@article{e5f42525665d4549961ca147a26fde26,
title = "Use of social impact bonds to address social problems: Understanding contractual risks and transaction costs",
abstract = "Social impact bonds, a recent innovation in social finance, are designed to harness capital and knowledge from private nonprofit, for-profit, and public entities to address pressing social problems. Although there is great policy interest in understanding how social impact bonds can be used to tackle social problems, the emergent nature of social impact bonds makes it hard to find relevant data and evidence. To overcome this challenge, we use single-significant-case sampling as our research design strategy. We conduct an in-depth case study of the Social Innovation Financing Youth Recidivism Project in Massachusetts. Our case study is comprised of a qualitative analysis of the multiparty contract and multiyear quantitative benefit–cost analysis to understand transaction costs. We draw upon contract theory to develop an analytical framework for the case analysis and highlight the risks and safeguards for the various parties to the contract, and conduct a formal benefit–cost analysis to map out transaction costs. We conclude with a discussion of study implications and future research.",
author = "Sheela Pandey and Cordes, {Joseph J.} and Pandey, {Sanjay K.} and Winfrey, {William F.}",
note = "Funding Information: Government ($38.7 millions) Commonwealth of Massachusetts (up to $27 million performance-based payments) U.S. Department of Labor ($11.7 million federal grant) Private Funders: Investors/Lenders ($12 million) For-profit: Goldman Sachs ($9 million, 5% Senior lender) Nonprofit: Kresge Foundation ($1.5 million, 2% Junior Lender) Nonprofit: Living Cities ($1.5 million, 2% Junior Lender) Philanthropic support ($6 million) Nonprofit private foundation: Laura and John Arnold Foundation ($3.7 million) Nonprofit venture philanthropy: New Profit ($2 million) Nonprofit community foundation: The Boston Foundation ($0.3 million) Service provider ($3.26 million deferred fees) Nonprofit: Roca Inc. Funding Information: Upfront funding of up to $27 million for Roca operations is to be provided by YSI with the initial advance of the funds expected to be made in early 2014. YSI will be repaid by the Commonwealth of Massachusetts only if Roca is able to reduce the rate at which SIF program participants are incarcerated. Table 2 outlines the role of the various initiative partners in the SIF Project. Senior loan financing is provided by Goldman Sachs (through its Social Impact Fund) and junior loan financing provided by the Kresge Foundation and Living Cities, with both providing $1.5 million each. The senior loan has an interest rate of 5% per annum, whereas the junior loans bear an interest rate of 2% per annum. Funding support also includes philanthropic grantors Laura and John Arnold Foundation ($3.7 million), New Profit Inc. ($2 million), and The Boston Foundation ($300,000). U.-S. Department of Labor awarded the Commonwealth a pay-for-success grant of $11.7 million. The additional funding, from the U.S. Department of Labor, is to facilitate project extension by 2 years to serve an additional 391 youth if the SIF project is successful in reducing incarceration and increasing employment (Third Sector Capital Partners, 2014). Sibalytics LLC was the initial independent evaluator and was tasked with verifying the number of youth served by Roca, and applying the performance measurement criteria and evaluation methodology outlined in the SIF Project contract. Sibalytics LLC was replaced by Urban Institute 10 months after the start of the pilot program (Abt Associates, 2016). Public Consulting Group is the independent validator—working on the Commonwealth of Massachusetts{\textquoteright}s behalf—tasked with reviewing the Independent Evaluator{\textquoteright}s findings. Public Consulting Group is also responsible for reviewing the Commonwealth{\textquoteright}s determination Publisher Copyright: {\textcopyright} 2018 Wiley Periodicals, Inc.",
year = "2018",
month = jun,
day = "1",
doi = "10.1002/nml.21307",
language = "English (US)",
volume = "28",
pages = "511--528",
journal = "Nonprofit Management & Leadership",
issn = "1048-6682",
publisher = "Jossey-Bass Inc.",
number = "4",
}