Appendix A: Pay for Success Background
Pay for Success 101 Prepared by the University of Virginia’s Pay for Success Lab
Pay for Success (PFS) is an innovative framework where a private investor pays for a program upfront while another party, such as a state or local government, agrees to repay the investor with the possibility of interest if the program meets specific predetermined outcome measures. PFS provides a means for expanding effective community organizations that measurably improve lives of vulnerable and at-risk members of our communities. In addition, the framework shifts the risk of a pro- gramnot meeting its intended outcomes away from limited government resources.
Benefits of Pay for Success Some of the most important benefits of Pay for Success are:
• F ocuses government resources on evidence-based programs that measurably improve lives • T ransfers the risk of a program not meeting its intended outcomes to non-governmental funders • S hifts government spending towards paying for valuable outcomes instead of inputs or outputs • B uilds a culture of evidence and accountability into government spending decisions • P rovides service providers long-term funding so that they can properly plan ahead • M ore closely aligns the timing of when the government spends and social outcomes occur • P rovides a framework for multiple government payor agencies to contribute to outcomes of their particular importance
Challenges of Pay for Success There are several challenges to implementing Pay for Success (PFS) project. These include:
• P FS projects to date have taken up to three years to develop, incurring significant amounts of consulting fees and in-kind government and social sector resources.
Pay for Success & Affordable Housing | Stefano Rumi 49
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