments for initial measurement of the statutory receivables and, as a result, statutory receivables are initially recognised at fair value plus any directly attributable transaction cost.
All receivables are due within 30 days.

4.2 Payables

Contractual payables: Are classified as financial instruments and measured at amortised cost. Accounts payable represent liabilities for goods and services provided to STC prior to the end of the financial year that are unpaid.

Payables for supplies and services are due within an average credit period of 30 days.

The terms and conditions of amounts payable to the Government and agencies vary according to the particular

4.3 Other Provisions

Other provisions are recognised when STC has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation.

Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using a discount rate that reflects the time value of money and risks specific to the provision.

Key Results Area (KRA) is a performance regime to monitor and measure the Project Co’s performance in relation to specified Key Performance Indicators (KPIs). The provision recognised is in relation to anticipated payments to Project Co in lieu of achieving the predetermined project KPIs.

These provisions represent 50 per cent of the total KRA achieved and mature on commercial acceptance as part of an acquittal process.

Reconciliation of movements in other provisions

05 Financing operations

Introduction

This section provides information on the sources of finance utilised by STC during its operations, along with interest expenses (the cost of borrowings) and other information related to financing activities of STC.

5.1 Borrowings

Notes:
(a) Secured by the assets leased. Leases are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

‘Borrowings’ refer to interest bearing state loan, lease liabilities and service concession arrangement liabilities.

The State loan is provided by the Minister for Transport Infrastructure for and on behalf of the Crown in right of the State of Victoria and has a term of 39 years following Financial Close of the Central Package PPP on 27 October 2021. The loan is subject to a fixed interest of 4.25 per cent per annum.

Borrowings are classified as financial instruments. Interest bearing liabilities are recognised at amortised cost unless STC elects to irrevocably designate them at fair value through profit or loss at initial recognition. The election depends on the nature and purpose of the interest-bearing liabilities.

All interest-bearing borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

For financial liabilities designated at fair value through net result, all transaction costs are expensed as incurred. They are subsequently measured at fair value with changes in fair value relating to STC’s own credit risk recognised in other comprehensive income and the remaining amount of changes in fair value recognised in net result. Amounts in other comprehensive income related to credit risk are not subject to recycling in profit and loss but are transferred to retained earnings when realised.

The service concession financial liability (SCL) relates to the service concession arrangements recognised when applying AASB 1059. Interest is charged on the liability and capitalised within Road Assets. The SCL is reduced over the term of the arrangement through cash payments to the operator.

The lease liabilities relate to the lease of office premise and vehicles. Non-lease component has not been included in the determination of lease liabilities.

Defaults and breaches: During the current year, there were no defaults and breaches of any of the loans.

Service concession arrangement liability

As outlined in Note 3.1 Property, plant and equipment – road assets, the accumulation of costs incurred during construction results in a progressive build-up of the SCA. A corresponding liability is progressively recognised in line with the fair value of the SCA. The nature of the liability and the subsequent accounting depends on the consideration exchanged in reference to the contract arrangements between STC (on behalf of the Victorian Government) and the operator. An exception to this principle occurs when the grantor reclassifies an existing asset to a SCA.

Initial recognition

STC recognises a SCL commensurate with the SCA, adjusted by the amount of any other consideration from STC to the operator, or from the operator to STC. Therefore, any Victorian Government contributions made prior to the recognition of the liability will reduce this amount.

Where STC reclassifies an existing asset as a SCA, it is measured at current replacement cost in accordance with the cost approach to fair value in AASB 13 Fair Value Measurement as at the date of reclassification. STC will not recognise a liability when an existing asset is reclassified as a SCA, except in circumstances where additional consideration is provided by the operator.

Subsequent measurement

After initial recognition, STC will determine if the liability represents a financial liability. Where STC has a contractual obligation to pay the operator for providing the SCA, it is measured as a liability in accordance with AASB 9 Financial Instruments. The liability will be increased by interest charges, based on the interest rate implicit in the arrangement. Where the interest rate is not specified in the arrangement, the prevailing market rate of interest for a similar instrument with similar credit ratings is used. Subsequently, the liability will also be reduced by any payments made by the Victorian Government to the operator if required by the contract.

STC has determined that the SCL represents a financial liability.

5.1.1 Maturity analysis of borrowing

5.1.2 Interest capitalised

Interest capitalised includes costs incurred in connection with the borrowing of funds and includes interest on the State loan and the service concession financial liability.

Interest capitalised is recognised in the period in which it is incurred and is capitalised to the SCA - road assets.

