CERTIFIED MANAGEMENT ACCOUNTANTS | BRITISH COLUMBIA

■ Service provider – delivers the program to the specified target population

■ Investor – provides upfront capital for program delivery

■ Government or other private investor – guarantees a rate of return for the investor if social outcomes are met

■ Intermediary/facilitator – manages contract; assesses impact of interven-tions; manages ongoing performance, e.g., acts as body where funds are � owed through

A case study of social impact bonds started the same year I sat in that Paris cafe. The Peterborough social impact bond – the first of these bonds – was launched about three years ago to reduce repeat o� enders in Peterborough, England, where approximately 60 per cent of prisoners re-offend within the year they are released, resulting in signi� cant social and community costs from crime, policing and incarceration. Approximately IS

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CERTIFIED MANAGEMENT ACCOUNTANTS | BRITISH COLUMBIA20 CMA UPDATE SPRING 2013

It’s 2013 and I’m sitting by my � re-place on a cold February night typing about a revolution. Valuenomics is about to change the public and private sector. Like the long list of “-nomics” such as genomics , infonomics , economics , reaganomics or freakonomics, value-nomics is a concept – one that seeks to ensure all parties achieve or receive value in any business deal or transaction. No one loses out; value can be measured and at tributed quantitatively or qualita-tively to everyone involved. In the public sector, the greatest potential for its appli-cation lies in social entrepreneurship and social impact bonds.

Across the pond, in Dickens’ “twin city” of London, lies the hotbed of social entrepreneurship – which can be de� ned as an approach to identifying and addressing social problems using market-based strategies and business models. It can be traced back as far as Florence Nightingale – founder of the � rst nursing school; however, the term is relatively new in literature and has only grown

ubiquitous in the last 25 years. Speci� c case studies are increasing across the globe, with the U.K. widely recognized as leader.

Social � nance is a concept within social entrepreneurship that has also entrenched itself in the U.K. Simply put, it involves managing money to deliver a social bene� t; an example is the use of social impact bonds in the public sector. The social impact bond is a contract between private investors and public sector organizations in which government pays for improved social outcomes. It allows funds to be

ValuenomicsCreating value for everyone through social impact bondsBy BERNARD ACHAMPONG, CMA

everal years ago, in a quaint area of Paris they call Marais, I was lounging in the terrace of an elegant cafe, a glass in hand, soaking in the Parisian sun. There was a lot to see – beautiful buildings, vibrant people, cars, bikes, pigeons ... And yet my eyes were fixated on a non-descript billboard

that read “Valeur pour tout le monde” – value for everyone. In the land of “Liberté” and “Égalité,” those five simple words took hold of my imagination.

Sraised from socially interested investors. This investment capital is used to fund service providers, and the government pays returns to investors based on a portion of the projected cost savings and the success of the intervention. In truth, though called a bond, the social impact bond mechanism is more closely related to a debenture that is contingent on revenue, or a performance bond.

The most likely investors for social impact bonds are socially motivated investors seeking minimal financial returns. � e conditions that are critical for social impact bond success include the presence of a high public cost of intervention combined with the poten-tial for signi� cant net bene� ts through a social service program intervention, i.e. quantifiable savings to government and measurable outcomes. Essentially, the savings associated with the outcome must be higher than the costs of delivering the outcome. � e four primary stakeholders in the social impact bond model are:

In British Columbia, the Downtown Eastside’s Potluck Café and Catering – which hires Downtown Eastside residents to provide thousands of free meals, while making profits by catering gigs for corporate clients – is a good case study in social entrepreneurship.

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SPRING 2013 CMA UPDATE 21CERTIFIED MANAGEMENT ACCOUNTANTS | BRITISH COLUMBIA

■ Service provider – delivers the program to the specified target population

■ Investor – provides upfront capital for program delivery

■ Government or other private investor – guarantees a rate of return for the investor if social outcomes are met

■ Intermediary/facilitator – manages contract; assesses impact of interven-tions; manages ongoing performance, e.g., acts as body where funds are � owed through

A case study of social impact bonds started the same year I sat in that Paris cafe. The Peterborough social impact bond – the first of these bonds – was launched about three years ago to reduce repeat o� enders in Peterborough, England, where approximately 60 per cent of prisoners re-offend within the year they are released, resulting in signi� cant social and community costs from crime, policing and incarceration. Approximately

£5m was raised from 17 social investors to fund a program with 3,000 male, short-sentence prisoners leaving Peterborough prison. Experienced service providers were given the £5m to deliver programs that provided intensive support to prisoners and their families, both inside prison and after release, to help them resettle into the community. � e investors will receive a return if re-o� ending among the prison-leavers falls by 7.5 per cent or more compared to a control group of short-sentence prisoners in the U.K. Should the social impact bond deliver a drop in re-offending beyond 7.5 per cent, investors will receive an increasing return capped at a maximum of 13 per cent per year over an eight year period. For example, a 10 per cent reduction in re-offending would result in a 7.5 per cent annualized return. � ere is value for society and government per bene� ts if the program is successful. Likewise, investors bene� t if the program is successful as per agreed upon success indicators.

