Social Impact Bonds Power Point

Educational Institutions Client Update:
Social Impact Bonds

H. Todd Bullard Patrick M. Malgieri 99 Garnsey Road Pittsford, NY 14534 585.419.8800 www.harrisbeach.com
I. What is a Social Impact Bond or Pay for Success Contract?
It is NOT secured by real property (ad valorem) tax revenue, full faith and credit and does not count against a municipalitys debt limit. The Social Impact Bond (SIB) is an innovative financing approach to fund social programs with the goal of achieving positive social outcomes that can be measured. SIBs are a creative way to have government get access to capital from the private sector to pay for not-for-profits to expand, innovate and reward programs that work.
Educational Institutions Client Update February 2014 Harris Beach PLLC, 2014
I. What is a Social Impact Bond or Pay for Success Contract? (cont.)
The SIB agreements are also called Pay for Success (PFS) contracts that contain performance clauses for deliverable and measurable successful outcomes in the agreements with the government. The PFS is, in essence, a contract entered into with a Not-for-Profit to provide services to a governmental entity initially financed with funds raised from the private sector. [See Flow Charts entitled Social Impact Bonds (Basic Deal Structure and Repayment)]
II. Potential Services Covered by SIB or Pay for Success Contracts

Poverty Recidivism related to Incarceration Educational Improvement Reduced Crime Higher Employment in specific neighborhoods
Better Health Outcomes Elder Care Child care for low income persons Veterans Services Affordable Housing
III. Potential Structure of SIB
The most common model involves a governmental entity (City, County, Town) entering into a contract with a private-sector not-for-profit often called an Intermediary entity to provide social services [Social Impact Bond Contract]. The governmental entity ultimately pays the intermediary (not-for-profit) entirely based on the successful achievement of performance goals. The performance goals are intricately measured by an independent party to evaluate if the performance goals have been achieved.
III. Potential Structure of SIB (cont.)
The intermediary initially obtains funds to provide the contracted service by raising capital from independent commercial or philanthropic investors who invest in the Social Improvement Bonds and/or the Social Impact Bond Contract. If the outcome is reached (or exceeded) as desired by the governmental entity, the payments to the private investors are funded by the government, typically on the basis of accrued cost savings achieved by the government as a result of the improved outcomes.
III. Potential Structure of SIB (cont.)
If outcomes are not achieved, the government does not pay and investors lose their funds. The SIB structure is an innovative way to outsource the delivery of key social services to a private party and pass the initial risk of the effective delivery of such services onto the private investor and the not-for-profit service provider.
IV. Background Recent Incentives
The intent is to encourage innovation in service delivery models and better customer service. As described below, both New York City and the State of Massachusetts are exploring SIB arrangements. United Kingdom, Peterborough Social Impact Bond: This was the first initiative utilizing SIBs. The Intermediary is a not-for-profit corporation called Social Finance, Inc. The goal is to reduce the recidivism rate of parolees. Recently, the Ministry of Justice has published some interim results that shows a reduction in reconviction rates of 6%.
IV. Background Recent Incentives (cont.)
New York City: Mayor Michael Bloomberg established the first SIB in the United States. His initiative is directed at providing services to 16 to 18 year olds jailed at Rikers Island. The initiative aims to reduce recidivism, and the related budgeting and social costs.
Bloombergs clearly defined goal is to reduce recidivism by 8.5% to 20% with payments coming to the investors with a premium if those goals are met. Goldman Sachs is the primary investor in the New York City initiative. Recently, Goldman has established a $250M social impact fund. The intermediary is a not-for-profit called MDRC. The results are expected in 2016. Massachusetts: The state has issued an Request for Response (RFR) to solicit services to address Homelessness.
V. Roles of Parties
The governments private sector partner in the policy initiative, called the Intermediary, is responsible for raising the capital to fund the operating cost and assemble the team of service providers. (See Flow Chart). An Evaluating entity (Evaluator) is charged with measuring outcomes.
V. Role of Parties (cont.)
The governmental entity provides the funds to repay the investors, including a premium, if the social programmatic goals are successfully met or exceeded. The investor provides key initial funding for the service providers to pursue innovative and creative methods to achieve measurable results.
VI. Criterion for SIB
The social impact bond must meet certain criteria for appropriate use.

