Transforming Government Funding to Drive Impact

It’s time to redefine government funding. How can we redesign government policies to focus on delivering measurable results, maintaining transparency, and using taxpayer dollars more effectively—and drive social impact at a large scale? Governments at all levels are facing an urgent need to answer this question and identify ways to pay for outcomes achieved, not simply for services provided. And with good reason. In 2013 alone, the US government distributed more than $500 billion in contracts and $546 billion in grants to state and local governments. With such huge sums, the stakes are high. While government has traditionally focused on developing strict processes to ensure financial responsibility, administrative benchmarks sometimes come at the expense of policy goals. If we could align policy goals with outcomes-based objectives, we could fundamentally transform service delivery and achieve results.

The Beeck Center for Social Impact & Innovation at Georgetown University is releasing a report today entitled Funding for Results: A Review of Government Outcomes-Based Agreements, which takes on this very issue. The center is also convening today a group of about 140 cross-sector leaders from the US and abroad to discuss how to design outcome-based agreements and advance impact-oriented policy solutions. The goal is to inspire and support cross-sector stakeholders to transform government and fund for 21st century solutions.

There are fundamental changes happening at the local, state, federal, and global levels of government to increase the focus on impact. The US government has introduced several different models, including Innovation Funds, Pay for Success Pilots, and Performance Partnership Pilots. In these models, payment and financial rewards are contingent upon the achievement of measurable outcomes. When programs are held accountable for realizing tangible results, costs are streamlined and governments are able to solve real problems.

The Funding for Results report looks at five different examples of outcomes-based funding in government within the United States and globally. These case studies are distilled into key lessons highlighting the design choices of the funding government, describing the evolution of the agreement, and drawing out major findings from each example. One of the examples is in Tennessee and the other in Australia.

• The Tennessee Department of Children’s Services transformed its child welfare system to an outcomes-based model. Tennessee established one clear goal: moving children into permanent homes more quickly. The state instituted a system where providers that improved on baseline performance received a share of the state’s savings and those that performed below baseline reimbursed the state for cost overages. Through this model, Tennessee nearly cut in half the average time a child spent in temporary care from 22 months to 14.
   
• The Australian government has also had success with outcomes-based agreements. Australia wanted to improve job placement for those seeking employment, rather than just provide them with training. The government paid non-governmental employment service providers based on both job training provided and placement in sustainable employment. Providers were given an incentive to link job training with real jobs, and between 1995 and 2005 the cost to place each job seeker dropped from $16,000 to $3,500. Employment outcomes for the most disadvantaged seekers improved by 55 percent.

The report provides a roadmap to help leaders solve problems with tangible results. It guides leaders through a series of choices that help them design an outcomes-based agreement that is right for their challenge. These models are most successful when: governments can measure performance and align incentives in a transparent and consistent manner; there is a willingness to be flexible—to learn, evolve, and shift current structures to achieve stated goals; and governments build relationships with all stakeholders.

Government leaders need to re-think and re-orient their incentive structures to focus on outcomes and results. This report is an important tool to help drive impact at all levels of government, both domestically and internationally. We hope the Beeck Center’s report and today’s convening will spark creativity and encourage government, philanthropic, and civil society leaders to look toward innovative ways to address some of our society’s toughest challenges.

Read more stories by Sonal Shah.