This is a new business approach the local New South Wales state government is rolling out to address a key social service delivery for foster children. I would think if it is successful it will be applicable to the other social services currently available. The key benefit of this approach is it reduces the financial burden on the government for the delivery of the service, provides a new type of investment that would cater to socially minded investors and hopefully bring some level of efficiency in how the services will be delivered.
From Pro Bono News
NSW Govt Announces Social Bond Pilot Selection
Posted: Tuesday, March 20, 2012 – 11:42
The NSW Government has announced that three private and community sector groups have been selected to develop pilot social bonds aimed at reducing foster care and preventing young criminals from returning to prison.
Westpac and the Commonwealth Bank and investment bank, Social Finance are to help develop social bonds to attract private funds into preventive programs aimed at reducing the need for taxpayer-funded foster care with selected Not for Profit organisations.
NSW Treasurer, Mike Baird said the Government had been overwhelmed by interest in the bonds, which were announced in the O’Farrell Government’s first budget in September 2011.
Baird says as the first of their kind in Australia, the social benefit bonds are modelled on Britain’s social impact bonds, which were introduced by the Cameron Coalition Government after the 2010 UK election.
The NSW Liberal and National Government took up the idea first considered by the former NSW Labor Government.
In the announcement today, The Benevolent Society, backed by Westpac Corporation and the Commonwealth Bank of Australia, will develop a $10 million bond to support 550 families over five years to reduce the number of days that children spend in foster care.
A second $10 million bond will involve UnitingCare Burnside working with children up to five years of age and their parents over seven years to achieve similar results.
Social Finance, a Sydney-based organisation modelled on the UK social investment bank which developed the British bonds, will work with Mission Australia on a $7 million bond to assist 500 young adult repeat offenders for up to six years.
When releasing the details in the State Budget last year, Treasurer Baird said the Government was establishing a trial of two Social Benefit Bonds (SBBs) to focus on improved social outcomes and reduced demand for future government services.
These bonds are financial instruments that pay a return to investors based on the achievement of agreed social outcomes.
The Treasurer said that this approach changed the culture of service delivery to outcomes, improving the effectiveness of every dollar spent.
Prof Peter Shergold from the Centre for Social Impact (CSI) says the scheme could be a win-win-win for the state, with better outcomes, less risk for the government and more involvement by the private sector with community organisations.
Prof Shergold says the trial team will work for the next six months to to put together their final process which will allow them to issues their first set of three bonds.
He says social bonds will allow Not for Profit organisations to think about how they could deliver on projects not previously considered; beyond normal philanthropy, grants or government funding.
He says the social bonds also benefited investors by creating a class of assets which did not require a choice between being a philanthropist or an investor.
Prof Shergold will chair a social investment expert advisory group to oversee negotiations between government departments and the proponents.
Read Prof Peter Shergold’s blog here.