ANIS 2012-Special Session_Ben Gales

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  • 1. Social Benefit Bonds pilotsNew South Wales, Australia Ben Gales Director, Program Review and Performance
  • 2. Agenda1) What is a Social Benefit Bond (SBB)?2) Why is NSW piloting SBBs?3) What are some of the challenges we are facing?4) Conclusions
  • 3. 1a) What is a Social Benefit Bond? Private Investors 1. Up-front 4. Repayment of investment for investment plus working capital return based on performance 3. Payment based on outcomesService Social Benefit achieved by Government 2. Funding forProvider(s) services Bond Issuer provider
  • 4. 1b) How do SBBs compare?Traditional NGO-Govt Social Benefit BondscontractsPay for process Pay for outcomePrescribe that the same service Allow NGOs to be responsiveis delivered across the state to local and individual needsGovernment bears risk of Investor bears risk ofunsuccessful interventions, but unsuccessful interventions,reaps 100% benefit shares benefit with GovtGovernment oversight Investor oversightDifferent sets of data used for Alignment of data focussing onGovernment, donors and outcomesoperations 4
  • 5. 1c) A social benefit bond must deliver financial benefit Case Study: economics of avoiding unnecessary out-of-home care entry (illustrative figures)Lifetime cost of out-of-home care Economics of the Social Benefit Bond COSTS BENEFITS Add’l benefits 25% effectiveness: foster care is only avoided for one in four Additional children and families in the $150k benefit to Public NSW service Benefits community Savings to cost of out- NSW Govt of-home $200k care p,a, Preservation Expenditure service cost per avoided $300k Return to per family OOHC place investor $38k $25k $100k Cannot $100k Savings to proceed $300k Government (8 yrs without @ =$280k avoided government $38k) OOHC cost savings lifetime cost in 5 out-of-home All costs are purely illustrative. This example does not factor in the substantial costs of establishing and operating the bond. care
  • 6. 2) Why NSW is piloting Social Benefit Bonds• Support Innovation – Government specifies the outcomes – NGOs determine the best way of achieving these outcomes• Increase investment in Prevention and Early Intervention• Improve capabilities across the sector – we get better at measuring what we do, in particular understanding what outcomes are achieved – improve the evidence base of what works• Improve outcomes for vulnerable people
  • 7. 3a) Many implementation challenges• It requires a change of mind-set for Government, NGO and the investor communities: – The bond must work within Government procurement and funding environments, while encouraging innovation and flexibility – NGOs must engage with investor community (and vice-versa) – Investors back a financial instrument without a track-record.• Government and NGOs must improve their understanding of what outcomes and benefits programs aim to achieve.• It requires increased capacity for data collection, analysis and continuous improvement.• High initial set up and transactions costs. 7
  • 8. 3b) The measurement challenge is largePayments will be triggered by demonstrated improvementagainst a control group or counterfactual, NOT a baseline 50 outcome measure 40 Improvement in outcome 30 20 10 0 Start 1 Yr 2 Yrs 3 Yrs Baseline Control Intervention 8
  • 9. 3c) UK Experience highlights the complexity• The development of the Peterborough social impact bond took – 18 months from the time Social Finance UK approached the Government to when the contract was signed – 2.5 person-years of Social Finance employee time – 300+ hours of pro bono legal advice• It involves complex and time-consuming work on outcome measurements and analysis by Government, work that continues during the bond life• It’s still too early to know whether Peterborough is a success 9
  • 10. 4) This is an exciting opportunity for NSW• NSW Government is developing up to three pilots in the areas of recidivism and out-of-home care (foster care)• But SBBs are not a panacea• Principles in SBBs are relevant to other contracts – payment linked to achievement of outcome – evaluating the impact of public spending ($ and outcomes) – providing incentives to innovate and improve – NGO capacity to deliver and manage contracts – intervention addresses need and Government priorities 10
  • 11. Social Benefit Bonds THANK YOU 11