5.1.3 Leases

STC leasing activity

STC leases an office premise and vehicles. The lease contracts are typically made for fixed periods of 1-5 years with an option to renew the lease after that date. There is no option to renew the lease after the expiry date. Lease payments for the office premise follow fixed escalations per annum of 3.5% for 5 years.

Non-lease components have not been considered for the recognition of right-of-use assets and lease liabilities for the office premise lease.

STC received a lease incentive of $567,000 as full cash payment at commencement of the lease.

5.2 Cash flow information

Cash and deposits, including cash equivalents, comprise cash on hand and cash at bank, deposits at call and those highly liquid investments with an original maturity of three months or less that are held for the purpose of meeting short-term cash commitments rather than for investment purposes, and are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

For cash flow statement presentation purposes, cash and cash equivalents include cash-on-hand and in bank.

5.3 Commitments for expenditure

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are recorded below at their nominal value and inclusive of Goods and Services Tax (GST). Where it is considered appropriate and provides additional relevant information to users, the net present values of significant individual projects are stated. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

Service concession arrangements (SCA)

Uncommissioned SCAs: The commitments include the capital component not yet recognised on the balance sheet (i.e. the amount relating to the asset which hasn’t been constructed as yet), STC’s future capital contributions as well as the operating and maintenance commitments for the SCA contract.

STC has entered into arrangements with an operator which give the operator (Project Co) the rights to provide public services to users for a specified ‘concession period’ using the relevant SCAs.

The operator, based on the terms and conditions specified in the agreements, is:

• responsible for the design, construction, partial financing, operation and maintenance of the SCA during the concession period; and
• subject to KPIs and/or annual works programs which ensure a level of service delivery for users. The operator has the opportunity to rectify any performance issues where relevant.

STC has the contractual obligation to provide the operator access to the SCA for the performance of the required services.

STC has control over the services the operator provides with the SCA over the concession period. It is responsible for monitoring that the services are performed to specified standards (i.e. frequency, quality, etc.) and other contractual obligations are met. STC will intervene as required to ensure safety for users of the assets as appropriate and to protect public interest.

At the end of the concession period, the rights and obligations provided to the operator during the concession period cease, and the SCA will be returned to STC.

Terminations are subject to standard commercial practices or under specified circumstances.

STC has recognised these arrangements in accordance with AASB 1059.

AASB 1059 Service Concession Arrangements: Grantors

A financial liability is recognised where STC has a contractual obligation to pay the operator under the service concession arrangement for the provision of SCAs and/or services. It is recognised as a borrowing (Note 5.1). The liability is increased by interest charges (Note 5.1.2), based on the interest rate implicit in the arrangement. The liability is reduced by any payments made by STC to the operator as required by the contract. These payments take the form of capital contributions, usually during the construction phase of the SCA and other periodic payments during the operation phase of the SCA (referred to as ‘Service Payments’). The periodic payments compensate the operator for delivery of services that are subject to the operator meeting KPIs. Service payments may be quarterly (QSP) or other periodic intervals.

These payments comprise a capital component associated with the design, construction and financing of the SCA, and components relating to ongoing operation, maintenance and other costs. Payments may be impacted by failure to meet KPIs.

An exception to this principle occurs when an existing asset of STC is reclassified as a result of becoming part of a SCA. When this occurs, the asset is revalued to CRC with a corresponding adjustment to the asset revaluation reserve. A liability is not recognised unless additional consideration is provided by the operator. If the assets included in an SCA are upgraded or expanded, STC recognises a corresponding liability (either financial or Grant of a Right to the Operator) for the amounts spent on the upgrade/expansion work.

After initial recognition, SCAs are measured by applying the revaluation model for STC’s SCA – road assets (Note 3.1).

The following material SCA’s existed at 30 June 2024. Unless noted in the arrangement specific disclosures below, no material changes have occurred during the year:

Notes:
i. The discounted values of the 'expected liability at commission' for uncommissioned arrangements have been discounted to the expected dates of commissioning to reflect the liability balance at practical completion of the projects.
ii. Other commitments relate to operating and maintenance and lifecycle costs and have been discounted to 30 June 2024 and 30 June 2023.
iii. From the 2023 financial year, STC has applied the STC borrowing rate in the present value calculation of other commitments for all service concession arrangements.
iv.Commitments nominal value includes the capital portion of the SCL that has been reported on the balance sheet.

Arrangement specific details

Operator: Spark North East Link Pty Ltd as trustee of the Spark North East Link Trust

Concession period: 25 years

Operational funding: Monthly Service Payments

On 28 October 2021, the Victorian Government and STC entered into a PPP (Project Deed) with Spark North East Link Pty Ltd (Project Co or Spark) to deliver the North East Link Central Package.