Valuenomics ensures all participants –

program users or clients, service providers, investors, government or other guarantors, and intermediaries or facilitators – maxi-mize their quantitative and qualitative value or bene� ts. Social entrepreneurship, social � nance or social impact bonds can be done without valuenomics; however, applica-tion of the valuenomics concept maximizes bene� ts for all and fosters increased utility and sustainability of social impact bonds.

Now let’s examine how the concept could be applied a bit closer to home – say, to address a social issue facing Aboriginal youth in Northern B.C., where unem-ployment among persons aged 20-30 is signi� cantly higher than anywhere else in the province. Once again, by applying valuenomics to a social impact bond, a program could be designed to reduce youth unemployment in the north by moving more young people into Northern B.C.’s thriving and sustainable oil, gas and mining industry. � e primary participants will be (illustrated per � gure 1):

■ Target population of Aboriginal youth aged 20-30 yearsIS

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CERTIFIED MANAGEMENT ACCOUNTANTS | BRITISH COLUMBIA

raised from socially interested investors. This investment capital is used to fund service providers, and the government pays returns to investors based on a portion of the projected cost savings and the success of the intervention. In truth, though called a bond, the social impact bond mechanism is more closely related to a debenture that is contingent on revenue, or a performance bond.

The most likely investors for social impact bonds are socially motivated investors seeking minimal financial returns. � e conditions that are critical for social impact bond success include the presence of a high public cost of intervention combined with the poten-tial for signi� cant net bene� ts through a social service program intervention, i.e. quantifiable savings to government and measurable outcomes. Essentially, the savings associated with the outcome must be higher than the costs of delivering the outcome. � e four primary stakeholders in the social impact bond model are:

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CERTIFIED MANAGEMENT ACCOUNTANTS | BRITISH COLUMBIA22 CMA UPDATE SPRING 2013

■ Aboriginal/First Nations and catchment area communities where we � nd the target population

■ Service providers (delivery agency and applicable sub-contractors) with relevant expertise (e.g. experience with a BladeRunners-type program) to deliver a program aimed at youth

■ Investor from the oil, gas and mining industry to fund or provide upfront investment through the social impact bond

■ Guarantor/payer, either from the federal or provincial government or a foundation, that enters into a contract with the investor and guar-antees a return only if the program is successful

■ Facilitator who connects all the participants, manages the contract and ongoing performance

Applying valuenomics means Aboriginal youth maximize bene� ts through sustainable employment and connections to their community. � e communi-ties they reside in gain quantitatively and qualitatively from tax revenue, consumer revenue and reduced crime and reliance on social assistance. � e non-pro� t service providers gain additional revenue, strategic expansion of services and synergies with existing services that generates cost e� ciencies and improved pro� tability. � e guarantors or payers such as govern-ment gain from tax in� ows, higher productivity and

spending, reduced government transfers and higher savings from unemployment transfers. Finally, the investor gains from reputation and image, portfolio diversi� cation and � nancial returns if the program is successful. The facilitator gains revenue from services provided; and the investor, payer, guarantor or government, and the oil, gas and mining sector gain from improved recruitment, hiring, training costs and a more skilled workforce.

A $4M investment could mean employment for approximately 500 newly trained workers in the oil, gas and mining sector in Northern B.C. � is could translate to approximately $19.5M annual income and a total of $4.12M in annual income taxes to both federal and provincial governments. � e $4M is paid for within two years. � e return to the private investor could be approximately $600K (based on a 15 per cent return) plus the original $4M investment if the program is successful. In short, optimum quantitative and qualitative value for all parties.

Valuenomics applied to social impact bonds maximizes benefits for everyone involved, while utilizing private investment for sustainable social good. Without question, it’s a concept primed to change how we deal with complex social issues – both at home and across the globe. Value for everyone, indeed. ■

BERNARD ACHAMPONG, CMA is a seasoned senior manager and proactive leader with broad experience in program development, design and implementation. He is passionate about making a difference in the provision of effective social programs nationally and globally.

Figure 1: Social Impact Bond (using valuenomics)

Y ACCOUNTING

Y STRATEGY

Y MANAGEMENT

SUB-CONTRACTOR

SIB FACILITATOR

COMMUNITY

IMPROVE SOCIAL OUTCOMES

PAYER/GUARANTOR

FINANCIAL RETURNS

CAPITAL INVESTMENT(WORKING CAPITAL)

WORKING CAPITAL

INTERVENTIONS

ECONOMIC AND SOCIAL

■ STRATEGIC VALUE PLANNING■ PERFORMANCE MANAGEMENT

■ FINANCIAL ANALYSIS■ SECURITY STRUCTURING

■ COMMUNITY ENGAGEMENT■ SYSTEMS MODELLING

■ PROGRAM DEVELOPMENT■ PROCUREMENT AND CONTRACT MANAGEMENT■ PROJECT MANAGEMENT

DELIVERYAGENCY

PRIVATEINVESTOR

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