There must be high net benefits to taxpayers and investors in outcome or goals. Measurable outcomes Well-defined treatment populations [African-American or Hispanic males ages 16-18; unemployed living in a particular and easily identifiable census tract, etc.] Credible Impact Assessment-[Good Evaluators] Built in Safeguards to prevent harm to treatment population.
VII. Strategies for Implementation

Sustained attention from top government officials Identify outcomes and social problems to be addressed Identify Key stakeholders Identify service providers Identify interested private investors
Social Impact Bonds: Structure Charts
SOCIAL IMPACT BONDS

(Basic Deal Structure)
Government Agency [Sets Outcome and Goals] (Pay for Success Contract for services) Working Investors Capital Funding Funding [Intermediary] External Not-for-profit (Social Impact Bond Agreement)
Evaluator Entity
Service Provider
Service Provider
SOCIAL IMPACT BONDS (Repayment if successful outcome)

Government Agency
Pays funds for Successful Outcome (cost savings accruing to Govt)
Investor
Repaid Investment plus return on premium
Not for Profit Entity
Social Impact Bond Finance Model (SIB) for Early Childhood Pay for Success (PFS) Contracts
SIB for PFS
The challenges to a PFS project often involve the following:

1.
2.
3.
obtaining strong and well-grounded statistical research that firmly establishes an economic linkage between an intervention and an early childhood benefit, formulating and drafting contracts between the parties in a PFS project, which capture the benefit monetarily and which all parties are willing to sign, and adequately monetizing the returns within a timeframe acceptable (3 to 5 years) to investors.
SIB for PFS
The following conditions and steps should be in place and undertaken to implement a successful SIB project:
Conditions:
State laws and regulations must be in place authorizing state agencies and jurisdictions to enter into PFS contracts. (New York has such legislation). Working within state laws and regulations, private, philanthropic, and government leaders agree to target a socially important outcome. For example, increasing school readiness of pre-k children and increasing literacy rates by the Third Grade. Feasibility research should be completed to ascertain whether a specific child development intervention is applicable to particular children or populations within the governments geographic jurisdiction and can the intervention produce enough near-term government cost avoidance and longer-term outcome improvements to justify investment.
SIB for PFS
Deal Structure:
Once feasibility is established by the research study, private and philanthropic investors provide the necessary capital to create and establish an intermediary to manage the PFS project. The intermediary can be any kind of for-profit, non-profit, or special purpose government entity. In other contexts, intermediaries are referred to as lead contractors or enterprises. The intermediary and the government entity enter into a contract, in which the government agrees to pay the intermediary a success payment to the extent cost avoidance and/or outcome improvements are achieved within an agreed upon time period.
SIB for PFS
Deal Structure:
The intermediary enters into a contract with pre-k providers to provide high quality pre-k education services to cohorts of children. The pre-k providers and the children served are comparable to those analyzed in the feasibility research. The intermediary and government together enter into a contract with an independent evaluator to determine each year whether the special education assignment rate of the PFS pre-k graduates is lower than comparable children who did not have pre-k service and by how much. If there is no cost avoidance or outcome improvement, the government owes no payment to the intermediary.
SIB for PFS
Deal Structure:
The intermediary raises capital from philanthropic, private and government sources to pay for the pre-k services and for the operations of the intermediary. The capital raised can take many forms.
i. ii. iii.
From philanthropies, the capital can be outright grants or projectrelated investments (PRIs). Private capital will almost always involve dividend or interest payments and debt instruments which will be repaid. Government capital can take the form of guarantees, matching funds, or any of the forms available to philanthropic or private investors.
SIB for PFS
Deal Structure:
The intermediary pays for its operations with funds from philanthropy and pays for pre-k services with funds from private, philanthropic and government sources. The justification for private investment and philanthropic investments is cost avoidancethe near-term financial return on the investment. The justification for philanthropic grants and government subsidies and guarantees is outcome improvementthe longterm economic and social long-term returns on early childhood investments.
SIB for PFS
Deal Structure:
As special education cost avoidance occurs as well as the intended literacy improvements and such conditions are confirmed by the evaluator, success payments are made to the private and philanthropic investors. Under many circumstances, special education cost savings exceed the amounts required to be paid to the investors. This residual is paid to the state government and is available for any purpose including increasing the number of children served by the project.

Social Impact Bonds Power Point

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Social Impact Bonds Power Point

Hochgeladen von

Copyright:

Verfügbare Formate

Educational Institutions Client Update:

Social Impact Bonds

I. What is a Social Impact Bond or Pay for Success Contract?

I. What is a Social Impact Bond or Pay for Success Contract? (cont.)

II. Potential Services Covered by SIB or Pay for Success Contracts

III. Potential Structure of SIB

III. Potential Structure of SIB (cont.)

III. Potential Structure of SIB (cont.)

IV. Background Recent Incentives

IV. Background Recent Incentives (cont.)

V. Role of Parties (cont.)

VI. Criterion for SIB

VII. Strategies for Implementation

Social Impact Bonds: Structure Charts

SOCIAL IMPACT BONDS

SOCIAL IMPACT BONDS (Repayment if successful outcome)

Pays funds for Successful Outcome (cost savings accruing to Govt)

Not for Profit Entity

SIB for PFS

The challenges to a PFS project often involve the following:

SIB for PFS

SIB for PFS

SIB for PFS

SIB for PFS

SIB for PFS

SIB for PFS

Das könnte Ihnen auch gefallen