The Central Package was procured and is being delivered as an ‘availability-based’ PPP with an ITC regime that applies in respect of costs incurred during the design and construction phase of the Central Package.

STC’s monthly payments to Project Co for the delivery of operating and maintenance services are subject to the terms and conditions of the Project Deed.

06 Risks

Introduction

STC is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for STC related mainly to fair value determination.

6.1 Financial instruments specific disclosures

Introduction

Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of STC’s activities, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes, fines, and penalties). Such assets and liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation.

Categories of financial assets

Financial assets at amortised cost

Financial assets are measured at amortised cost if both of the following criteria are met, and the assets are not designated as fair value through net result:

• the assets are held by STC to collect the contractual cash flows; and
• the assets’ contractual terms give rise to cash flows that are solely payments of principal and interest.

These assets are initially recognised at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method less any impairment.

STC recognises the following assets in this category:

• receivables (excluding statutory receivables); and
• cash and deposits.

Financial liabilities at amortised cost

Financial liabilities are initially recognised on the date they are originated. They are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest-bearing liability, using the effective interest rate method. STC recognises the following liabilities in this category:

• payables;
• service concession financial liability;
• state loan; and
• lease liabilities.

Financial risk management objectives and policies

As a whole, STC’s financial risk management program seeks to manage risks and the associated volatility of its financial performance.

Details of the material accounting policy information and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each material class of financial asset, financial liability, and equity instrument above are disclosed in the applicable notes in the financial statements.

The main purpose in holding financial instruments is to prudentially manage STC’s financial risks within the government policy parameters.

Whilst STC recognises its current risks including credit risk, liquidity risk and interest rate risk, STC is not exposed to these due to its existing financial arrangements. Should they arise, risk management procedures in line with governance requirements are outlined in STC’s Treasury Management Policy.

STC uses different methods to identify, measure and manage the different risks to which it is exposed. The primary responsibility for the identification and management of financial risks rests with the CEO of STC.

07 Fair value determination

This section sets out information on how STC determined fair value for financial reporting purposes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following assets are carried at fair value:

• Right-of-Use vehicles;
• Right-of-Use building;

In addition, the fair values of other assets and liabilities that are carried at amortised cost, also need to be determined for disclosure purposes.

STC determines the policies and procedures for determining fair values for both financial and non financial assets and liabilities as required.

Fair value hierarchy

In determining fair values, a number of inputs are used. To increase consistency and comparability in the financial statements, these inputs are categorised into three levels, also known as the fair value hierarchy. The levels are as follows:

• Level 1 – quoted (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2 – valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
• Level 3 – valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For those assets and liabilities for which fair values are determined, the following disclosures are provided:

• carrying amount and the fair value (which would be the same for those assets measured at fair value);
• which level of the fair value hierarchy was used to determine the fair value in respect of those assets and liabilities subject to fair value determination using Level 3 inputs; and
• a reconciliation of the movements in fair values from the beginning of the year to the end.

Right-of-use assets are measured at fair value using level 3 valuation techniques, noting that the carrying amount is equal to the fair value. The carrying amount and fair value are equal due to the assets being depreciated to represent their current replacement cost.

For disclosures in connection with fair value determination and movements for financial instruments refer note 7.1 and for non-financial physical assets refer note 3.1.1.

7.1 Fair value determination of financial assets and liabilities

STC currently holds the following financial instruments that are recorded in the financial statements where the carrying amounts are approximate to fair value, due to their short-term nature or with the expectation that they will be paid in full by the end of the next reporting period. In addition to the above, the carrying value of Service Concession Liabilities approximates fair value because it represents the net value of construction works and costs performed by Project Co less any Construction Contributions made by NELSTC.

it represents the net value of construction works and costs performed by Project Co less any Construction Contributions made by NELSTC.

Where the fair value of the financial instruments is different from the carrying amounts, the following information has been included to disclose the difference.

08 Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the balance sheet but are disclosed and, if quantifiable, are measured at nominal value.

STC held no contingent assets or contingent liabilities as of 30 June 2024 (30 June 2023: none).

09 Other disclosures

Introduction

This section includes additional material disclosures required by accounting standards or otherwise, for the understanding of this financial report.

9.1 Responsible Persons

In accordance with the Ministerial Directions issued by the Assistant Treasurer under the FMA, the following disclosures are made regarding responsible persons for the reporting period.

Names

The persons who held the positions of Ministers and Responsible Persons in STC are as follows

9.1.1 Remuneration of Responsible Persons

The compensation detailed below excludes the salaries and benefits the Portfolio Ministers receive. Minister’s remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the State's Annual Financial Report.

