Advocates Question Viability of PFS Model Funding

Children and youth advocates question the usefulness of the new Pay for Success model competitions – which only pay out if programs are successful – because they ignore addressing broader problems and instead focus on unsustainable quick fixes.

The Pay for Success competition template is a new approach that partners private, public and nonprofit sectors by aligning payments for social services with verified social outcomes. This allows the public sector to receive the highest return on taxpayer investments. If the project does not meet pre-determined goals, like an increase is classroom achievement, the sub-grantees don’t get paid.

It is popular. In 2014, the Corporation for National and Community Service’s Social Innovation Fund launched its Pay for Success program. Through its eight inaugural grantees, 43 programs across the country are receiving PFS technical assistance. Federal legislation has also been introduced to foster the creation of PFS deals. Six states, Colorado, Idaho, Massachusetts, Oklahoma, Texas, and Utah have passed PFS enabling legislation and more states are expected to follow.

However, PFS contracts are complex. The actors involved include government, an intermediary, an investors, a service provider and an independent evaluator, although individual PFS programs may vary in the roles and responsibilities, according to “A Guide to Evaluating Pay for Success Programs and Social Impact Bonds.” It was produced by In the Public Interest, AFSCME, Minnesota Council of Nonprofits, Keystone Research Center, Oregon Center for Public Policy, Economic Opportunity Institute, Center for Effective Government, and the ReFund America Project at the Roosevelt Institute.

Unfortunately, the PFS interventions employed typically do not address the root causes of these social ills, the report said. The PFS model, with a narrow focus on pay for success outcomes and cashable savings, precludes investment in primary prevention and addressing the underlying structural inequalities. Fixing complex social problems typically requires investments and policy changes on multiple levels and such solutions are beyond the PFS structure, the report said.

For example, a program to reduce recidivism among youth detained at the Rikers Island correctional facility was terminated when projected outcomes were not achieved. But a deeper look showed there were significant design problems with the PFS project from the start, the report said.

The Rikers Island PFS funded moral cognation therapy to reduce recidivism. Options with a potentially larger impact on recidivism reduction, such as decreasing the number of questionable misdemeanor arrests or making access to bail easier, were not considered because they are not amenable to measurement, the report said.

But, states have reduced recidivism through other means, including increasing public investment in community-based treatment, re-entry planning and intensive supervision, and providing continuity of care to people with mental health problems. Because these interventions are difficult, if not impossible to measure, these interventions would not be considered in PFS deals, the report said.

What is driving the PFS solutions conversation is “what can be funded by a PFS deal?” rather than “what structural changes and services can best address the problem we are seeing,” the report said

Info: (for the report).

About Frank Klimko

Frank Klimko is a nationally known journalist, grants expert and speech writer/speaker. He has years of experience helping nonprofits devise lists of the right funding opportunities and secure funding from these foundations and corporate entities. Clients have focused on an array of areas including child care, homeless, hunger and K-12 education.

Additionally, he is a Freedom of Information Act expert, who has helped numerous clients with securing proprietary information from the federal government.

Currently, Frank Klimko writes the Children & Youth Funding Report and Private Grants Alert, which are Washington DC-based publications. CYF is a daily publication covering Congress, the Education Dept. and the various federal regulatory agencies. PGA, another daily publication, covers the world of private philanthropy.

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