9.2 Remuneration of executive officers

During the year, 1 July 2023 ending 30 June 2024, STC engaged seven executive officers either via secondment or direct contract.

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.

Other long-term benefits include long service leave, other long service benefits or deferred compensation.

Notes:
(a) The total number of executive officers includes persons who meet the definition of Key Management Personnel (KMPs) of STC under AASB 124 Related Party Disclosures (AASB 124) and are also reported within the related parties note disclosures (refer to Note 9.3).
(b) Annualised employee equivalent is based on the time fraction worked over the reporting period.

9.3 Related parties

STC is a wholly owned and controlled entity of the Victorian Government.

Related parties of STC include:

• all key management personnels (KMPs) and their close family members and personal business interests (controlled entities, joint ventures, and entities they have significant influence over);
• all Cabinet Ministers and their close family members; and
• all public sector entities that are controlled and consolidated into the whole of State consolidated financial statements.

All related party transactions have been entered into on an arm’s length basis.

Significant transactions with government-related entities

During the financial year, the following aggregate transactions were undertaken, and balances held with other Victorian Government controlled entities. These transactions were undertaken in the ordinary course of operations.

Key management personnel of STC include the named responsible persons as disclosed in note 9.1 and members of the senior executive team as disclosed in note 9.2.

Remuneration of Key Management Personnel

Key Management Personnel of STC include the named Responsible Persons as disclosed in note 9.1, and members of the Senior Executive Team, which includes:

The compensation detailed below excludes the salaries and benefits the Portfolio Ministers receives. The Minister’s remuneration and allowances is set by the Parliamentary Salaries and Superannuation Act 1968 and is reported within the State's Annual Financial Report.

Notes:
(a) KMPs are also reported in the disclosure of remuneration of executive officers (Note 9.2).

Transactions and balances with Key Management Personnel and other related parties

Given the breadth and depth of the Victorian Government activities, related parties transact with the Victorian public sector in a manner consistent with other members of the public, e.g., stamp duty and other government fees and charges. Further employment of processes within the Victorian public sector occurs on terms and conditions consistent with the Public Administration Act 2004 and Codes of Conduct and Standards issued by the Victorian Public Sector Commission. Procurement processes occur on terms and conditions consistent with the Victorian Government Purchasing Board requirements.

Outside of normal citizen type transactions with STC, there were no related party transactions that involved key management personnel, their close family members, and their personal business interests.

No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

9.4 Remuneration of auditors

Audit fees paid or payable to the Victorian Auditor-General’s Office for the audit of the financial statements are outlined in the table below.

9.5 Subsequent events

The policy in connection with recognising subsequent events that are for events that occur between the end of the reporting period and the date when the financial statements are authorised for issue is as follows:

• adjustments are made to amounts recognised in the financial statements where those events provide information about conditions that existed at the reporting date; and
• disclosure is made where the events relate to conditions that arose after the end of the reporting period that are of material interest.

No event has arisen since 30 June 2024 that has significantly affected or may significantly affect the operations, or results, or state of affairs of STC.

9.6 Other accounting policies

Contributions by owners

Consistent with the requirements of AASB 1004 Contributions, contributions by owners (that is, contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the income and expenses of STC.

Additions to net assets that have been designated as contributions by owners are recognised as contributed capital. Other transfers that are contributions to or distributions by owners have also been designated as contributions by owners.

Transfers of net assets arising from administrative restructurings are treated as distributions to or contributions by owners. Transfers of net liabilities arising from administrative restructurings are treated as distributions to owners

Accounting for GST

Income, expenses and assets are recognised net of the amount of associated GST, except where GST incurred is not recoverable from the taxation authority. In this case, the GST payable is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from or payable to the Australian Taxation Office (ATO) is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis.

Commitments are also stated inclusive of GST.

Australian Accounting Standards issued that are not yet effective

A number of standards and minor amendments have been issued that apply to future reporting periods. These accounting standards have not been applied to the STC Financial Statements. STC, in conjunction with the Victorian Government, is reviewing its existing policies and assessing the potential implications of these accounting standards, however, they are not expected to have any significant impact on the financial statements in the period of initial application.

Ex-gratia expenses

Ex-gratia expenses are the voluntary payment of money or other non-monetary benefit - for example, a write off - that is not made either to acquire goods, services or other benefits for the entity or to meet a legal liability, or to settle or resolve a possible legal liability or claim against the entity.

STC does not in its normal course of business make ex-gratia payments and is governed by the DTP Ex-Gratia Payment policy to ensure that these payments (if required) are highly regulated.

STC had no ex-gratia expenses in the financial year ended 30 June 2025

Public sector values and employment principles

The Public Administration Act 2004 established the Victorian Public Sector Commission (VPSC). The VPSC’s role is to strengthen public sector efficiency, effectiveness and capability, and advocate for public sector professionalism and integrity.

STC continues its initiatives to foster the highest possible standard of integrity and conduct across STC, supporting staff to build a workplace that demonstrates respect, trust and openness in the way we improve outcomes for all Victorians.

Workforce inclusion policy

STC continues to make good progress in creating an inclusive working environment where equal opportunity and diversity are valued, and that reflects the communities we serve.

STC values staff with non-binary gender identities at all levels from VPS officers through the executives. Moreover, STC acknowledges that due to historic and current barriers to disclosure of non-binary gender identities, staff may not choose to disclose this information. As a result, targets or quotas are not currently a useful way to promote opportunities for gender diverse staff at all levels.

As at 30 June 2024, 40% per cent of STC’s executives were women.

Compliance with the Disability Act 2006

STC has not developed entity specific policies as provisioned in Part 3 of the Public Administration Act 2004. Instead STC was guided by and adhered to the DTP Accessibility Action Plan 2020-2024 during 2023-24. The need for a standalone Disability Action Plan for STC will be reviewed annually.

Compliance with the Carers Recognition Act 2012

STC takes practical measures to comply with its obligations under the Carers’ Recognition Act 2021. STC offers all its employees 15 days’ carers leave, in line with the Victorian Public Service Enterprise Agreement. STC also encourages and facilitates flexible work arrangements including compressed hours, flexible working hours and working from home arrangements.

Comparative workforce data

As at 30 June 2024, STC had a total of 23 Full Time Equivalent (FTE) employees, an increase from four as at 30 June 2023. This growth represents the ongoing establishment of STC, as well as the transition of some staff from temporary secondment or contracting arrangements to permanent roles.

Employment and conduct principles

STC has not developed entity specific policies as provisioned under Part 3 of the Public Administration Act 2004. Instead, all STC employees are bound by applicable DTP conduct policies, as well as the Victorian Public Service Code of Conduct.

Occupational health and safety

STC has not developed entity specific standalone policies as provisioned under Part 3 of the Public Administration Act 2004. Instead STC applies DTP’s Occupational Health, Safety and Wellbeing policy.

Environmental Reporting

STC was still in its establishment phase in 2023-24 and did not adopt specific environmental reporting standards. It will be undertaking continuous improvement of its environmental reporting in the coming years.

STC resources travelled 85,828 kilometres on commercial flights in the 2023-24 financial year (2022-23: 332,040 kilometres).

STC had three vehicles as at 30 June 2024, two full electric and one internal combustion vehicle.

During 2023-24, STC continued its arrangement with Cenitex to rent workstations in its Melbourne CBD office. The Cenitex office environment is paperless and STC undertakes sustainable procurement practices and initiatives to reduce the environmental impacts including:

• Paperless office environment;
• Leveraging the State Purchasing Contract (SPC) for large site energy consumption, which includes the provision of renewable energy certificates, noting a significant reduction in office energy consumption due to staff working from home;
• The building has a six-star energy efficient NABERs (National Australian Built Environment Rating System); and
• Banned the use of single-use plastics in the provision of office supplies to the new building, in support of the goal to phase out single-use plastics across the VPS.

Local Jobs First

Whilst STC did not have entity specific policies in relation to Local Jobs in place as at 30 June 2024, it does comply with the Victorian Government Procurement Board Local Jobs First guidelines.

STC is in the process of developing and implementing its own Local Jobs First policy, in compliance with government requirements.

Social Procurement Framework

Whilst STC did not have entity specific policies in relation to Social Procurement Framework in place as at 30 June 2024, it does comply with the Victorian Government Procurement Board Social Procurement Framework.

STC is in the process of developing and implementing its own Social Procurement policy, in compliance with government requirements

Consultancy Expenditure

Details of consultancies (valued at $10,000 or greater)

In 2023-24, there were two consultancies where the total fees payable to the consultants were $10 000 or greater. The total expenditure incurred during 2023-24 in relation to these consultancies is $90 000 (excluding GST). Details of individual consultancies can be found on the STC website.

Details of consultancies under $10,000

In the year ended 30 June 2024, there were no consultancies engaged during the year where the total fees payable to the individual consultancies was less than $10,000.

STC does hold engagements with a panel of specialist resources. Whilst these engagements are not consultancy in nature there may be elements of their work undertaken throughout the year which could be considered a consultancy.

STC has disclosed the list of these engagements and their description on its website.

Information and communication technology (ICT) expenditure

STC incurred direct ICT expenditure with following vendors: